From 25 November 2013, shareholders will be able to trade their MTN Zakhele (MTNZ) shares. Craig Gradidge of Gradidge Mahura Investments looks at the factors to consider when deciding whether to buy or sell these shares.

There are many MTNZ shareholders looking at the great returns achieved by MTNZ over the past three years and asking themselves if they should be selling. There are even more qualifying black investors who missed the boat the first time around asking themselves if they should be buying MTNZ now or anytime soon. As always the answers are neither easy nor straightforward.

The case to sell MTNZ

1. Sell if you need the money. This is a simple and obvious one. The deal was done three years ago and much has changed since then. So those needing the money to settle expensive debts should sell.
2. Sell if you believe that MTN is overvalued. This is a harder one to determine. Top-rated managers like Investec and Foord are not excited about the prospects of MTN going forward. But industry darling Coronation is quite excited about the prospects of MTN.
3. Sell if MTNZ is your only investment. Sell a portion and apply the principle of diversification. You could consider the well diversified Thembeka Capital in the BBBEE share space, a unit trust fund or some other opportunity not related to telecommunications.
4. Sell if the demand for MTNZ shares is high and you can get a good price. In October 2012 Sasol Inzalo was trading at between R90 and R100 a share. I had estimated them to be worth less than R40 at the time, so I sold. I can buy them back today at R50-R60 a share. Share prices can sometimes run way ahead of valuations and it may make sense to trade.

The case to buy MTNZ

1. Buy if you can pick up shares at a good price. There may be desperate sellers out there who cannot afford to wait for a higher price. The NAV is estimated at between R120 and R146 a share at the moment.
2. Buy if you believe in the fundamentals of MTN as a business. MTNZ shareholders can make a good return even if the MTN share price remains where it is. If dividend payouts remain high or increase significantly over the remaining three years, MTNZ shareholders can make a good return even if the MTN share price remains flat.
3. Buy if you do not have MTN already and you are building a diversified share portfolio. It is lowly correlated with shares like Sasol Inzalo, and if you owned it together with Vodacom you have exposure to around 90% of the local market.
4. Buy if you are going to need a tax-efficient source of income in the near future. Someone in their early-to-mid fifties can benefit massively from taking an exposure and waiting for the dividend flow. At R100 an MTNZ share they are buying on forward expected dividend yields of over 9%. This income is also likely to grow at a rate higher than inflation over time.

For specific advice and information contact your financial adviser or stock broker. Visit www.mtnz.co.za for additional information.