Wednesday, December 23, 2015

Seeking Alpha: MTN Group Desperately Needs To Get Its Act Together

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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