MTN Nigeria’s 9M 2023 Revenue growth was driven largely by double-digit growth in voice ((+10.6% y/y to N834bn) and data revenue ((+36.4% y/y to N749.53bn), amidst inflationary growth in Operating Expenses (+22.2% y/y to N417.42bn). A 174.41% y/y increase in Net Finance Cost to N375.96bn contributed significantly to the decline in Pre-tax Profit, which was down 42% y/y to N232.47bn in 9M 2023 from N400.67bn in 9M 2022.
Dangote Cement’s operations were affected negatively by the election uncertainty and cash unavailability which impacted business operations in Q1 2023. The company also noted that the significant FX devaluation in Q2 2023 also hampered sales volumes. Consequently, the group sales volume declined 2.3% y/y to 20.29m MT in 9M 2023. However, the combination of increases in prices and strong volume growth from its Pan African operations came to the rescue, resulting in Revenue growth of 28.7% y/y in 9M 2023. We believe constrained purchasing power and low CAPEX expenditure by the government continue to affect sales volumes across the whole industry.
United Bank of Africa Plc (UBA) will likely grow gross earnings by 116.5% to c.N1.7 trillion by FY'23 end (vs a five-year average of N587.4 billion), aided by a projected surge in non-interest revenue to N698.4 billion (FY'22: N213.1 billion) and a 74.0% accretion in interest income. The expected surge in non-interest revenue should be inspired by the rise in net fair value gains on derivatives recorded in the second quarter of the year - a positive offshoot of the material naira devaluation and associated derivative revaluation, with the bank mainly net long in dollar assets. The further deterioration in the I&E window in the ongoing quarter (c.815.32/$ as of the close of 31st October 2023) suggests that there could be scope for more currency-inspired accretion. Similarly, interest income should be supported by the upward movements in fixed-income yields inspired by material re-ratings at the NTB and OMO markets, the removal of the cap on the SDF, and the overall hawkish disposition of the CBN. The impact of the above drivers will likely remain evident in FY'24.
Elsewhere, the bank's huge stock of cheap funding (low-cost funding mix of 93.8% as at 9M'23) and aggressive expansion of retail presence should lead to a relatively subdued increase in interest expense (67.6% YoY vs our projected 74.0% increase in interest income) over the ongoing financial year. Hence, we see legroom for a 1.1ppts increase in NIM to 6.5% in FY'23. This NIM should support a total operating income growth of 126.1% over the full-year period (vs 145.6% YoY in 9M'23). Given this, passthrough from currency-induced gains, and our expectation for a more measured increase in operating expense (+37.8% YoY vs the employee wages and regulatory charges induced 41.2% increase in 9M'23), we see latitude for an improvement in the cost-to-income ratio to c.36.0% in FY'23 (vs 59.1% in FY'22).
BUACEMENT embarked on an aggressive capacity rollout between 2018 and 2022, growing from 5 million metric tonnes (MT) at the start of the period to 11.0MT in January 2022, aided by the 6.0MT capacity expansion across its Kalambaina plant in Sokoto and Obu plant in Edo. Its management took the capacity expansion drive further in 2023 by commencing an additional 6.0MT plant capacity project, following a $500 million capital raise from the International Finance Corporation (IFC). This project should raise the total installed capacity to 17.0MT by 2024, boost economies of scale potential, and drive down cash costs per ton.
In this report, we adjusted our revenue and earnings forecast upwards to reflect increased optimism in both the power and hospitality businesses and capture the potential impact of the commencement of the company's oil and gas business on valuation. For the former, the likely increases in available capacity and foreign earnings from the exportation of power to the West African power pool amidst an even weaker Naira support our optimism. Increases in the average daily rate (ADR) for the hotel business (+38.0% YoY) would also help with revenue accretion for the hotel business. Similarly, aided by valuation by parts, we incorporate potential earnings accretion from the commencement of the oil and gas business, which we valued using NAV. Our parts valuation resulted in a target price of N7.75 and a BUY recommendation on the stock
The Afrinvest weekly sentiment weakened to 1.7x (previously at 2.0x). This week, we expect market performance to be dictated by Q3’23 earnings release.
