PDSNET Market Snapshot

Private investors should prefer to invest in service industry companies, especially those which derive a large proportion of their income from passive or annuity income. Such a companies typically require minimal working capital and are not burdened by a large unionised unskilled or semi-skilled labour-force.

If most of a company’s revenue comes from regular monthly payments (such as debit orders) then it will typically be profitable even before opening its doors each month. This contrasts sharply with most companies in manufacturing or retail which begin each month from zero and only reach profitability on the 24th or 25th. MTN is a service company which receives a very large proportion of its income from its existing client base in the form of regular payments.    

The company describes itself as a pan-African mobile operator whose purpose is "Leading digital solutions for Africa's progress". Most of its growth these days comes from its data and fintech offerings. It is an interesting company because its largest market is Nigeria and South Africa is only its third largest market. It also has strong markets in Ghana, Uganda and Rwanda.

It has shown itself to be very capable of dealing with Africa’s disparate and politically unstable administrations. This can be seen from its ability to take out large chunks of its profits from various countries. Thus, in the first three months of 2026 it “upstreamed” R2.3bn and generated a healthy corporate liquidity headroom of R42.6bn. After the end of the quarter, R2.7bn of cash was brought in from Nigeria and R5.3bn from Ghana.

In the first quarter of 2026, the company increased its subscriber base by 5,4% to 312,7m and the number of active data users increased by 8,7% to 175,6m. Data traffic was up 20,2% from the same quarter in 2025.

Fintech transactions were up 15,8% and the value of fintech transactions rose by 32,8%. Overall service revenue rose by 41,7% in Nigeria, 35,7% in Ghana, 14,4% in Cameroon and 18,3% in Cote D’Ivoire. All of this compares with South Africa’s paltry 0,7% increase in service revenue. The provision of data is by far the company’s largest contributor to service revenue growth and was up 34,5%.  

From this you can see that while South Africa is an important part of their business, the lion’s share of the growth is coming from elsewhere in Africa. This makes the company a higher risk, higher return investment than other mobile operators but gives it enormous blue sky potential.

In the year to 31st December 2025 the company reported service revenue up 22,9% and data revenue up 37,7%. Headline earnings per share (HEPS) rose by a massive 67% with total customers rising 5,6% to 307,2m. MTN is growing rapidly in line with the growth of the African continent.

The share has also demonstrated its virtual immunity to the war in Iran and the subsequent rise in the cost of energy world-wide. It continues to grow rapidly even though most countries are raising interest rates and tightening their fiscal belts.

Consider the chart:

The chart shows that MTN is in the process of recovering from a major downward trend which began in February 2022 when the war in Ukraine began. From a technical perspective the company completed an almost perfect reverse head-and-shoulders formation during 2024, finally breaking up through the neckline in mid-January 2025. Added to the Winning Shares List (WSL) on 15th January 2025 at a price of 9729c, it has subsequently risen to 23068c – a gain of 133,47% in 17 months. It also paid out a R5 dividend to shareholders for the 2025 year.

In our view, the spread of digital solutions in Africa is making the various African countries more reliable both politically and economically. They are no longer backwaters of progress and knowledge, but are able to share in the massive explosion of information that is sweeping the world. Africa has enormous resources of metals and minerals as well as proven agricultural potential. It is steadily catching up with the rest of the world economically and MTN is participating in that growth.  

We have never liked Bitcoin or even regarded it as a true investment. As Charlie Munger famously said about those who buy cryptocurrencies, “...somebody else is trading turds and you decide I can't be left out.” More recently, the esteemed Professor Paul Krugman has linked the price of Bitcoin directly to the political influence and dominance of Trump. He described its value as nothing but “technobabble”.

We have always advised people not to invest in it and to sell it if they had it. We hope that you took our advice. Our main reason for not considering it to be an investment is that it offers no return. It generates no interest, dividends or rent – meaning it lacks fundamental value. So, its value really only exists in the minds of the people who buy it and as they come to realise their mistake, the price will inevitably decline.

At one point there was the suggestion that cryptocurrencies were somehow digital gold, but nothing could be further from the truth. The truth is that the demand for cryptos is much more similar to the demand for tulips in Holland in the seventeenth century. It exists only in the minds of a relatively few individuals who have been swept away by the rapid advances in technology in the modern world. Cryptos lack universal appeal. By contrast, gold has been known and prized by every human being on earth for millennia no matter what their culture, creed or background.

In any event we will let the chart tell the story.

