SIMON BROWN: I’m chatting now with Zwelakhe Mnguni [from] Benguela Global Fund Managers. Zwelakhe, I appreciate the early morning time. Two sets of results yesterday. I want to touch on Aspen, but first let’s touch on MTN.
We get some insight coming through. Of course we saw the Nigeria results at the end of January – that’s their big market. We’ve seen Ghana and some of the others, Uganda, smaller markets, coming through. Short answer, a strong set of numbers and the dividend is back – and a good-looking dividend from MTN. The company is doing well. Is that a fair assessment?
ZWELAKHE MNGUNI: Good morning, Simon. It is certainly a fair assessment. MTN is back on track. I think the new leadership that took over a few years ago has made a clear strategic commitment, and they are delivering on that. So, with the dividend coming back, I think we also saw continued improvement in return on equity. It’s about 20% now, and that has been driven largely by a number of factors. I think revenue growth was fantastic, around 18% growth. And we also saw margins opening up.
Maybe to break down the revenue growth a bit more: when one looks at the voice element, that was up 5%. But if you look at the data, that grew about 36% and I do think that they did say that if you look at the volume of data traffic, it was up 53% – so fantastic execution on that front.
We also saw a few other things like them exiting the Middle East. Their Mobile Money strategy, that’s taking shape. They now have 57 million active users on that platform, where people can do money transfers and transactions. The value of those transactions has amazingly grown to almost $240 billion. That’s a growth of about 57%. So quite a good set of numbers from MTN.
SIMON BROWN: Is there still value offering here? This is a stock that’s up about sixfold since the lows of the pandemic. That’s maybe not quite a fair comparison considering [that] the pandemic was a whole different story. But trading at, what, R192 [a share] was where it closed yesterday. Do you think there’s still value here?
ZWELAKHE MNGUNI: Yes, I’d certainly say there is still a bit of value, but certainly less than what was there a few years ago, or at least a few months ago, the reason being that they are still working to unlock value. One of the transactions that they’re doing is to sell their towers to IHS [which is] listed in New York. I think that would unlock some value for shareholders, but now we are talking incremental value rather than just a big jump in value. So certainly there is still some value.
The returns are decent. I think going forward we should see data and Mobile Money being the key drivers of growth, so that that’s how value would be unlocked.
SIMON BROWN: Quick question around Aspen. Aspen’s also had a good recovery, although it was, what, R280 [a share] middle of last year. It’s come back a whole bunch. The results themselves, not to dis [Stephen Saad] and his team, they were, I suppose, in line; they were okay. What struck me, I went back to some five years ago, had a look at their debt, R55 billion. [It’s] now down to, what, about R12 billion. They really have unwound that debt and strengthened the balance sheet. You can’t help thinking that [Stephen] Saad must be looking for some acquisitions; that’s in his DNA.
ZWELAKHE MNGUNI: I think that’s always a big concern with him. He’s certainly done well to have reduced the debt to where it is now, but I think it was almost forced upon them; the share price collapsed, and I think that hurt quite badly,
I think going forward he might start looking for acquisitions. The debt is in a good place. I think the manufacturing business, he’s kind of re-engineered the solution there, where they were running low on capacity utilisation – and he’s turned [it] around by basically getting to this Covid-19 [vaccine] contract manufacturing … to produce for themselves. I think that is quite a fantastic turnaround.
But certainly as the cash flows come in he might start looking for things to acquire. He’s too growth-focused, in my opinion.
SIMON BROWN: Yeah. He doesn’t want to have an ex-growth company. That’s not his style in the least. Zwelakhe Mnguni, Benguela Fund Managers, I appreciate the time this morning.