The proposed listing of MTN Nigeria shares on The Nigerian Stock Exchange (NSE) is set to lift the market capitalisation of the bourse by close to $10billion.
According to a valuation carried out by BusinessDay Research & Intelligence Unit (BRIU), MTN Nigeria is forecast to have values ranging from $8.56 billion to $10.88 billion. BRIU, a strategic business unit within the BusinessDay Group, used various valuation methodologies including the discounted cash flow valuation (DCF) and relative valuation to estimate the Value of MTN Nigeria. This is the first major pre-IPO valuation attempted by a research firm using publicly available data.
BRIU used telecommunication companies from various emerging markets as peers in order to obtain a multiple for MTN Nigeria, which is on the verge of listing on Africa’s 3rd largest stock market.
Comparing telecommunication companies in various emerging market including Vodacom in South Africa, Safaricom in Kenya, Bharti Airtel in India, PLDT Inc., in the Philippines and Total Access Management in Thailand, BRIU obtained an industry average using price to cash flow (P/CF) of 9.9x, price to sales (P/S) of 2.9x, price to earnings of 47.6x, price to book (P/B) of 5.2x, and EV/EBITDA of 9x.
Our findings reveal a range between N1.4trn and N7.2trn. We arrived at an average value of N3.2trn (equivalent US$8.9bn).
“MTN Nigeria has around 402 million shares in issue, the same amount in preference shares, which it sold at $0.99 in 2007.As part of the IPO it would split one share into 50 units, to create 20 billion shares, which would be listed on the bourse and set the IPO price via book building,” Reuters said earlier after viewing a pre-IPO presentation by MTN.
Going by this estimate, BRIU arrived at a share price of N159.42 per share.
Also, using the free cash flow to firm valuation methodology, we arrive at a value of N3.9trn, or US$10.9bn ($1/N360). Going by the number of shares estimate of 20 billion, the share price is given as N195.90.
Last year, MTN group announced that its Nigerian unit will be listed on the Nigerian stock exchange following a compulsory fine of $1.7 billion that was slammed on telecom giant.
The MTN group said they have made good progress on the IPO processes in Nigeria, and they aim to conclude it during 2018.
The company would use the proceeds of the share sale to redeem preference shares issued to existing investors who bought the shares 11-years ago and also cut its dollar exposure.
MTN wants to achieve a “retail friendly” offer price for the IPO, it said in the pre-IPO document, of around N80 naira per share, the average price for shares listed on Nigeria’s bourse.
And it would split its nominal value to 2 kobo from one naira. South Africa’s MTN owns more than 70 percent of MTN Nigeria, which has under 300 existing shareholders.
Analyst have said the share sale will go a long way in deepening the Nigerian financial market especially since the market has not recorded any initial public offers for two years since the January 2015 listing that saw the birth of Transcorp.
MTN Nigeria is the largest subsidiary of MTN Group which is a multinational telecommunications group that offers cellular network access to over 223 million subscribers in 22 countries in emerging markets.
As at the reporting date in 2017, MTNN had a total of 52.3 million subscribers. MTN Nigeria is the second largest contributor to MTN Group revenue of about 27.2 per cent closely behind South Africa which contributes 32.2 per cent.
The MTN Nigeria is expected to achieve double digits growth.BusinessDay will update the valuation report as more IPO information is released by MTN Nigeria.