Financial analysts have assessed MTN Nigeria’s (MTNN) latest financial performance, examining both the company’s revenue growth and the challenges it faces, including FX losses, negative retained earnings, and investor concerns over dividend payments.
The discussion, which took place on the podcast, Drinks and Mics, featured Ugo Obi-Chukwu, CEO of Nairametrics; Samson Esemuede of Zrosk Capital; Tunji Andrew, CEO of Awabah; and Arnold Dublin Green of Cordros Capital.
Watch full analysis here:
Earnings performance:
Despite MTNN’s robust revenue growth, the analysts noted the company’s struggles at the bottom line.
According to Ugo, “MTNN did well topline with over N3.3 trillion in revenue, up from N2.4 trillion in 2023, but recorded a massive bottom-line loss of over N400 billion compared to N138 billion losses in 2023.”
While the company managed to post a profit in Q4, the debate remains on whether this signals a full recovery or if more challenges lie ahead.
FX losses and cost restructuring:
Arnold pointed out that MTNN made significant progress in restructuring its cost base, particularly its dollar-denominated expenses. “The renegotiation of dollar operating expenses from 45% to 20% was a major win, which played a role in the Q4 recovery,” he noted.
However, Samson countered that a portion of this improvement may be overstated due to a dollar-related repayment that inflated the EBITDA margin. “When adjusted, the EBITDA margin was closer to 41% instead of the reported 46%,” he said.
Samson noted that one of his frustrations with MTNN over the past year was the lack of clarity on the sources of its FX losses. However, he acknowledged that Q4 results provided better insight. ‘There is a sequential improvement in business, but only a couple of quarters of strong performance would confirm sustainability,’ he added
Dividend uncertainty:
One of the key issues weighing on investor sentiment is MTNN’s negative retained earnings of N607.5 billion and negative shareholders’ funds of N458 billion. These figures mean that, legally, the company cannot pay dividends until these losses are cleared.
Tunji emphasized that concerns over dividend payments have prevented the market from fully pricing in MTNN’s recent improvements. “Investors remain cautious because they are unsure when dividends will resume, despite the company’s recovery efforts,” he said.
On the other hand, Samson argued that what is important is whether the company is generating good cash flow and for him, it is a big yes. Ugo emphasized that even with good cash flow, the company cannot pay dividends with retained losses, which stood at N607 billion.
Path to recovery:
The discussion also touched on whether MTNN might need to raise equity to clean up its balance sheet. Ugo suggested that such a move might be necessary.
“For a full recovery, MTNN would need at least two years of N1 trillion in back-to-back profits,” Ugo estimated. However, Samson provided a more immediate projection, stating, “With Q4 PAT of N114.5 billion, an annualized growth of 40% would yield about N500 billion in 2025. The company does not need massive, retained earnings, just a return to positive retained earnings to pay dividend.”
Key drivers for 2025:
Looking ahead, analysts identified several factors that could influence MTNN’s performance:
- Tariff adjustments – While a price increase could boost revenue, it may also impact subscriber usage patterns.
- NIN-SIM deregistration impact – The worst of the subscriber losses may be over, which could stabilize revenue growth.
- Market sentiment – Investors will likely remain cautious until the company shows a clear and sustained return to profitability.
Based on the analysts’ recommendations, there is a strong leaning towards a buy for MTNN, with three out of four analysts, Arnold, Samson, and Ugo favoring a buy, while Tunji recommended a hold.
- Despite MTNN’s challenges, including FX losses and negative retained earnings, analysts recognize the company’s ability to generate strong cash flows and its improving financial performance.
- Samson and Arnold believe the recovery path is clearer following the Q4 earnings, while Ugo maintains that sustained profitability is key to long-term success. Tunji’s hold stance reflects lingering concerns over dividend uncertainty and regulatory risks.
- Ultimately, the consensus suggests that MTNN presents an opportunity for investors who are willing to ride out the volatility, with expectations of further recovery in the coming quarters. However, dividend-focused investors may remain cautious until retained earnings turn positive.
MTNN’s share price has shown signs of recovery this year, with a 27.9% year-to-date return as of Friday, March 7, 2024, rebounding from a 24% YTD loss in 2023.
