Why MTN Nigeria will recover fully in 2025 

The discussion, which took place on the podcast, Drinks and Mics, featured Ugo Obi-Chukwu, CEO of Naijaonpoint; Samson Esemuede of Zrosk Capital; Tunji Andrew, CEO of Awabah; and Arnold Dublin Green of Cordros Capital.

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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.

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

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.

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.” 

Looking ahead, analysts identified several factors that could influence MTNN’s performance:

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.

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.

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.