Where I would invest R10 000 | Aluwani's Patrick Mathidi opts for MTN and FirstRand

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Bafana Patrick Mathidi is a founding member and the head of equities and multi-asset strategies at Aluwani Capital Partners.
Bafana Patrick Mathidi is a founding member and the head of equities and multi-asset strategies at Aluwani Capital Partners.
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OPINION

News24 asked Bafana Patrick Mathidi, a founding member and the head of equities and multi-asset strategies at Aluwani Capital Partners, where he would invest R10 000, with a view to holding the investment at least for the next three to five years.


It is important to hold a portfolio of investments that are sufficiently diversified with varying drivers, such that even if one gets one investment view wrong, hopefully the others in the portfolio are still able to meaningfully contribute positively to returns. Set out below are three such investments and our rationale for liking them:

MTN Group

Over the last few years, MTN has strengthened its balance sheet by selling off non-core assets, paying down debt, and reinvesting in the quality of their networks.

In March 2022, MTN was awarded additional spectrum, this gives it the capacity to load more users and/or allows users to do more on the network without compromising quality. 

Turning to the rest of Africa, where data penetration is very low, and in a country like Nigeria where MTN is the largest operator, it is well positioned to benefit from the growing trend in data usage which should drive profits higher. 

Then there's also the Mobile Money opportunity in Nigeria, which is very exciting. Mobile Money is a service where users conduct financial services on their phone and MTN stands to generate fee income from these transactions, further diversifying its revenue streams away from voice and data.

Despite the persistent risks of depressed consumer spending due to high inflation and weak Nigerian currency, we think that at the current share price levels, MTN is attractively valued with good growth opportunities.

FirstRand

The group has been a consistent generator of superior earnings growth and returns over the long term.

The group’s return on equity (RoE) of 20.6% remains comfortably above the peer group (big four) average of 17%. Disciplined capital allocation and focus on returns should result in the business continuing to generate a superior RoE relative to peers.

The stock is trading at discount to long-term history.

BHP

BHP remains the most defensive of the diversified miners and despite the downward pressure on both iron ore and coper prices, together with a temporary under-delivery in production volumes in the first quarter of 2023, the share price has performed well. In addition to excellent geographical diversification, the company maintains operational stability from a well-diversified commodity portfolio with increasing exposure to battery metals.

In addition to being undervalued, strong free cashflow generation from current spot commodity prices is expected to result in a dividend yield to June 2023 of 9.3%.

Disclaimer: News24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers. Under the ECT Act and to the fullest extent possible under the applicable law, News24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.

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