Why MTN hasn’t fired up Uganda’s stock market

By Musinguzi Blanshe
Posted on Wednesday, 21 December 2022 14:03

Passengers use their mobile phones at the departure lounge of the Entebbe international airport in Entebbe, Uganda January 26, 2019. Picture taken January 26, 2019. REUTERS

A year after listing on Uganda’s stock market, MTN – the country’s largest telecom – hasn’t triggered the buzz that many hoped it would despite impressive growth and dividend payout.

Its share price has been flat for months. The company’s performance may have prompted the government to allow Airtel Uganda, the second largest telecom company, to delay listing on the market.  

As per the company’s latest unaudited financial results, it registered a 21% year-on-year growth in net profit of Sh292.65bn ($80m) for the first nine months of 2022, up from Sh241.9bn ($66m) recorded in the same period last year. 

The company has paid a dividend of Sh336bn ($96m) in three installments to shareholders who acquired shares in the company following its listing in December 2021.  

The latest pay of about $33m was cashed on Tuesday 20 December.

The roughly $30m dividend paid for September and that of December were for the financial year 2022, a company official explained, meaning that the company has already paid $63m, roughly 78% of its net profit for nine months of this year.

A third dividend installment for 2022 will be paid in June next year, an official at MTN said.  

Only two companies have paid a higher dividend than MTN: Umeme, the largest electricity distributor, and British American Tobacco (BAT), an official of Uganda Securities Exchange (USE) tells The Africa Report.  

Despite the impressive growth, the company’s share price on the stock market has been static at Uganda Sh180 (0.049 cents) for months.

This was implicitly the company’s initial public offering price. 

The share price was Sh200 but buyers received a 10% bonus for the shares they bought.

In its year of trading, MTN’s share price increased to Sh205 at one point and decreased to Sh160 before stabilising at Sh180.

The company has also commanded 45% of trading on the Uganda Securities Exchange.  

A puzzle  

Bob Musinguzi, manager for Securities Central Depository (SCD) at Uganda Securities Exchange tells The Africa Report that it’s puzzling as to why investors aren’t appreciating MTN’s impressive performance. 

“The company is steadily growing, the company is steadily paying a return to its shareholders, ideally, the appreciation of the reaction should be paying more for that particular asset which is the company,” he says.

Perhaps, Musinguzi says, “investors are reading something maybe we are not understanding […] maybe, they feel the company can do more”.

He adds that investors who drive demand and supply for shares are sometimes driven by wrong perceptions.  

Calvin David Bateme, a research analyst at Crested Capital, a brokerage firm, says investors are always on the lookout for return on investment and have various options of where to invest.

“When the yields on the fixed bonds started picking up, we saw a migration of some people investing more in the fixed income sector and letting the equities aside,” he says.  

Dividend payout

Bateme explains that the share price of companies sometimes doesn’t fluctuate when dividend payout dates get close.

Only shareholders who had been fully registered by the start of the month will qualify to receive a dividend on 20 December, meaning there has been less incentive to trade MTN shares for three weeks, he said.   

In a written response to The Africa Report, MTN says the company “has no influence on the share price. The share price is purely determined by market forces of demand and supply”. 

We couldn’t underestimate the negative effects of Covid-19 on the economy. While our economy was still recovering, the Ukraine war began. The timing was bad.

MTN said it has posted resilient performance this year despite a tough macro environment, adding that it “has paid out a dividend three times this year. The total dividend paid in 2022 translates to Sh15.1 per share providing a good dividend yield to our shareholders”. 

This dividend, however, isn’t a substantial pay for thousands of ordinary shareholders who invested in the company’s IPO. For instance, a person who has invested $100 in MTN shares gets a dividend of roughly $7 after being charged withholding tax. 

Andrew Muhimbise, an independent analyst says no one is winning from the current scenario.

“MTN’s share price affects its credit rating when they are looking for international credit and for shareholders, you bought a share at 180 and it’s 180 a year later, you don’t benefit,” he says. 

Muhimbise adds that this may have dampened the mood, prompting Airtel Uganda to think twice before listing. The company was expected to list this year but its listing was postponed to next year. 

Optimism and reality 

At the time of listing, there was optimism because arguably the largest company in the country was listing on the stock market.

During MTN’s listing process, more than 74,000 new trading accounts were opened on the Uganda Securities Exchange, which was almost double of accounts that existed.  

Pushed by the government to go ahead with it during the pandemic, MTN raised a record $152m in an IPO, which was Africa’s largest in 2021, selling 2.9 billion shares. 

After the listing, Capital Markets Authority CEO Keith Kalyegira told The Africa Report that the USE was close to attaining frontier market status as defined by the Morgan Stanley Capital International (MSCI) index.

To attain the status, the USE needed two listed companies whose net worth is at least $700m. MTN was the first and Airtel was expected to be the second.  

Airtel has not listed but the hope is on, albeit pushed to 2023. Kalyegira said in a recent interview that Airtel’s listing was delayed because of the prevailing economic situation.

“We couldn’t underestimate the negative effects of Covid-19 on the economy. While our economy was still recovering, the Ukraine war began. The timing was bad,” he said.  

“Sometimes you don’t insist and force the listing for the sake of ticking the box but it’s important that the listing is successful. Market conditions have to be right.”  

Only 66% of floated shares were bought, half of which by the National Social Security Fund (NSSF), East Africa’s largest provident fund with assets worth $4.6bn. 

MTN will float shares that were never bought when Airtel lists, Kalyegira says. NSSF is expected to invest heavily in Airtel’s IPO and it could also have been a factor in delaying the listing. 

The fund paid savers more than $300m in midterm access this year and uncertainty over the fund’s leadership still looms as government officials fail to reach a consensus on the renewal of the contract of Richard Byarugaba, the CEO who steered the company’s success in the past decade.

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