Emerging market stocks have had a bad year in general, with most of
the diversified indexes showing double-digit losses. South Africa's MTN Group (OTCPK:MTNOY) has done substantially worse, falling more than 50% this year and doubling the poor performance of the iShares MSCI South Africa Index (NYSEARCA:EZA),
as the company has faced competitive challenges in many African
markets, ongoing executive turmoil, and a huge regulatory fine in
Nigeria.
That the shares seem significantly undervalued and
represent a diversified play on the growth of Africa is really the only
reason to continue to put up with the drama and volatility. MTN Group
does do some things right, and the company is seeing strong performance
from mobile data and mobile money, but the company desperately needs to
name a strong candidate as CEO and craft a plan that will see the
company compete profitably in its markets.
I believe that mid
single-digit long-term revenue growth and high single-digit FCF growth
can support a fair value close to $14 for the ADRs. That represents a
substantial erosion of value over past articles on this company, but the
movement of the rand against the dollar (from around 10.50 to 15.20)
has done a lot of the damage. Cooperatively resolving the fine in
Nigeria, leveraging growth potential in Nigeria, Iran, and Ghana, and
competing intelligently in South Africa would all help drive value apart
from macroeconomic factors like currency rates.
Read more here:
MTN Group Desperately Needs To Get Its Act Together
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