I bought shares in FTSE 100 incumbent Airtel Africa (LSE: AAF) just over a year ago. I’m a huge advocate of long-term investing, which I’d define as a five to 10-year period. Here’s why I’m tempted to add some more shares to my holdings.
Telecoms in Africa
Airtel Africa is a telecoms and mobile money services business operating in Africa. I’m buoyed by its modus operandi as telecoms is a burgeoning market in the African continent and there is lots of market share for the business to capture.
Airtel’s share price chart over the past year is akin to an exciting roller coaster I enjoyed in my formative years. The meandering nature of the price is primarily due to macroeconomic and geopolitical issues. As I write, the shares are trading for 118p, which is a 4% increase from 113p at this time last year.
Powering onto the FTSE 100
Airtel’s story and rise to the UK’s premier index is a fascinating one. The business was established in 2010. Only two and a half years after joining the FTSE, it gained entry to the top table at the beginning of last year. Rapidly growing performance as well as surging market share contributed to this.
So why am I tempted to buy more Airtel shares you ask? In simple terms, I view Airtel as a great long-term growth stock and recent volatility in its share price as well as impressive half-year results have caught my eye.
Airtel shares look decent value for money to me right now on a price-to-earnings ratio of 17. Furthermore, the shares would boost my passive income with a dividend yield of over 4%, which is higher than the FTSE 100 average of 3.8%. However, I do understand dividends are never guaranteed.
Reviewing Airtel’s results released last week, there were a few key positives that show me the business is doing well. Its customer base grew by 10%, increasing an already impressive market share. Next, revenue, earnings per share, and EBITDA all rose too.
Risks and what I’m doing now
There are a couple of issues Airtel could and has encountered that could impact the business. For example, in its most recent results, moving exchange rates affected performance as the business reports money made based on today’s rate, and what it could have made if currency did not fluctuate. This is not uncommon for businesses that report in multiple currencies. In Airtel’s case, this has hindered the business as it reports in local Nigerian currency, a core market for the business. The Nigerian currency has been dropping in recent months. I believe this is a reason why Airtel shares haven’t taken off recently.
Another issue for me is geopolitical issues. Africa is prone to volatility, which could hinder the firm’s growth plans and performance. This is out of Airtel’s control but something I’m wary of.
To conclude, I’m a fan of Airtel shares and believe it’s one of the best growth options on the FTSE 100 index. I’m planning on buying some more shares when I next have some cash to invest. Rising demand for telecoms and mobile money services in Africa, as well as a passive income and decent valuation right now make me adding more shares to my holdings an easy decision.
