MTN soars as oil boosts outlook

Reaching market values last seen almost seven years ago and it’s partly down to the rally in oil prices.
Image: Waldo Swiegers/Bloomberg

Africa’s largest wireless carrier, MTN Group Ltd., is reaching market values last seen almost seven years ago and it’s partly down to the rally in oil prices.

MTN shares climbed 5.3% in Johannesburg on Wednesday to their highest since August 2015. Oil rose above $110 a barrel as Russia’s invasion of Ukraine deepened concerns about a global shortfall. The soaring price of crude is a windfall for the economy of Nigeria, Africa’s largest producer and the mobile-phone company’s biggest market.

The stock has risen for four days in its longest winning streak since November last year, also supported by recent positive earnings updates from MTN’s locally listed units in Ghana and Nigeria.

MTN “has been putting out a good set of results across different markets over the past few weeks,” said Greg Davies, a money manager at Cratos Capital in Johannesburg. “The share is getting a further push from uncertainties caused by the current Russian-Ukraine war, and what that means for oil supplies.”

Oil prices at the highest since 2013 could improve the prospects of success in talks to ease sanctions on Iran, holder of the world’s No. 2 natural gas and No. 4 crude reserves, Davies also said. MTN has struggled to repatriate funds from the major market due to the restrictions related to the country’s nuclear power development.

The MTN management team has executed well on strategy in key countries, said Peter Takaendesa, head of equities at Mergence Investment Managers in Cape Town. “We expect MTN to resume paying dividends as gearing keeps reducing and their rest of Africa operations contribute more cash to the group as repatriation is looking better for now.”

MTN investors also stand to benefit from the company’s de-risking program, which has seen it exit Syria and Yemen, and progress on the sale of some assets, said John Davies, a senior analyst at Bloomberg Intelligence. “This progress may deliver a dividend above the median consensus of R3.50 a share when it reports next week.”

© 2022 Bloomberg

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