HELIOS TOWERS PLC (HTWS) — Research Note

Executive summary

Helios Towers is the leading independent mobile tower company across Africa and the Middle East, operating ~14,750 sites across 9 markets and leasing colocation space to blue-chip MNOs (Airtel, Vodacom, Orange, Axian). FY25 delivered a 10th consecutive year of Adjusted EBITDA growth (+12% to US$471m), tenancy ratio hit 2.17x a year ahead of plan, FCF more than tripled, and net leverage fell 0.6x to 3.4x — the business has reached its "cash compounding sweet spot" and started a US$75m buyback plus inaugural US$25m dividend under IMPACT 2030. The single most important point for valuation: this is a long-duration contracted-cashflow infrastructure asset with strong operating leverage, but it is NOT an AI beneficiary — the thesis is mobile penetration/data growth in Africa, not AI buildout.

Fair value estimate

• Fair value range: 240 – 310p per share (implied mcap £2,425m – £3,130m)
• Mid: ~275p / £2,780m
• Methodology: EV/EBITDA on FY26E guidance midpoint, cross-checked with recurring FCF yield.
  • FY26E Adj. EBITDA ~US$517m. Applying 10-12x EV/EBITDA (discount to US tower REITs AMT/CCI/SBAC at 18-22x to reflect EM/leverage/FX risk) gives EV US$5.2-6.2bn. Deducting net debt US$1.72bn, lease liabilities US$235m gives equity US$3.2-4.3bn ≈ £2.5-3.3bn at 1.3 USD/GBP.
  • Cross-check: FY26E recurring FCF US$218m mid at 6-7% yield gives equity US$3.1-3.6bn ≈ £2.4-2.8bn.
• Current market cap: £2,186m — implied upside ~8-45%, central case ~27%.
• View: undervalued-to-fair on an infrastructure framework.

Sector context

• Classification confirmed: Telecommunications (ICB), subsector tower infrastructure.
• Profile vs. peers: quality (contracted revenue, hard-currency EBITDA 71%, blue-chip MNOs) is in line with developed-market towercos but leverage (3.4x) is higher than AMT/CCI (~5-6x but with lower cost of debt) and growth (9%+ EBITDA CAGR to 2030) is well above US peers. Emerging-market risk justifies a multiple discount.
• Listed peers: American Tower (AMT), Crown Castle (CCI), SBA Communications (SBAC); IHS Holding (IHS) is the closest EM-focused tower peer.

Investment thesis

1. Structural data demand with contracted visibility — US$5.3bn contracted revenue, 6.6-year avg remaining life, 98% from multinational MNOs with CPI/power escalators, in markets with ~50% mobile penetration and some of the fastest population growth globally 2026-03 FY25 results.
2. Operating leverage inflecting into material cash returns — margin expanded to 55%, ROIC to 13.5%, net leverage down to 3.4x; management committed to >$1.3bn recurring FCF 2026-30, >$400m shareholder returns, Moody's upgrade to Ba3 Feb-2026, cost of debt 7.1% 2025-11 Capital Markets Day; 2026-03 FY25.
3. Capital-light growth phase with high incremental returns — the heavy acquisition phase (Oman, Malawi 2022) is integrated; incremental tenancy on existing sites drops disproportionately to EBITDA, with target 15-20% ROIC by 2030 and double-digit EBITDA growth already running ahead of plan 2026-03 FY25; 2025-11 CMD.

Key risks

1. Material AI/thesis mismatch — this is a mobile telecom infrastructure play, not an AI-receiver. There is nothing in the filings linking revenue to AI buildout; "Digital by Design" is an internal efficiency initiative, not AI revenue 2026-03 Annual Report.
2. Emerging-market/FX/political risk and tax disputes — operations in DRC, Tanzania, Congo B, Ghana, Madagascar carry outstanding tax assessments totalling >US$80m (TZ, DRC, CB) that remain unresolved; political and currency risk disclosed as a principal risk with increased concern noted in 2025 2026-03 FY25 principal risks.
3. Customer concentration — top 4 MNOs = 72.3% of revenue (Airtel 27.9%, Vodacom 23%, Orange 11.1%, Axian 10.3%); loss or consolidation of any one would be material. Leverage, while down, remains >3x so there is less balance-sheet cushion to absorb an MNO shock 2026-03 FY25.

Operating leverage

Operating leverage here is high and demonstrated. The cost base is predominantly fixed: tower assets, ground leases, local staff costs. Power (US$186m, 22% of revenue) and non-power (US$94m, 11%) scale with site count more than tenancy. Incremental colocations on an existing tower add revenue at close to 100% contribution margin — amendment revenue in 2025 was 4,222 colocations vs. 2,929 in 2024, driving the 2ppt margin expansion. The FY25 math is explicit: Adj. EBITDA grew US$50m YoY on US$62m revenue growth = ~80% flow-through; recurring FCF grew US$60m on that same base. Management guides to 55-60% Adj. EBITDA margin medium term from 55% today. In a 10-20% upside revenue scenario, operating profit would scale materially more than 10-20% — plausibly adding 30-50% to operating profit given the fixed-cost structure. The inflection point was reaching the "cash compounding sweet spot" at ~2.0x tenancy ratio, now at 2.17x and targeting >2.5x by 2030 2026-03 FY25; 2025-11 CMD.

Value-trap signals

None identified. Revenue +8%, EBITDA +12%, FCF tripling, 10 consecutive years of EBITDA growth, net leverage falling, credit ratings upgraded, inaugural buyback and dividend announced, consistent beats vs. guidance. The one caveat is the limited AI relevance for this investor profile, but that's a thesis-fit question, not a value-trap.

Earnings vs. expectations

• H1 2024: guidance tightened upwards mid-year (Adj. EBITDA US$410-420m from US$405-420m); outcome ahead of plan 2024-08 H1 2024.
• H1 2023: FY23 guidance tightened upwards to top end; organic tenancy additions guidance raised from 1,600-2,100 to 1,900-2,100 2023-08 H1 2023.
• FY25: result "ahead of expectations", 2.2x tenancy target achieved one year early; initial 2025 EBITDA guidance was US$455-475m, delivered US$471m — top-half of range 2026-03 FY25. Pattern: consistent beats or in-line-at-top-end, repeated upward guidance revisions, ten unbroken years of EBITDA growth. Earnings-surprise trend is clearly positive.

Conviction

4 — high. Anchors: (1) ten-year track record of consistent delivery with explicit guidance beats; (2) clean contracted-revenue model that supports a straightforward EV/EBITDA valuation; (3) multiple valuation methods (EV/EBITDA, FCF yield) converge in a similar band. Limits: (1) emerging-market multiple is judgmental — the "right" discount vs. AMT/CCI could reasonably be 30% or 50%, materially widening the FV range; (2) material tax disputes remain unresolved and could affect realised cash flow.

Overall scoring rationale

HTWS fits the operating-leverage pillar well and valuation is reasonable, but has essentially zero direct AI-receiver exposure — the thesis is African mobile penetration, not AI buildout. Downside protection is moderate (leverage, EM, customer concentration). Score in the 300-400 band reflects a quality compounder that misses the strategy's defining AI-receiver criterion.