IHS Holding Ltd: Telecom Infrastructure Builder Looks Like a Great Investment

Why IHS Stock Is Compelling

In developed countries, we’re blessed with the most advanced telecommunications services. But in many parts of the world, getting reliable access to wireless and wired telecommunications services is difficult. Therefore, the market potential for telecommunications infrastructure is massive.

According to one study, the telecom network infrastructure market could jump above $127.0 billion by 2027. (Source: “Telecom Network Infrastructure Market Size,” Global Market Insights Inc, last accessed January 24, 2022.)

To play this market growth, investors might want to consider IHS Holding Ltd (NYSE:IHS), especially since, as of this writing, IHS stock is 37% below its high.

IHS builds telecom towers in developing regions. The company has access to a market of about 600 million people via its network of 30,500 towers in five countries in Africa, three countries in Latin America, and one country in the Middle East. (Source: “Overview,” IHS Holding Ltd, last accessed January 24, 2022.)

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Chart courtesy of StockCharts.com

IHS Holding Ltd Moving Toward $2 Billion in Revenues

IHS Holding Ltd generated more than $1.0 billion in annual revenues in its last three reported years, setting a record in 2020. Moreover, the company’s rolling 12-month revenue to September 2021 was $1.5 billion.

As IHS continues to increase the number of its towers, its revenues should ramp up. Analysts estimate that the company will report revenues of $1.6 billion for full-year 2021 and $1.8 billion for 2022. (Source: “IHS Holding Limited (HIS), ” Yahoo! Finance, last accessed January 24, 2022.)

Based on its current growth trend, IHS could generate revenues of more than $2.0 billion by 2023.

Fiscal YearRevenue (Billions)Growth
2018$1.17N/A
2019$1.235.4%
2020$1.414.0%

(Source: “IHS Holding Ltd.” MarketWatch, last accessed January 24, 2022.)

IHS Holding Ltd has managed to produce earnings before interest, taxes, depreciation, and amortization (EBITDA) income, including a surge of more than 200% to a record level in 2020.

Fiscal YearEBITDA (Millions)Growth
2018$534.4N/A
2019$251.5-52.9%
2020$764.8204.0%

(Source: Ibid.)

At the bottom line, IHS Holding Ltd has been losing money, but the losses have narrowed. The company’s generally accepted accounting principles (GAAP) losses declined in 2019 and 2020.

After adjusting for non-recurring expenses, the company could see profits of $0.01 per diluted share in 2021, followed by $0.27 per diluted share in 2022. (SourceYahoo! Finance, op. cit.)

Fiscal YearGAAP Loss (Millions)Growth
2018-$132.8N/A
2019-$423.5-219.0%
2020-$322.024.0%

(Source: MarketWatch, op. cit.)

IHS Holding Ltd delivered positive free cash flow (FCF) in 2019 and 2020. The company’s ability to produce positive FCF is critical because it had $2.5 billion in debt as of the end of September 2021.

The company’s debt is high because of the amount of capital expenditures required to build physical infrastructure. I don’t foresee any financial issues, given the company’s FCF generation and expected move toward profitability.

Fiscal YearFCF (Millions)Growth
2018-$65.3N/A
2019$231.8455.0%
2020$245.76.0%

(Source: MarketWatch, op. cit.)

Analyst Take

My bullish outlook for IHS Holding Ltd is supported by the expected rapid growth in telecom infrastructure in developing regions.

IHS stock isn’t expensive, especially after its price deterioration. The company is currently trading at a forward multiple of 2.7 times its consensus 2022 revenue estimate, which is considered low in the current high-multiple environment.

In my view, IHS stock could easily handle an increase in its revenue multiple as the company grows.