EquitiesGhana

1 August 2022

MTNGH 1H2022 Results: Whistling in the dark?

In brief

Scancom PLC (MTN Ghana) released its 1H2022 results yesterday evening and an updated version (corrections made to quarterly financial highlights) this morning. Although the impact of the electronic levy (eLevy) weighed heavily on mobile money (MoMo) revenue, data growth kept pace with the momentum from the previous quarter resulting in net earnings exceeding our expectation by 25.5%.

 

Performance: MoMo slows down but data saves the day

  • Net profit was up by 54.1 y/y to GHS 1.3bn, exceeding our estimated figure of GHS 1.1bn
  • Data was the key growth driver, increasing by 49.3% y/y (+7.9% q/q) to GHS 1.8bn and accounting for 39.0% of service revenue.
  • A jump of 15.1% y/y in active data subscribers as well as higher data traffic and increased consumption underpinned data growth.
  • As expected, a decline in transaction activity due to the implementation of the eLevy within the period resulted in MoMo revenue declining by 25.4% q/q to GHS 899m. This was fairly in line with our forecast of GHS 866.3m.
  • EBITDA at GHS 2.7bn was 36.0% better y/y and 29.4% higher than our estimate. This translated into a 303bp y/y expansion in EBITDA margin to 57.4%

Outlook: How long will data hold

  • Despite the depressed macroeconomic backdrop, regulatory disruptions and increased competition, we believe earnings momentum will remain robust for the remainder of the year.
  • Growth will primarily be driven by data as consumer behaviour and smartphone penetration drives further increase in megabytes consumed per active subscriber and higher data traffic.
  • However, we are concerned about how sustainable earnings momentum will be post 2022 given the full impact of eLevy and the potential loss of MoMo customers to competing products with zero-rated fees like GhanaPay and VodaCash.
  • In our opinion, GhanaPay presents a significant threat to MoMo. It is an all-in-one bank-wide platform which incorporates banking and mobile money services at no charge (except eLevy).
  • While other competing products are focused on disrupting MoMo’s P2P transactions, we believe that GhanaPay threatens both P2P transactions as well as MoMo’s float.
  • We are happy to see the SMP directives having minimal impact on revenue so far. However, we continue to caution that the major setback to revenue growth is the directive on regulating voice, data, SMS and mobile money prices.
  • This directive is yet to be implemented and it is difficult to quantify its impact on revenue at this stage.
  • Largely, we believe the market has priced in the major disruptions to the extent to which it is quantifiable but visibility of top line growth remains poor.
  • We are uncertain if data growth is sticky over the medium-term to augment the shortfall in voice and MoMo revenue. Consequently, we will require a deeper conversation with management to form an opinion

Valuation: Not rated 

  • MTN Ghana is trading at an EV/EBITDA multiple of 1.9x

Dividend announcement

  • Interim dividend = GHS 0.04 per share
  • Ex-dividend = 17 August 2022
  • Qualifying date = 19 August 2022
  • Dividend payment date = 22 September 2022