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MTN Group CEO Ralph Mupita. Picture: ZIPHOZONKE LUSHABA
MTN will not be buying back its shares in the coming years, preferring instead to invest in its own growth.
In recent times, a number of JSE players, including Momentum Metropolitan, Karooooo, Old Mutual, Glencore, Netcare and Ninety One have been buying up their own shares, a sign that they see their stock is undervalued.
Perhaps the largest example of this is the Naspers stable, which launched a buyback programme in 2022 after winding down an unpopular cross-shareholding structure with Prosus.
By reducing the number of outstanding shares, a company increases its earnings per share, which often translates to a higher stock price. This is particularly attractive when management believes the shares are undervalued.
When a company announces a share buyback, it can signal to the market that management is confident about the company’s future prospects.
During an investor presentation on Monday, group CEO Ralph Mupita said management had decided to not buy back its shares, favouring instead ongoing investment into its operations.
“From time to time we get questions from our shareholders, that at current share prices don’t you want to do a buyback? It sends a message to investors that you believe the share is undervalued,” Mupita said.
Having reached a peak of R202.80 in March 2022, MTN shares have taken a beating in the market, now trading at less than half of that, at R90.72.
“We’re saying [that] we’ve taken those messages in, we’ve debated them with our advisers, we’ve debated them with the board and we feel the right allocation of capital is to the growth opportunity, [which] we believe is structural and will continue to come through. So we’re keeping our batting order of capital allocation pretty much the same and you’ll see share buybacks and specials right at the at the bottom of that list.”
He said the focus was on investing in networks and platforms, paying down the debt and then the dividend, which for 2024 was pegged at 330c.
“The board anticipates we will be able to meet that, and that’s also within our capex envelope of R28bn to R33bn for FY2024.”
In other quarters, resistance to share repurchases include potential conflicts of interest, when executives with share-based incentives get to decide on a strategy that simply boosts the value of those shares, as opposed to fundamental business imperatives such as growing operations, increasing sales and boosting profits.
This comes as MTN dipped into the red at the halfway stage of the financial year, the first time the telecom major has reported a loss since 2016, as the further devaluation of the naira and the conflict in Sudan weighed on results.
The group reported a headline loss per share of 256c for the six months to end-June from headline earnings per share of 260c a year ago. No interim dividend was declared.
Group earnings before interest, tax, depreciation and amortisation before one-off items was down 41.2% in reported currency at R29.046bn, the group said in a statement on Monday. Group service revenue was 20.8% lower at R85.3bn and total subscribers increased by 0.8% to 288-million.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
No share buybacks in MTN’s immediate future
MTN will not be buying back its shares in the coming years, preferring instead to invest in its own growth.
In recent times, a number of JSE players, including Momentum Metropolitan, Karooooo, Old Mutual, Glencore, Netcare and Ninety One have been buying up their own shares, a sign that they see their stock is undervalued.
Perhaps the largest example of this is the Naspers stable, which launched a buyback programme in 2022 after winding down an unpopular cross-shareholding structure with Prosus.
By reducing the number of outstanding shares, a company increases its earnings per share, which often translates to a higher stock price. This is particularly attractive when management believes the shares are undervalued.
When a company announces a share buyback, it can signal to the market that management is confident about the company’s future prospects.
During an investor presentation on Monday, group CEO Ralph Mupita said management had decided to not buy back its shares, favouring instead ongoing investment into its operations.
“From time to time we get questions from our shareholders, that at current share prices don’t you want to do a buyback? It sends a message to investors that you believe the share is undervalued,” Mupita said.
Having reached a peak of R202.80 in March 2022, MTN shares have taken a beating in the market, now trading at less than half of that, at R90.72.
“We’re saying [that] we’ve taken those messages in, we’ve debated them with our advisers, we’ve debated them with the board and we feel the right allocation of capital is to the growth opportunity, [which] we believe is structural and will continue to come through. So we’re keeping our batting order of capital allocation pretty much the same and you’ll see share buybacks and specials right at the at the bottom of that list.”
He said the focus was on investing in networks and platforms, paying down the debt and then the dividend, which for 2024 was pegged at 330c.
“The board anticipates we will be able to meet that, and that’s also within our capex envelope of R28bn to R33bn for FY2024.”
In other quarters, resistance to share repurchases include potential conflicts of interest, when executives with share-based incentives get to decide on a strategy that simply boosts the value of those shares, as opposed to fundamental business imperatives such as growing operations, increasing sales and boosting profits.
This comes as MTN dipped into the red at the halfway stage of the financial year, the first time the telecom major has reported a loss since 2016, as the further devaluation of the naira and the conflict in Sudan weighed on results.
The group reported a headline loss per share of 256c for the six months to end-June from headline earnings per share of 260c a year ago. No interim dividend was declared.
Group earnings before interest, tax, depreciation and amortisation before one-off items was down 41.2% in reported currency at R29.046bn, the group said in a statement on Monday. Group service revenue was 20.8% lower at R85.3bn and total subscribers increased by 0.8% to 288-million.
gavazam@businesslive.co.za
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Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.