ANALYST OPINION - Sikasem
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ANALYST OPINION
We consider the offer price of GH¢0.75 per share to be a fair value of
MTN Ghana and recommend that interested investors participate in
the IPO.
Our valuation of the equity of MTN Ghana using a combination of the Discounted Cash
Flow and multiples approach gave us a target price of GH¢0.78 per share. Currently,
bullish sentiments on the market which have resulted in high valuations of stocks has the
potential of pushing MTN share prices above intrinsic value.
We consider the offer price of GH¢0.75 per share to be a fair value of MTN Ghana and
recommend that interested investors participate in the IPO.
MTN Ghana, the largest telecommunication service provider in Ghana with a market
share of approximately 55% as at December 2017 is undertaking an IPO. The company
intends to raise GH¢3.48bn (4.64bn shares) which will make up 35% of the issued shares
of MTN Ghana.
The Telco over the last five years has recorded a compound annual growth rate (CAGR) of
8% and 15% in net operating income and net profit respectively. Over this period, topline
has grown by 14% (CAGR) as the company’s client base has increased by an average of
12% year-on-year over the period. Average Revenue Per User (ARPU) on the other hand,
dipped marginally by 4% at the close of 2017 compared to ARPU five years earlier on the
back of increased competition in the industry which led to a reduction in tariffs to retain
market share. We however expect competition to heat up in the sector due to increase
prospects for market players but MTN Ghana will be able to weather the storm given its
dominant position in the market.
FirstBanC Brokerage Services Ltd, No. 7 Volta Street, Airport Residential Area l P.O. Box 1464 Osu, Accra
l Tel: +233 (0)302 781489/781484/780402 l Email: brokerage@firstbancgroup.com l
www.firstbancgroup.comThe company has seven main revenue lines namely; the airtime and subscription,
interconnect and roaming, SMS, data, handset and accessories, mobile money and value
added services. Data and mobile money is expected to drive revenues going forward due
to increased internet use and an increasing reliance on mobile money to make payments.
On the cost side, the company’s OPEX has grown by 13% (CAGR), mainly due to 30%
(CAGR) and 15% (CAGR) uptick in general and administrative expenses as well as
depreciation expenses respectively. The company has added GH¢2bn of CAPEX over the
last five years in preparation for the expected upsurge in demand for business solution,
data and mobile money.
The company has limited the use of debt in its capital structure by limiting it to 14% of
total invested capital, resulting in a debt-to-equity ratio averaging 17% over the past five
years. Total borrowings by the company have seen a compound annual growth rate of 9%
from 2013 to date.
Earnings per share over the last five years has grown by 15% (CAGR) and the company
has been able to maintain a dividend payout ratio of over 60%, with the exception of 2016
when it paid out only 20% due to heavy investment in capital expenditure. We are very
optimistic the company will continue to maintain a payout ratio of 60% as stated in the
prospectus.
1.1 MTN Ghana Limited (MTN) Offer Summary
The Offer comprises 4,637,394,533 Offer Shares, representing 35% of MTN Ghana’s
issued shares after the Offer. Up to 2,489,698,667 of the Offer Shares will be new MTN
Ghana Shares to be issued by MTN Ghana to the successful Qualifying Applicants. Up to
2,147,695,867 of the Offer Shares will be Existing Shares to be transferred from the Selling
Shareholder to the successful Qualifying Applicants.
Each Offer Share shall carry the right to vote and to participate in any future dividends to
be declared and paid on the MTN Ghana Shares. Each Offer Share shall rank pari-passu
with the Existing Shares, is freely transferable and is not subject to any restrictions on
marketability or any pre-emptive rights on transfer.
FirstBanC Brokerage Services Ltd, No. 7 Volta Street, Airport Residential Area l P.O. Box 1464 Osu, Accra
l Tel: +233 (0)302 781489/781484/780402 l Email: brokerage@firstbancgroup.com l
www.firstbancgroup.com1.2 Use of Funds
The Offer is expected to raise GHS 3,478,045,900 through the sale of 4,637,394,533
ordinary shares.
