South African mobile operator MTN continued its sustained trade through a technical resistance level of R160 on the JSE on Thursday (20 September), and analysts see further long-term value in the group.
At close on the local exchange, MTN gained 93 cents to R161.56, placing its market cap at R304.54 billion and with a 52 week range of R126.65/R163.89 per share.
However, rival operator Vodacom continues to be hampered by an apparent ceiling price of R110.
Having reached a high of R112.22 on Monday (17 September), Vodacom has steadily slipped to a closing price of R106.09 on Thursday (20 September), off 2.54%, or R2.76, in intraday trade.
The group has a market cap of R157.86 billion, and a 52 week range of R85.30/R112.22
The All Share Index slipped 0.17% to 36,400 points.
Fred Teeling-Smith, an analyst at Stanlib said: “It does appear as though the R110 level for Vodacom is a ceiling for the price currently. I believe that the Vodacom price is all about its dividend yield at the moment and it appears that Investors are happy to pay for that at the moment. I do not think that the dividend in Vodacom is under threat in the short term and investors are prepared to pay for this.”
“At R110 we do think that Vodacom is at the top end of its valuation range; while at R160, we still think MTN offers long-term value,” he said.
Teeling-Smith said that, while short-term issues around extraction of cash from Iran and slower revenue growth in Nigeria are likely to impact MTN’s valuation in the near-term, a weaker ZAR has a positive impact.
“While we are seeing slower local currency growth in Nigeria it’s translated earnings are still likely to remain strong. We still believe in the long term story for MTN, continued voice growth and an increasing data contribution in markets that remain under penetrated,” he said.
“After a good run since the beginning of April, MTN has outperformed Industrial index by approximately 10%. It does appear as though R160 is a level that short-term investors are prepared to take profits,” the analyst said.
Nadim Mohamed, investment analyst & partner at First Avenue Investment Management, said of the two operators: “We see the future growth prospects for Vodacom and MTN as fully-priced at these levels, even though their dividend yields are quite attractive.”
“However, the value unlock of tower sharing in some of MTN’s African operations might well surprise us going forward.”
The analyst said that investors continue to wait to see how the aggressive pricing that Cell C introduced to the SA market plays out.
“If Cell C is able to steal enough share from MTN and Vodacom, it may prompt them to match the 99c deal, which would dilute margins significantly,” he said.