London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
91p worth a tranche. GL all
"FINTECH FRENZY: Tap Into Africa's Mobile Money Boom".
In the 'what to buy' section Airtel Africa is described as "one of the purest plays on the market". The other LSE option mentioned was Wise.
Swings and roundabouts of inflation and currency have many different sides that have opposing viewpoints,but, increasing numbers using the products cannot hide the direction of the company...Well up.....and consistently up...A bargain at this market cap....
The Naira is down another 3% this week.
Today, you now only get £485 for 1,000,000 Nigerian Naira. At the start of the current financial year this figure was closer to £1,760.
So as we enter the new Financial Year, conversion of the Dividend, (which is declared in USD) and any of the various calculations that one might use to calculate Enterprise Value, (which we trade in GBP), is now diluted to one quarter of what it was 12 months ago.
I appreciate that Nigeria makes up only about 35 -40% of the Groups overall operations, but it should also be borne in mind that in the first 6 months of the current year, 12 out of the other 13 African nations in which Airtel have a presence also experienced a currency devaluation; with three of these (Zambia, Kenya and Malawi), being between 10 and 20%. Only the Central African Franc provided a token Re-valuation to counteract the other 13.
Airtel is a great business, and has delivered sustained growth in their year on year financial performance over the 6 /7 years that I have been invested. Ever expanding coverage, more services, and a mobile banking capability is great if you are a customer paying in Naira, or an employee being paid in Naira, or a supplier invoicing in Naira.
Yes, Nigeria might be the fastest growing economy in Africa, and Yes, the population may double over the next 25 years, but the fact remains that, going into FY '25, the returns on our investment (be it dividends, or Valuation of the Enterprise, which translates into share price), is now calculated at just c25% of the exchange rate that it was a year ago, on what is the cornerstone network in their portfolio.
Usually, when it comes to selling I am hopeless at converting intuition, into action. But in the case of AAF, in the past week I have sold c85% of the c50k shares that I had.
Have I been too rash?
The one possible saving grace is that the Dividend cover has been 3x., and this may be enough to afford what will be part year effects of the recent devaluations, - but for the year that is just about to start, it will be this time next year, before we know whether the full effect has been priced into an SP of c95p.
According to Bloomberg, Nigeria's economy grew faster than anticipated in the fourth quarter of 2023 so, with regard to Airtel, we can only hope that the bad news has now been priced in. No shortage of internal issues in Nigeria though.
R_hnew
Nigeria accounts for 40% of their business/income..it was by far their biggest customer base. That's why it has had such an impact.
@ r_hnew/ I've been to Africa, several times, tho I haven’t been to Nigeria, I have been to Ghana which pretty close considering the size of Africa, a slave coast originally which I travelled most of going up lake Volta, the one thing I saw in my journeys is lots of them had phones even though they lacked many other needs.
This may be a blip as many countries suffering due to many variables in our current setting but if you read the link I provided which the information has been based on statistics: Nigeria is the biggest economy in Africa and one of the world’s fastest growing economies – predicted to be in the top 20 by GDP by 2035. It is also predicted by the UN to nearly double its population to over 370 million people by 2050
AAF operate across 14 African countries why would Nigeria alone drag it down the extent it is currently languishing at? If the Kemi deal is to be believed then why the the following article
https://www.thecable.ng/consumers-no-longer-able-to-afford-bottle-of-beer-nigerian-breweries-ceo-speaks-on-fx-crisis/amp
Is a mobile phone more important than a beer? “Probably”. (Now where have I heard that before 🤔)
This may also add to the disconnect in the share price announced 20th
https://developingtelecoms.com/telecom-business/telecom-regulation/16243-regulator-investigates-atc-airtel-africa.html
Good luck all….
Kemi Badenoch to sign first-of-its-kind trade and investment partnership worth 7 billion
https://www.gov.uk/government/news/uk-signs-landmark-economic-partnership-with-nigeria
This article tells you the severity of the situation. The Naira has experienced a 230% drop in value over the past year. The joys of investing in Africa. I would not bank on a quick turnaround either. The South African Rand has been on a steady decline for 40 years.
https://www.voanews.com/a/nigeria-grapples-with-soaring-inflation-plummeting-currency-/7492283.html
Thanks Fishinggardener. I didn't appreciate the devaluation was that severe - on your figures it's almost 70%, truly shocking over such a short period. I think you are right that devaluation is a feature of investing in Africa which has to be taken into account by investors, but the severity of the current situation is unusual - probably a symptom of worldwide economic malaise (apart from the US which seems to be doing fine, further worsening currency issues for AAF)
Naira watchers. On the assumption this continues, there will be an opportunity again in this stock. I see the brokers bandwagon has started again so will add when it falls and trim when it rises. Aiming for a near £zero cost holding and the volatility in this SP may well help me achieve that ahead of target.
Not for widows and orphans.
