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The Finance Ghost: Tale of two MTNs, Rautex, the poultry industry and Harmony

The Finance Ghost: Tale of two MTNs, Rautex, the poultry industry and Harmony
The Finance Ghost
By The Finance Ghost
5 May 2024
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MTN Ghana turns in a good showing while the mobile provider ponders what to do about the dismal performance of its Nigerian subsidiary. No such worries over at Raubex, a mid-cap that’s worth watching, and at Harmony, which has been making hay while gold shines. The poultry sector also gets a break.

MTN isn’t shy about operating in risky markets. The thesis is that these markets offer significant growth prospects, with continuing increases in smartphone penetration and the opportunity to offer a variety of fintech services to an unbanked population. On paper, it all sounds very good. In practice, MTN’s share price is down 12% over five years.

The volatility continues, with MTN Nigeria reporting truly awful numbers and MTN Ghana managing to achieve strong growth above inflation.

MTN Nigeria cannot carry on like this, with forex-related problems causing havoc for the group. Even earnings before interest, taxes, depreciation and amortisation (Ebitda) are now under pressure. There are few if any highlights in the latest quarterly numbers for the business, with Ebitda down 1.9% despite service revenue increasing 32%.

Even if we ignore the forex losses in MTN Nigeria, profit after tax is down 57.8%. Include those losses and you won’t be able to use the word “profit” any more, as the company then reflects such substantial losses that equity is now negative.

How will it fix it? Aside from lobbying for regulated tariff increases, MTN Nigeria will have to slow down on capex and especially capex that creates dollar-denominated letters of credit. The depreciation of the naira is making it very expensive to undertake capex programmes that use important equipment.

Over at MTN Ghana, we find service revenue up 32.4% and Ebitda up 31.6%, so Ebitda contraction is minor and that margin sits at 55.9%. Profit after tax is up 49.3% and capital expenditure was 23.3% lower, so the cash flows look healthy as well.

Raubex: a mid-cap worth watching


Raubex has been listed on the JSE since 2007, which means it did a great job of timing the bull market before the global financial crisis. Having been through that and Covid, this is a mid-cap that has stood the test of time despite operating in a sector as difficult as infrastructure and construction.

The year ended February 2024 wasn’t meant to be an exciting one for Raubex, as the Beitbridge Border Post project had been completed in the prior year and that created a very difficult base for comparative purposes. The company went to great lengths to create low expectations among investors.

The market doesn’t particularly like surprises, but positive surprises are much better than negative ones. As recently as March, Raubex had guided headline earnings per share (Heps) growth of between 0% and 15% for the financial year. For whatever reason, the result is actually much better than that, coming in at growth of 15% to 25%.

That’s certainly not bad for a company that didn’t expect to grow at all. Full details will be available when the company reports on 13 May. The share price is up almost 14% in the past year.

Poultry players spread their wings


After dealing with avian flu, load shedding and the challenges facing consumers, the poultry sector really deserved a break. Earnings volatility has been immense in the past few years, and there were stomach-churning outcomes for shareholders in peak-to-trough share price moves.

If you suffer from vertigo, avoid drawing a Quantum Foods share price chart – recent shareholder register activity has taken that one to the moon, with continuing speculation about how the strategic shareholding structures might play out. There are a few different parties involved there.

Away from a world of share price volatility, we find vastly improved operating conditions for these companies. The percentage increase is almost a bit silly, like at Astral Foods, where Heps for the six months to March is up by between 435% and 445%. It’s crazier at Quantum Foods, where Heps is between 21.4 and 21.9 cents versus just 2.9 cents in the comparable period.

In perfect Harmony


In the commodities game, mining houses need to take advantage of every upswing in prices. With the average rand gold price up by 17% year on year for the nine months to March, this was a period in which Harmony Gold needed to make hay while the sun was shining.

And make hay it certainly did, with gold production up by 10% and all-in sustaining costs (AISC) down by 2%. Along with the positive move in gold prices, this led to a vast increase in free cash flow and a solid net cash position on the balance sheet.

Full-year production guidance has been increased and AISC guidance has come down, so key metrics that are under Harmony’s control are trending in the right direction.

The Harmony Gold share price is up more than 80% in the past 12 months. When things go well, you can generate excellent returns in the mining sector. Refer to your friendly local platinum group metals miner chart for an example of what happens when things go badly. DM

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R29.


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