Analyst recommendation

                                                                                                           As at 23 November 2024

Executive Summary

1. • Top line was in line with management expectations, but cost inflation was elevated in this period from various Opcos
   weighing in on margins which were impacted by currency volatility and conflict in Sudan.
   o Blended inflation of 13.9% in 3Q24 compared to 17.1% in 3Q23.
   o Group EBITDA increased by 3.4%. The EBITDA margin declined by 9 percentage points (pp) to 33.8%
   • The balance sheet remains robust. Group net debt/EBITDA at the holding company (Holdco) level held firm at 0.8x
   as of 30 September 2024 (31 December 2023: 0.4x).
   o Up streamed cash of R2.2 billion from MTN operating companies over the quarter.
   o The ongoing conflict in Sudan has resulted in disruptions to service delivery and a decline in the customer base,
   contributing to the revenue shortfall in the MENA region.
   o Despite facing challenges, MTN sustains a robust liquidity position of R32.1 billion as of 30 September 2024.
   o The board anticipates a dividend of 330 cents per share for FY24.
   o MTN has successfully concluded the sale of its South African tower infrastructure, transferring more than 5 700
   towers to IHS Towers (NYSE: IHS)
   • Intrinsic value of R92.
   a. We update our expectations given the recent devaluation in the naira.
   b. Our bull case is still supported by the inherent valuation in the Fintech business, and we saw a glimpse of that in
   the recent Mastercard offer.

Analyst thesis

The current price is discounting no value for MTN Nigeria (R14 of the R92 IV), previously was R18 resulting in our
positive view on the asymmetric upside. Indeed, most of the WECA valuation is ignored by the market too.
• Due to the sharp devaluation of the naira, this ultimately results in a higher cost of doing business which affects the
entire business model and makes it harder to drive margin recovery.
• Even though Nigeria offers potential advantages, the uncertainty or risk remains high, and there's no known trigger at this moment that would alleviate that risk perception.
• The asset realization process needs to continue which should streamline the portfolio, reduce debt and risk, and enhance returns.
• A significant risk remains MTN’s material exposure to forex. The sum of the parts (SOTP) valuation shows that 29% of the exposure comes from South Africa, and the rest is volatile currencies and inflation exposure.

Results

Results summary

In 3Q24, group service revenue decreased by 13.4% compared to the same period last year.
• The miss was impacted by MTN Nigeria as a result amidst increasing inflation and continued naira volatility.
• MTN SA’s EBITDA grew by 2.6% in the quarter.
• MTN SA’s EBITDA margin decreased by 0.2pp to 36.4% (down 0.1pp to 36.3% excluding gain on disposal of towers).

Valuation

Table 3: Valuation

Table 6: Valuation multiples

Source: FactSet