30 July 2021

Scancom PLC (MTNGH) 1H2021 results

In brief

Scancom PLC (MTN Ghana) released a set of impressive 1H2021 numbers yesterday evening. Earnings exceeded our forecast by 16.9% on support from higher than anticipated mobile money and data revenue.

Performance: Data and MoMo continue to power growth

  • EPS was up 25.9% y/y to GHS 0.07
  • Revenue grew by 24.9% y/y to GHS 3.6bn driven by a 47.9% and 50.9% y/y growth in data and mobile money respectively
  • EBITDA margin improved by 83bp y/y to 54.4% driven by lower than anticipated OPEX
  • ROaE stood at 46.9% compared with 44.3% for the same period in 2020
  • An interim dividend of GHS 0.03 per share was announced
    • Ex-dividend date – 18 August 2021
    • Qualifying Date – 20 August 2021
    • Payment Date – 14 September 2021

Outlook: Growth to remain robust but regulatory impact remains non-quantifiable

  • Despite recent regulatory uncertainty, we remain optimistic of the growth outlook of MTN Ghana
  • This is because, in our opinion, the key drivers of growth are fairly insulated from the impact of the pandemic and while regulatory directives are difficult to quantify, we do not expect it to be material
  • From our analysis, the implementation of the 30% asymmetric interconnect rate reduction has weakened revenue by less than 1%
  • Subsequently, we do not expect the implementation of the removal of on-net/off-net price differentials from 1 August 2021 to have any significant impact on earnings especially when more than 70% of subscribers are on the MTN network
  • What we think could be material are the insertion of a price floor/ceiling on voice, data, SMS and mobile money as well as a review and approval of all MTN prices by the regulator
  • In addition, we are uncertain of the approach regarding the structure for the localisation of the mobile money business
  • In our opinion, we expect the carving out of the mobile money business to be value accretive given that globally, multiples for fintechs and payment platforms have been higher than those for the telco businesses

Valuation: Not rated

  • MTNGH is trading at an EV/EBITDA multiple of 7.9x
  • We intend to initiate coverage in 3Q2021