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Airtel Africa (AAF) analysis and intrinsic value calculation : UKInvesting


Hello UK investors!

As requested, I have done a deep dive analysis into Airtel Africa, discussing both the qualitative and quantitative aspects of the business. This is a company that has been on my watchlist for some time, but I’ve only now got round to analysing the business in depth.

The link to the video is above, but in summary:

Overview: AAF is a UK listed telecommunications company operating in 14 countries in Africa. As of September 2020, it had 116 million subscribers to its services and is growing fast.

Risks: Poor balance sheet – As at the most recent quarter, AAF had a current ratio of 0.6, meaning they don’t have enough current assets to cover their current liabilities, thus increasing the likelihood of raising addition capital.

Currency risk – AAF earn their revenues and receive their cash in various African currencies, meaning depreciation in these currencies against the US dollar (their reporting currency) will negatively impact results.

COVID-19 impact – Many African countries don’t have significant access to vaccines, meaning COVID can continue to cause problems in the short to mid term future.

Opportunities: Huge total accessible market – AAF currently only operate in 14 out of 54 African countries. The logical path for growth is expansion into more countries.

Fast growing market – Sub-Saharan Africa have the fastest growing mobile phone market in the world, forecast to grow at a CAGR of 4.6%.

Intrinsic value calculation: To determine intrinsic value, I’ve used a discounted cash flow model and 10 year earnings multiple approach. Considering how conservative I’ve been with my growth numbers, the outcome is compelling.

As always, I appreciate any time taken to read the post and watch the video. The purpose of this is to create discourse and provide a fair, balanced view from a variety of perspectives.



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