Nigeria | NGX

In our view, MTNN may be set for another data-driven robust earnings performance in FY'22. The recently released Q1'22 financial statement, for example, showed that data contributed 66.6% of total revenue growth, while the voice segment (54.9% of total sales) contributed only 16.5%. The primary drivers of data revenue growth are: 1. Increased usage from active data customers, 2. Conversion of voice-only customers to voice and data users, 3. Improved network rollout.

The local African currency (LCY) bond market remained bearish in April, with the AFMI Bloomberg African Index shedding 4.40% in April—the worst performance in 25 months. These weak sentiments may have primarily reflected the second-order effects of the Russia-Ukraine war, which continues to pressure global inflation. In addition, global central banks appeared to have shown a greater disposition to tightening, despite weaker growth expectations. With the 50bps rate increase in the U.S and the sustained risk-off sentiments of foreign investors, the prognosis is for yield uptrend to persist across African bond markets. Another notable concern for some foreign investors could be the likelihood that pass-through from the Russia-Ukraine war may continue to drive elevated inflation, currency weakness, and less appealing carry trade opportunities in Africa.

We raise our 12-month target price for GUINNESS to N86.68/share (vs N74.60 previously) to reflect the impact of a better-than-expected 9M’21/22 earnings, improved net cash position, and higher price growth expectations across our forecast horizon. The section below highlights the prominent drivers of our target price revision: While our FY'21/22 revenue growth projection is largely unchanged, we have slightly adjusted our five-year CAGR to 13.9% (vs 12.7% previously). This revision reflects an expected average price increase of c.6.3% over the next five years (vs 5.0% previously), reflecting an improved capacity to transfer cost burden across the industry.

We maintain our optimism on WAPCO and forecast a price induced margin expansion to 22.3% (+1.1 ppts YoY). In our view, WAPCO has been playing within a sellers' market since H2'20, a period that has been characterised by relatively inelastic demand response to price changes. As a result, margins continue to expand despite a high inflationary environment.

Following the release of its Q1’22 numbers, we revise our FY’22 earnings forecast to N24.87 billion (vs N22.70 billion previously). This new projection hinges on expected improvement in generating capacity, cost optimization, and improved cash generation. Thus, we raise our 12- month target price to N1.36 and retain our BUY rating on the counter.

ETI’s Q1'22 result reflected a continuum in revenue consolidation from FY’21. The overall earnings improvement highlighted strong growth in its digital banking segment vis-à-vis non-interest income, and improved net interest margins on the back of the ascension in yields in most parts of its Pan African subsidiaries. We forecast a FY'22 earnings of $392.0 million (vs $394.1 million previously) on the potential impact of higher yields and sus- tained digital banking traction. Further aided by the sustained containment of operational cost, we estimate that dividend payout in FY’22 could poten- tially surpass that of the previous year (0.16 US cents).