If I’d invested £5,000 in Airtel Africa shares 3 years ago, here’s how much I’d have now!

Our writer looks at the performance of Airtel Africa shares over the past 3 years, and examines how much a £5,000 investment made in 2020 would be worth today.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Young Caucasian girl showing and pointing up with fingers number three against yellow background

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Had I purchased £5,000 of Airtel Africa (LSE:AAF) shares in February 2020, my stake would now be worth £8,095. Only four other stocks currently in the FTSE 100 have performed better over the same period.

The company recently came to my attention after releasing its latest quarterly results. However, I wonder whether I’ve left it too late to invest.

What’s the story?

Airtel is the second largest telecoms operator in Africa. Since listing in June 2019, it’s grown rapidly.

Should you invest £1,000 in Airtel Africa right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Airtel Africa made the list?

See the 6 stocks

In FY 2020, the company made a profit before tax of $598m. Two years later, this had increased to $1.22bn. Not surprisingly, the company’s share price has followed a similar trajectory. It’s now over 60% higher than it was three years ago.

The business operates in three territories: Nigeria, East Africa and Francophone (predominantly French-speaking countries).

Looking back over two years, revenue has increased each quarter.

Territory / $mQ1 2021Q2 2021Q3 2021Q4 2021Q1 2022Q2 2022Q3 2022Q4 2022
Nigeria422445450476507517523545
East Africa358394428459436455487502
Francophone260276285288282288299304
Combined1,0401,1151,1631,2231,2251,2601,3091,351
(Data relates to the calendar year and not the company’s financial year)

During the same period, average revenue per user (ARPU) has remained close to $3 per month. This means the growth in revenue has come from an increase in subscribers, rather than from extracting more money from existing customers. Indeed, users increased from 125.8m at the end of 2021 to 138.5m a year later.

Although Airtel’s ARPU might not sound very high, it compares favourably to other rivals. For example, Vodafone generates monthly revenue of $2.90 from each of its 184.5m users in Africa.

Future growth is expected to come from the company’s mobile money offering. Presently, half of the adults in Africa don’t have a bank account. Airtel Money currently transacts $100bn of payments each year.

Dividends

As well as the impressive earnings and revenue growth, I like the fact that the directors are keen to reward the company’s shareholders.

The dividend for 2022 was $0.05 per share.

Although other stocks currently offer a better return, the board’s ambition is to grow the payout each year by a “mid-to-high single digit percentage“.

Compared to 2022, the interim dividend for 2023 has been increased by 9%. With the final dividend expected to rise by the same amount, the stock is presently yielding 3.7%.

Debt

Telecoms companies usually have high borrowings. The required infrastructure investment doesn’t come cheap, and is often funded by debt.

With net debt (borrowings less cash) 1.3 times higher than EBITDA (earnings before interest, taxation, depreciation and amortisation), Airtel appears to have its indebtedness under control.

At 31 MarchNet debt $bnUnderlying EBITDA $bnLeverage ratio
20203.2471.5152.1
20213.5301.7922.0
20222.9412.3111.3

What should I do?

According to the United Nations, Africa’s population will double by 2050. The company presently operates in 14 of the continent’s 54 countries. I see no reason why it couldn’t replicate its business model elsewhere. It should also gain from the anticipated population growth.

Also, Airtel’s stock is currently trading at a price-to-earnings (P/E) ratio of nine. This is low compared to some of the more well known members of the FTSE 100.

Like most people, I only have a limited amount of cash available to invest. But I’m going to add the stock to my shopping list for when my circumstances change.

Should you buy Airtel Africa shares today?

Before you decide, please take a moment to review this first.

Because my colleague Mark Rogers – The Motley Fool UK’s Director of Investing – has released this special report.

It’s called ‘5 Stocks for Trying to Build Wealth After 50’.

And it’s yours, free.

Of course, the decade ahead looks hazardous. What with inflation recently hitting 40-year highs, a ‘cost of living crisis’ and threat of a new Cold War, knowing where to invest has never been trickier.

And yet, despite the UK stock market recently hitting a new all-time high, Mark and his team think many shares still trade at a substantial discount, offering savvy investors plenty of potential opportunities to strike.

That’s why now could be an ideal time to secure this valuable investment research.

Mark’s ‘Foolish’ analysts have scoured the markets low and high.

This special report reveals 5 of his favourite long-term ‘Buys’.

Please, don’t make any big decisions before seeing them.

Claim your free copy now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

James Beard has positions in Vodafone Group Public. The Motley Fool UK has recommended Airtel Africa Plc and Vodafone Group Public. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Close-up of British bank notes
Investing Articles

£20,000 in savings? Here’s how it could be used to target a £913 second income each month

Christopher Ruane walks through some practicalities of how an idle £20k could be the foundation for a sizeable long-term second…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

5 steps to building monthly passive income with a spare £10k

Christopher explains how an investor could aim to use some spare cash to start building regular passive income streams through…

Read more »

Blue NIO sports car in Oslo showroom
Investing Articles

Tesla’s struggling. Could NIO stock benefit?

NIO stock has moved up very slightly this year, while Tesla has crashed. Our writer considers whether it might be…

Read more »

Two employees sat at desk welcoming customer to a Tesla car showroom
Investing Articles

Could Tesla stock be a brilliant bargain in plain sight?

Christopher Ruane sees some things to like about Tesla, but as its vehicle revenues have gone into sharp decline, is…

Read more »

British coins and bank notes scattered on a surface
Investing Articles

3 cheap FTSE 250 stocks with big dividends to consider buying right now

The FTSE 250's loaded with so many big dividend yields it's hard to know where to start. These three have…

Read more »

Rolls-Royce's Pearl 10X engine series
Investing Articles

Up 585%, could Rolls-Royce shares still go higher?

Christopher Ruane likes the Rolls-Royce business but is not so convinced by the value its current share price offers him.…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

I reckon a bull market’s coming! Here’s what I’m buying for my Stocks and Shares ISA

Hoping to capitalise on what he believes is an undervalued UK stock market, our writer’s added more of this FTSE…

Read more »

piggy bank, searching with binoculars
Investing Articles

The UK stock market looks undervalued to me. Here’s 1 growth stock to consider for a SIPP

Our writer explains why he thinks the UK stock market’s currently in bargain territory, and identifies one share potentially worthy…

Read more »