Johannesburg - The share price of MTN [JSE:MTN] rallied strongly on Thursday morning, despite news of a sharp drop in the company’s full-year profit as it set aside R9.29bn for its record Nigerian fine.
By mid-morning the share price was already 7.5% higher at R146.00 and the impact of the fine on MTN’s business has now been mostly discounted.
It also seems if investors are encouraged by the fact that MTN made provision for far less than the actual fine, which indicates that an agreement with the Nigerian authorities is on the cards.
The strong surge in the price of MTN shares, which were the busiest on the JSE, as well as continued gains in financial and resources stocks helped the rest of the market higher. The All-share index is now on its way to 52 000 points and is 5.26% higher over the past seven days and 10.12% over the past 30 days.
MTN on Thursday reported that basic headline earnings per share (Heps) declined by 51.4% to 746 cents. The drop was “largely a result of the Nigerian regulatory fine provision (R9.29bn), which had a 402 cents negative impact on Heps”.
Late last year, Nigerian regulators fined MTN $3.9bn for failing to disconnect 5.2 million subscribers they deemed unregistered, amid tightening security as the country battles an Islamist insurgency. The fact that MTN only provided for $597m (R9.29bn) seems to indicate the company does not expect to pay the whole fine.
The uncertainty surrounding the record penalty has wiped almost a third off the company’s share price since it was made public on October 26, but the stock has recovered about 20% of those losses.
The market’s attention was focused on results on Thursday, with various financial institutions also announcing good earnings growth.
By mid-morning the Financial index was already 0.97% higher, which helped the All-share index gain 0.99% to 51 473 points; the Top 40 index was 1.09% higher at 45 759 points.
The Resources index also continued its upward momentum with investors seeking value as some of the big shares in the sector seemed completely oversold. By mid-morning the Resources index was 2.75% higher after it gained more than 25% over the previous 30 days.
Some of the big conglomerates were again among the big movers, with Glencore [JSE:GLN] gaining 7.11% to R30.89 and Anglo American [JSE:AGL] trading 5.91% higher at R117.62. Glencore is now 60.8% higher than a month ago after reaching a 52-week low of only R15.41. Anglo American, which traded as low as R53.30 earlier in the year, gained more than 102% over the past 30 days.
Attention in the financial sector was focused on Standard Bank [JSE:SBK], which reported a 27% rise in full-year profit on Thursday after offloading loss-making operations outside Africa. The share price responded by jumping 6.33% to R122.28. Before this surge the share gained more than 16% over the past 30 days.
Standard Bank said headline earnings per share totalled 1 359 cents for the period to end-December, from 1 070c the previous year. The dividend was up 13% to 674 cents per share (2014: 598c). The results were largely in line with expectations.
Chief executive Sim Tshabalala however warned that the group’s performance will be affected by factors such as economic growth in South Africa and the rest of Africa, and the retention of a South African investment grade sovereign credit rating.
FirstRand [JSE:FSR] traded 2.19% higher at R46.09 and Barclays Africa Group [JSE:BGA] gained 1.44% to R146.50.
Santam [JSE:SNT] gained 3.05% to R218.99 after the company said it plans to focus on growing its business in the rest of Africa and Southeast Asia, as low gross domestic product growth in its home market means little growth in insurable assets. Before Thursday’s trade the share gained more than 15% over the past 30 days.
For the 12 months to December 2015, the insurer grew gross written premiums by 7% to R24.3bn, which was less than the 12% recorded for the prior period and a function of “competitive market conditions and the downturn in the economic environment”, Santam said.
MMI Holdings [JSE:MMI], which gained 21% over the last 30 days, lost 1.82% in morning trade to R23.78 after a drop of 9% in core headline earnings to R1.7bn in the six months until the end of December. The interim dividend was 3% up to 65c/share.