My Web link didn't seem to convert into my post, so I have copied the relevant paragraph below here:
Analysts' forecasts are presented on a 'reported currency' basis. These include inherent
assumptions for currency forecasts which are specific to each individual broker. In our
latest results report for Q1'24, Airtel Africa highlighted the following currency sensitivities:
"The expected annualised impact of the devaluation in Nigeria incurred in the month of
June 2023 is expected to be between $850m and $900m on annualised revenues, and
between $450m and $500m on annualised EBITDA. With respect to currency devaluation
sensitivity going forward, on a 12-month basis, a further 1% USD appreciation across all
currencies in our OpCos would have a negative impact of $48m on revenues, $24m on
EBITDA and $21m on finance costs (excluding derivatives). Our largest exposure is to the
Nigerian naira, for which a further 1% USD appreciation would have a negative impact of
$14m on revenues, $8m on EBITDA and $7m on finance costs (excluding derivatives). This
sensitivity analysis assumes the USD appreciation occurs at the beginning of the period."
More detail on this is in the investor section of the Airtel Website, and this particular page is under "analysts and Concensus" tab, at the far right of the menu options. (you have to scroll along to the right!), and then look under the link to "Consensus Forecast Data".
I am and have been a long term holder of AAF - to date as a business they have done really well over the past 5 or 6 years. - growing their customers, expanding their territories of operation, and bringing to market a great "mobile banking" product.
But i think that a problem is looming, and so, this morning, I have sold one third of my holding, and am debating reducing it further.
In FY 24 (The current Financial year), there have been two devaluations of the Nigerian Naira.
In April '23, 1,000,000 NGN converted into £1,740 GBP. Today, 1,000,000 NGN will convert into just £535.
The devaluation affects 1 out of 14 countries in which AAF has an operation, but it is their biggest market by far.
Take a look at the following link, which is a page on the investor section of the AAF web site. It is from the consensus of the ~6 brokers who follow the Company. It suggests that the effect of the Naira devaluation is going to be more than just a headwind. It will seriously impact revenues, EBITDA and Profits.
https://cdn-webportal.airtelstream.net/website/investor/main/pdf/20231004_Analysts'_consensus_vFinal.pdf
So the result for the current year is going to be significantly worse than FY '23. You can build a quarter by quarter analysis by looking at the most recent quarterly results RNS. With the second devaluation only occuring with 7 weeks of this FY remaining, my rough calculations suggest that there will be enough Free Cash Flow to cover a Flat dividend, if that's what the board felt able to do - but it would be a massively reduced cover.
My issue is the outlook for FY '25.
The effect of the two most recent devaluations will have a "whole year" effect on the business starting in April 2024, and this, I think will wipe out all the "good" down by the growth in the business, when it comes to converting their trading performance into a USD denominated dividend.
Mary BR suggests that currencies will bounce back, but generally speaking I don't think that there is much form for African currencies re-valuing against the USD / GBP. - very happy to be corrected on this!.
So, my view is that the business is achieving commendable growth, but given the sensitivities of their financial performance record, and in particular the dividend payouts, we have seen enough damage been done, to snuff out the upside of all the growth for this year and next, and my worry is that with high inflation and interest rates in Nigeria, there is every possibility that further devaluations will occur.
Read the posts directly below?
Currency devaluation is hitting profits....which translates into headwind for the share price
Anyone knows why the share is free falling since one month ?
Interestng article - seems just currency headwinds impacting reported figures - the currency losses will reverse and become currency gains again.
When this happens suprcharging all the way back to the 120s/130s.
Buy low sell high - an opportunity here perhaps but DYOR.
Https://totaltele.com/airtel-africa-unveils-new-fibre-wholesaler-telesonic/
We are all followers of the Naira now.
Adding on further weakness as during 2024 this will be up - strong growth story.
Nice big buy
12-Feb-24 15:22:00 102.00 1,979,000 Unknown* 102.00 102.20 2m O
Big potential here now:
https://www.capitalfm.co.ke/business/2024/02/airtel-eyes-africas-fibre-connectivity-market-with-new-entity/
Price Consolidated = ready for a move back up
@swingman
As @blahblahdoh states, the CEO hasnt been sacked. He will become the chair of the groups charity arm. I understand he is very passionate about that and the company undertake many projects to support local communities.
They haven't "sacked" Olusegun Ogunsanya , he is retiring in July and becoming the head of their charity organisation. His replacement, Sunil Taldar, has already worked for the parent company for 15 years, so no real reason to expect a radical change in direction based on his appointment. The family have always owned most of the company, which is really a spinoff from their main Indian operation. They started with 100% before deciding to launch it on the London market - recent purchases may seem like a large amount of money to you, but to them it's just a small additional percentage. It's probable that they just see the SP as good value at current levels. Unless you expect the Naira to be devalued every year, the growth here remains spectacular. We should, unfortunately, expect devaluation from time to time though (-:
Yes it's. bit strange since the large buy by the family at a large discount, it has started dropping. Very little news about the company in any press. This FT100 company dropped over 10% no mention anywhere.