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African phone-mast IPO priced for smooth safari

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LONDON, Oct 11 (Reuters Breakingviews) – An African operator of cell phone masts is dialling down the hype for its second try at an preliminary public providing. If its New York itemizing goes forward this week, IHS may turn into the most important Africa-focused firm on Wall Street. A market worth of as much as $8 billion seems designed to win over even essentially the most sceptical investor.

Companies that handle towers for cell telecom transmitters have turn into inventory market darlings as a consequence of their progress prospects and predictable money flows. Choppy markets pressured IHS and regional rival Helios Towers to shelve itemizing plans in 2018. The smaller Helios (HTWS.L) accomplished an IPO in London the next 12 months; shareholders who purchased in have loved an annualised return of 18%, together with dividends.

IHS Chief Executive Sam Darwish is holding his ft on the bottom, although. Including debt, U.S. and European operators like American Tower (AMT.N) and Cellnex Telecom (CLNX.MC) are value over 20 instances their ahead EBITDA. Helios trades on 13 instances, reflecting the continent’s elevated political, credit score and foreign money threat. Operating towers within the Kalahari Desert or East African savannah additionally includes the extra problem of putting in energy turbines and photo voltaic panels.

IHS transmits related dangers. More than half its 30,000 towers are in Nigeria, the continent’s most populous nation but in addition certainly one of its most turbulent. Oil accounts for round 80% of Nigerian exports, making its foreign money vulnerable to devaluations. Its authorities additionally has a behavior of shaking down foreign-owned corporations, as South African cell phone big MTN (MTNJ.J) – IHS’s primary shareholder – can attest.

This fuzzy sign is mirrored in IHS’s valuation. If its adjusted EBITDA retains rising on the identical 21% compound annual progress charge of the previous 4 years, it ought to attain round $1 billion this 12 months. At $24 per share – the highest finish of the revealed worth vary – its enterprise worth could be practically $10 billion, after factoring in practically $2 billion of web debt. That suggests a modest 10 instances a number of and a reduction to each Helios and Cellnex, though all three companies generate about $30,000 of EBITDA per tower.

Given previous disappointments, Darwish is smart to not be too grasping. He will probably be hoping to emulate the respectable post-IPO efficiency of Helios and African on-line retailer Jumia Technologies , which additionally listed in 2019. If he succeeds, buyers will get pleasure from a nice safari.

Follow @edwardcropley on Twitter

CONTEXT NEWS

– Africa-focused cell phone tower firm IHS mentioned on Oct. 3 it was making ready to checklist its shares on the New York Stock Exchange.

– The firm operates 30,000 masts, of which greater than half are in Nigeria. It is providing 22.5 million shares, of which 18 million is new inventory and 4.5 million are being offered by present shareholders. The underwriters of the preliminary public providing even have an choice to buy a further 2.7 million new shares and 675,000 shares from present buyers. The shares will probably be priced between $21 and $24 every.

– IHS generated adjusted EBITDA of $819 million in 2020 on income of $1.4 billion. In the primary six months of 2021, adjusted EBITDA was $490 million whereas income was $764 million.

Editing by Peter Thal Larsen and Karen Kwok

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