BROKERS’ NOTES: Buy AdvTech, sell MTN

Rowan Williams, portfolio manager: Nitrogen Fund Managers 

BUY: AdvTech

AdvTech is a long-listed education group on the JSE and we see it as one of the few secular growth stories on the stock exchange. There’s still significant demand for private education in South Africa and Africa, and it’s very well positioned in primary, secondary and tertiary education to meet the continent’s needs. AdvTech is reaping the rewards of an extensive capex programme it embarked on a while ago, it is seeing significant enrolments in all its facilities, and there are economies of scale across the group with its centre of excellence. It’s trading on a forward p:e of less than 10 and a p:e growth ratio of less than one, so that makes the stock very attractive.

SELL: MTN

The latest corporate decision was to take 2,500 cellphone towers away from telecoms infrastructure provider IHS Towers (of which MTN owns 26%) because it got a better proposal from American Tower Corp in Nigeria. It just demonstrated the pressure that MTN Nigeria is under from a cost perspective due to the weakening naira, as the tower contracts have to rebase in dollars. It’s also indicative of the pressure that the group is under in two key areas of its operations: Nigeria and South Africa, where load-shedding and a weak consumer environment will put pressure on margins. We feel the Mastercard investment in the fintech operation is also too small to imply a see-through valuation for the full fintech business. It may be strategic for Mastercard, but it’s not enough to move the needle for MTN.