New York Listing: IHS to Become Largest African Company on Wall Street

Peter Uzoho with agency report

An African operator of mobile phone masts, IHS Towers might become the largest Africa-focused company on Wall Street if its New York listing goes ahead this week.

The company, which is 29 per cent owned by MTN, is dialling down the hype for its second attempt at an initial public offering (IPO) as it prepares for a listing on the New York Stock Exchange.

According to Reuters, with a market value of up to $8 billion, the company appears designed to win over even the most skeptical investor.

The move is expected to unlock value for the pan-African mobile operator.

The tower company, which has a presence in Latin America, the Middle East and sub-Saharan Africa and manages towers for mobile telecom transmitters, has become stock market darlings due to its growth prospects and predictable cash flows, the report added.

The company operates 30,000 masts, of which more than half are in Nigeria. It is offering 22.5 million shares, of which 18 million is new stock and 4.5 million are being sold by existing shareholders. The underwriters of the initial public offering also have an option to purchase an additional 2.7 million new shares and 675,000 shares from existing investors. The shares will be priced between $21 and $24 each.

Choppy markets forced IHS and regional rival Helios Towers to shelve listing plans in 2018. The smaller Helios completed an IPO in London the following year and shareholders who bought in have enjoyed an annualised return of 18 per cent, including dividends.

IHS Chief Executive, Sam Darwish, according to the report, was keeping his feet on the ground, though. Including debt, US and European operators like American Tower and Cellnex Telecom are worth over 20 times their forward Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA), the report stated.

Helios trades on 13 times, reflecting the continent’s elevated political, credit and currency risk. Operating towers in the Kalahari Desert or East African savannah also involves the additional hassle of installing power generators and solar panels.

“IHS transmits similar risks. More than half its 30,000 towers are in Nigeria, the continent’s most populous nation but also one of its most turbulent. Oil accounts for around 80 per cent of Nigerian exports, making its currency prone to devaluations. Its government also has a habit of shaking down foreign-owned companies, as South African mobile phone giant MTN – IHS’s main shareholder – can attest.

“This fuzzy signal is reflected in IHS’s valuation. If its adjusted EBITDA keeps growing at the same 21 per cent compound annual growth rate of the past four years, it should reach around $1 billion this year. At $24 per share – the top end of the published price range – its enterprise value would be nearly $10 billion, after factoring in nearly $2 billion of net debt.

“That suggests a modest 10 times multiple and a discount to both Helios and Cellnex, even though all three firms generate about $30,000 of EBITDA per tower.

“Given past disappointments, Darwish is wise not to be too greedy. He will be hoping to emulate the decent post-IPO performance of Helios and African online retailer Jumia Technologies, which also listed in 2019. If he succeeds, investors will enjoy a pleasant safari,” it added.