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Weak Fundamentals Hurting Airtel from London to Lagos

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Airtel Africa Plc - Investors King
  • Weak Fundamentals Hurting Airtel from London to Lagos

Airtel Africa, a subsidiary of India’s Bharti Airtel Ltd, has been on the decline since it listed on London Stock Exchange (LSE) and Nigerian Stock Exchange (NSE) as investors seem wary of the fundamental issues affecting the company’s growth.

Unlike its rival in Africa, MTN Group, Airtel Africa has incurred more than $4 billion in debt, yet unable to broaden its coverage to compete effectively with MTN in Africa.

In October 2018, Airtel raised $1.25 billion in an initial round of pre-IPO funding, and in January 2019, another $200 million was raised for expansion.

Similarly, Bharti Airtel Ltd is struggling back home in India with mounting debt and a year-long price war with rivals.

While Airtel group continues to sell its ’14 key operations’ in Africa as the key to future growth, investors are concerned about the instability in emerging economies and lack of reach needed to compete efficiently, especially after what happened to MTN Nigeria in recent years.

Raghunath Mandava, chief executive of the group, said: “The 14 countries where we operate offer strong GDP growth potential and have young and fast-growing populations, low customer and data penetration and inadequate banking infrastructure. These fast-growing markets provide us a great opportunity to grow both our telecom and payments businesses.”

However, a fund manager with Scottish Investment Trust Plc, Ally McKinnon, who said he didn’t participate in the IPO, pointed to the level of vulnerability of telecommunication companies in emerging markets.

According to him, “Once you’ve got the network built, you’re vulnerable because you’ve got assets in the country, you’re a big company that makes money, or makes cash flow at least.”

Another analyst with New Street Research, Alastair Jones, said the company exposure to Nigeria and weaker position compared with rivals is an issue.

“Clearly it’s a more difficult market at the moment for African telcos,” said Jones, who doesn’t have a rating on Airtel, in an interview on Friday. “The regulatory risk around the region is elevated given what has happened with MTN over the last few years.”

Despite been the third most valuable company on the Nigerian Stock Exchange and adding more than N1.3 trillion to the exchange market capitalisation, Airtel Africa has failed to replicate MTN Nigeria success as investors are more concerned about its capability to compete with MTN Nigeria and at the same time sustain it slight edge over Globacom, an indigenous telecom giant in Nigeria.

Again, because Nigeria contributes over 35 percent of its total revenue, Nigeria remains an important market for the company. Therefore, if there is doubt about its ability to scale and compete effectively in Africa’s largest market, investors will remain wary.

Accordingly, Airtel Africa’s poor performance since its debut on the Nigerian Stock Exchange goes beyond current issues hurting the exchange as widely publicized.

Airtel does not have the same appeal as MTN Nigeria, therefore, until its management is able to address investors’ concerns and put out a growth blueprint, we may not see substantial improvement in the stock value in near-term.

Airtel Africa has dropped over 18 percent of its total market value since its debut on the Nigerian stock exchange. Down from N399.3 a share it attained on Tuesday to N323.50 on Friday. Erasing N148 billion from its market value.

Similarly, it has dropped from 80 pence it listed on London Stock Exchange to 72 pence as of Friday.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Oil Prices Continue to Slide: Drops Over 1% Amid Surging U.S. Stockpiles

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Crude Oil

Amidst growing concerns over surging U.S. stockpiles and indications of static output policies from major oil-producing nations, oil prices declined for a second consecutive day by 1% on Wednesday.

Brent crude oil, against which the Nigerian oil price is measured, shed 97 cents or 1.12% to $85.28 per barrel.

Similarly, U.S. West Texas Intermediate (WTI) crude slumped by 93 cents or a 1.14% fall to close at $80.69.

The recent downtrend in oil prices comes after they reached their highest level since October last week.

However, ongoing concerns regarding burgeoning U.S. crude inventories and uncertainties surrounding potential inaction by the OPEC+ group in their forthcoming technical meeting have exacerbated the downward momentum.

Market analysts attribute the decline to expectations of minimal adjustments to oil output policies by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, until a full ministerial meeting scheduled for June.

In addition to concerns about excess supply, the market’s attention is also focused on the impending release of official government data on U.S. crude inventories, scheduled for Wednesday at 10:30 a.m. EDT (1430 GMT).

Analysts are keenly observing OPEC members for any signals of deviation from their production quotas, suggesting further volatility may lie ahead in the oil market.

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Energy

Nigeria Targets $5bn Investments in Oil and Gas Sector, Says Government

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Crude Oil - Investors King

Nigeria is setting its sights on attracting $5 billion worth of investments in its oil and gas sector, according to statements made by government officials during an oil and gas sector retreat in Abuja.

During the retreat organized by the Federal Ministry of Petroleum Resources, Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, explained the importance of ramping up crude oil production and creating an environment conducive to attracting investments.

He highlighted the need to work closely with agencies like the Nigerian National Petroleum Company Limited (NNPCL) to achieve these goals.

Lokpobiri acknowledged the challenges posed by issues such as insecurity and pipeline vandalism but expressed confidence in the government’s ability to tackle them effectively.

He stressed the necessity of a globally competitive regulatory framework to encourage investment in the sector.

The minister’s remarks were echoed by Mele Kyari, the Group Chief Executive Officer of NNPCL, who spoke at the 2024 Strategic Women in Energy, Oil, and Gas Leadership Summit.

Kyari stressed the critical role of energy in driving economic growth and development and explained that Nigeria still faces challenges in providing stable electricity to its citizens.

Kyari outlined NNPCL’s vision for the future, which includes increasing crude oil production, expanding refining capacity, and growing the company’s retail network.

He highlighted the importance of leveraging Nigeria’s vast gas resources and optimizing dividend payouts to shareholders.

Overall, the government’s commitment to attracting $5 billion in investments reflects its determination to revitalize the oil and gas sector and drive economic growth in Nigeria.

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Commodities

Palm Oil Rebounds on Upbeat Malaysian Exports Amid Indonesian Supply Concerns

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Palm Oil - Investors King

Palm oil prices rebounded from a two-day decline on reports that Malaysian exports will be robust this month despite concerns over potential supply disruptions from Indonesia, the world’s largest palm oil exporter.

The market saw a significant surge as Malaysian export figures for the current month painted a promising picture.

Senior trader David Ng from IcebergX Sdn. in Kuala Lumpur attributed the morning’s gains to Malaysia’s strong export performance, with shipments climbing by a notable 14% during March 1-25 compared to the previous month.

Increased demand from key regions like Africa, India, and the Middle East contributed to this impressive growth, as reported by Intertek Testing Services.

However, amidst this positivity, investors are closely monitoring developments in Indonesia. The Indonesian government’s contemplation of revising its domestic market obligation policy, potentially linking it to production rather than exports, has stirred market concerns.

Edy Priyono, a deputy at the presidential staff office in Jakarta, indicated that this proposed shift aims to mitigate vulnerability to fluctuations in export demand.

Yet, it could potentially constrain supply availability from Indonesia in the future to stabilize domestic prices.

This uncertainty surrounding Indonesian policies has added a layer of complexity to palm oil market dynamics, prompting investors to react cautiously despite Malaysia’s promising export performance.

The prospect of Indonesian supply disruptions underscores the delicacy of global palm oil supply chains and their susceptibility to geopolitical and regulatory factors.

As the market navigates these developments, stakeholders remain attentive to both export data from Malaysia and policy shifts in Indonesia, recognizing their significant impact on palm oil prices and market stability.

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