Airtel Africa

African businesswoman on cell phone

Airtel Africa Plc (AAF.L) provides telecommunication and mobile money services to customers in Nigeria, East and Central Africa, and Francophone Africa. It offers prepaid and postpaid wireless voice, international roaming, and fixed line telephone services; data communication services, including 2G, 3G, and 4G; and mobile money services, such as payments, microloans, savings, and international money transfers. The company also messaging, value added, enterprise, and site sharing services, as well as support services; and sells handsets. It serves approximately 165 million customers. The company was incorporated in 2018 and is based in London, the United Kingdom. Airtel Africa Plc is a subsidiary of Airtel Africa Mauritius Limited.

AAF.L is one of the few stocks outside the oil sector that have shrugged off the selloff of the last two weeks. Invariably, when the overall market turns these high relative strength shares outperform. The chart of AAF.L is shown below over the past year.

VectorVest graph of Airtel Africa
Click or tap image to enlarge

The chart of AAF.L shows the price action in candlestick format. VectorVest values the stock at 184p while AAF.L closed at 149p on the 26th of January 2022. The share is undervalued by the market according to the VectorVest valuation model.

In the bottom window below the price, the blue study shows that forecast Earnings per share (EPS) is rising and this is the engine that’s been driving the share price upwards. Over the last year forecast EPS has risen from approximately 7p to 12p.

On VectorVest, the Relative Safety (known as RS) of the earnings stream is ranked as fair. This share would not fit into the VectorVest Worry Free trading system with an RS of 1.06 on a scale graduated between o and 2. The opportunity in the share is for those who can manage risk carefully and rigorously and simply follow the VectorVest calculated stop loss. This stop loss is calculated by the VectorVest program each day and is plotted on the chart above as a light blue line study just under the price. At present, the stop loss level is 133p.

The share pays a dividend yield of 2.25% which is well covered by an earnings yield of more than double that figure. The dividend safety and dividend growth are rated as good on VectorVest. The forecast dividend growth of 15% is particularly noteworthy in this low yield environment.

The metric measuring long-term share price appreciation potential in relation to a AAA rated corporate bond (known as RV) is rated as excellent by VectorVest. AAF.L has a forecast Earnings Growth Rate (GRT) of 25% which VectorVest considers to be excellent.

The overall rating of AAF.L using the VectorVest Master Indicator VST (Value, Safety and Trend) is rated as excellent.

Technically, AAF.L is trending strongly as measured by the proprietary VectorVest Comfort Index. The Comfort Index (CI) is an indicator which reflects a stock’s ability to resist severe and or lengthy price declines. The Comfort Index is unique in investment research and a secret weapon. VectorVest rates the CI of AAF.L at 1.62 which is excellent on a scale measured between 0 and 2.

AAF.L has been on a Buy recommendation since June 2021 where the stock has risen from around 80p to the present level of 149p. Technical analysts reading will note that the share has recently broken out of a “cup and handle” pattern on rising volume. This is a very bullish sign.

In summary, AAF.L has excellent growth and fair safety of earnings fundamentals. The technical position of the stock is excellent and looks highly probable for more upside.

At VectorVest, we believe in buying rising Buy-rated stocks with excellent fundamentals when the overall market is rising. As I write on the 27th of January, the overall UK market as defined by the VectorVest Composite is falling on both a short term and long-term view. Traders should wait for the overall market to turn before adding any new positions. The position of the overall UK market and all the markets that VectorVest follow are summarized each day in the format below. Note the C/Dn in red in the illustration of the VectorVest home page below. C/Dn is an abbreviation for a Confirmed Down signal which is a long-term measure of the trend of the overall market. Being brave in the market when there is a Confirmed Up (C/Up) in place and timid when there is a C/Dn in place will put your investments into top gear.

A single glance will instruct whether the overall market is rising or falling. The most important thing to know in financial markets is whether the overall market is rising or falling. Everything follows from that.

Traders should wait on the turn. Doing nothing is much more difficult than it would seem, I know.

VectorVest Color Guard 26 January 2022
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