The collapse of Bitcoin from its peak in October 2025 has been dramatic. Its value has more than halved through a series of cycles. The cycles are caused by the “stale bulls” who simply refuse to acknowledge that Bitcoin’s popularity is now permanently and irreversibly damaged. The Bitcoin price is falling just as Trump’s popularity and political clout are falling.

The effect of Trump’s ill-advised decision to go to war with Iran and the consequent jump in the price of fuel worldwide can be clearly seen. His popularity has nose-dived. Even hardline MAGA supporters who remained loyal through all his other obvious problems found the jump in the price of “gas” just too much to stomach.

From a technical perspective Bitcoin has broken down through a series of key support levels. Firstly, it found support at $83268 – the cycle low of November 2025 and that was followed by quite a significant “stale bull” rally. The rally came to an end when Bitcoin broke below that support level in February 2026 and then smashed down through the earlier cycle low at $77380 established in April 2025.

When Trump began bombing Iran, a new low point was established on 24th February 2026 at $64 000 and again the stale bulls motivated a rally which took the crypto briefly back above $80 000. However, Trump’s continued unpopularity and the growing evidence that he may be suffering from some kind of dementia has resulted in Bitcoin breaking decisively below $64 000 – which has now become a technical resistance level.   

While we see Wall Street recovering from the current correction, we do not see Bitcoin recovering. As Trump inevitably descends into political oblivion, so too will Bitcoin. Already it is an investment sideshow used primarily by organised crime to move money with impunity.  

From our very first article on Bitcoin in December 2017, The Bitcoin Bubble, we have always advised investors to stay away from it. Our advice remains unchanged:

“If you have it, sell it. If you don’t have it, don’t buy it”.

Experienced investors know that when a market has run hard for a while, as it has for the last two months, some sort of correction is more-or-less inevitable. We suggested in the recent Confidential Report that right now you should be looking for that correction – and then on Friday the 5th of June 2026, the S&P500, which was teetering after having made a new record high (7609.78) fell by an impressive 2,64%. Consider the chart:

The anatomy of a correction is that the positive news in the market reaches a point where it has been heavily over-discounted and shares begin to look seriously vulnerable and over-priced. Profit taking then sets in and the market falls back to more reasonable levels. This is a natural and normal pattern - even healthy - which reflects the interaction of the two great human emotions which dominate the market – fear and greed.

The fundamentals of a share can indicate what profits are likely to flow from owning it, while the technicals show the thrust of investor sentiment towards or away from it. When it comes to analysis, there are two kinds of people in the market – those that say they will not buy a share unless they can see the “real” value (the fundamentalists) – and those who say that the real value does not matter. What matters is what people think the real value is (the technicians). In other words, the reality and the perception of that reality.

And markets, like wildfires, can sometimes create their own energy. They can reach a point where they get carried up or down by the mere fact of their own momentum. In the longer term, the positivism or bullishness which is driving this market up today is beginning to become a self-fulfilling prophecy. Some investors are now coming into the market, not because they have done their homework and can see the earning potential of the shares that they want to buy, but rather because they are confident that in a few weeks’ or months’ time, someone with even less knowledge than them will buy the same shares back from them at a higher price.

When this begin to happen, the share’s price tends to lose touch with its underlying fundamentals and become over-priced. The fundamentals may be very good – but the important question is, “Are they good enough to justify the current price?” In 1998, during the dot-com boom, the blue sky potential of the nascent internet boom seemed immense – just as the potential of AI seems immense to us today. But, markets went too far, bid shares up too high, and inevitably fell back to more reasonable levels. However that did not mean that the potential of the internet was suddenly gone – far from it. The internet’s potential was only just beginning to be understood. It was just that markets had become too excited and lost sight of their underlying fundamentals.

We pointed out in our article of 18 May 2026 that the S&P 500 chart is becoming exponential. The blue sky potential of shares is now the dominant factor in investors’ assessments, with the focus shifting to possible future profits rather than established track records. Investors are concentrating on forward, rather than historical, P:E ratios. It is sobering to realise that all three of the enormous new listings coming to Wall Street this year—SpaceX, OpenAI, and Anthropic—are still unprofitable..

In our view, the current correction on Wall Street, and hence on markets around the world including the JSE, is more than likely temporary. After a period of selling, the downward trend will almost certainly give way to bullish investors seeking to buy the dip. Since there is no obvious fundamental factor driving this downward trend we see it as almost completely technical – and therefore temporary and healthy. The market is literally catching its breath.

What is interesting is that the JSE Overall index made its record high on 27th February 2026, at 128456, and has been basically trending down since then. It is apparent that local investors never really believed much in Wall Street’s strong recovery from Trump’s Iran war correction. We have found that often the JSE is a leading indicator of what happens on Wall Street.