Expected Use of Funds Amount in GHS
Payment to the Selling Shareholder for the Sale Shares 1,563,968,324
Payment of dividends to the Existing Shareholders 1,826,899,697
Transaction Costs 87,177,879
- Cost to be borne by selling shareholder 46,803,576
- Cost to be borne by MTN Ghana 40,374,303
Total Consideration 3,478,045,900
1.3 Details of the Offer
The Offer consists of 4,637,394,533 shares and is being made to resident and non-
resident individuals and companies who are eligible to participate under their applicable
laws. A breakdown of the terms of the Offer is as follows:
FirstBanC Brokerage Services Ltd, No. 7 Volta Street, Airport Residential Area l P.O. Box 1464 Osu, Accra
l Tel: +233 (0)302 781489/781484/780402 l Email: brokerage@firstbancgroup.com l
www.firstbancgroup.comDetails of Pre-Offer & Post-Offer Shareholding if Fully Subscribed
Pre-Offer Shareholding
Number of Shares Percentage of Shares
Investcom Consortium 10,496,380,000 97.55%
MTN Dubai Limited 10,760,000 0.10%
Zent International Limited 252,860,000 2.35%
Existing Shares (Pre-Offer) 10,760,000,000 100%
Offer Details
Number of Shares Percentage of Shares
Offer Shares (Total) 4,637,394,533 35.00%
Subscription Shares (Offer Shares by subscription) 2,489,698,667 18.79%
Sale Shares (Offer Shares by transfer from Selling
Shareholder) 2,147,695,867 16.21%
Price per Share GHS 0.75
Expected Proceeds from the Offer GHS 3,478,045,900
Post-Offer Shareholding
Number of Shares Percentage of Shares
Investcom Consortium 8,348,684,133 63.01%
MTN Dubai Limited 10,760,000 0.08%
Zent International Limited 252,860,000 1.91%
Aggregate holders of Offer Shares 4,637,394,533 35.00%
Total Issued Shares (Post-Offer) 13,249,698,667 100.00%
1.4 Applying for Shares
The minimum subscription of each Qualifying Applicant under the Offer must be for a
minimum of 10 Offer Shares amounting to GHS 7.50 and, thereafter, any additional Offer
Shares subscribed for must be in multiples of 10 amounting to GHS 7.50, with no
maximum on subscriptions.The latest time for receipt of Application Forms is 17:00 hrs.
GMT on 31st July, 2018.
Oversubscription
Should MTN Ghana receive applications for Offer Shares in excess of 4,637,394,533
ordinary shares or 35% of the issued shares of MTN Ghana, the Directors shall not issue
additional ordinary shares of MTN Ghana to satisfy the extra demand. Any monies
FirstBanC Brokerage Services Ltd, No. 7 Volta Street, Airport Residential Area l P.O. Box 1464 Osu, Accra
l Tel: +233 (0)302 781489/781484/780402 l Email: brokerage@firstbancgroup.com l
www.firstbancgroup.comreceived in respect of applications, and for which Offer Shares are not allotted, will be
returned to the Qualifying Applicants within ten (10) days of the allotments. Refunds after
this period will attract interest at the BoG policy rate until the refund is made unless the
Company can prove that the default in the repayment was not due to any misconduct or
negligence on its part.
In the event of an oversubscription, the allotment of Offer Shares will be conducted at
the discretion of the MTN Ghana Board and in the following order of priority:
(a) First, satisfy all duly completed applications from Ghanaian Investors; and
(b) Second, satisfy all duly completed applications from other Qualified Applicants who
are not Ghanaian Investors.
1.5 Minimum amount to be raised
The minimum aggregate amount to be raised for the Offer to be declared successful and
implemented is GHS 347,804,590 (the “Minimum Amount”). If MTN Ghana only raises the
Minimum Amount under the Offer, then MTN Ghana shall utilise the amount raised as
follows:
Expected Use of Funds Amount in GHS
Payment of dividends to the Existing Shareholders 293,912,559
Transaction cost 53,892,031
Total Consideration 347,804,590
In the event that the Minimum Amount is not obtained, then MTN Ghana shall in its sole
and absolute discretion be entitled to regard the Offer as being null and void, in which
event the transactions contemplated by this Prospectus will not be implemented and all
monies paid for the Offer Shares and deposited into the Escrow Account will be returned
(without interest) to the Receiving Agents immediately after the Offer Closure Date for
onward distribution to the Qualifying Applicants.
1.6 Payment
Payment must be made in full on application. Payment may be made by cash or cheque
which should be presented at the offices of FirstBanC where the Application Form is
lodged.
FirstBanC Brokerage Services Ltd, No. 7 Volta Street, Airport Residential Area l P.O. Box 1464 Osu, Accra
l Tel: +233 (0)302 781489/781484/780402 l Email: brokerage@firstbancgroup.com l
www.firstbancgroup.comKEY MILESTONES AND TIMETABLE
Activity Date Time
Offer Commencement Date 29 May 2018 12:30pm
Offer Closure Date 31 July 2018 5:00pm
Application Review and Allotment Begins 01 August 2018 9:00am
Refund Commencement Date 08 August 2018 9:00am
End of Allotment 15 August 2018 5:00pm
SEC Approval of Offer Results 27 August 2018 5:00pm
Crediting of Offer Shares to Successful 28 August 2018 – 04
Qualifying Applicants September 2018 5:00pm
Commencement of Trading 05 September 2018 10:00am
Listing Date 05 September 2018 10:00am
Refund Final Date 06 September 2018 10:00am
FirstBanC Brokerage Services Ltd, No. 7 Volta Street, Airport Residential Area l P.O. Box 1464 Osu, Accra
l Tel: +233 (0)302 781489/781484/780402 l Email: brokerage@firstbancgroup.com l
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