Safaricom eyes Sh400bn value ahead of results

Analysts predict Safaricom’s growth in the first half will be driven by M-Pesa, M-Shwari and data. Photo/FILE  NATION MEDIA GROUP

By CHARLES MWANIKI

In Summary

• Safaricom’s market value surged to just Sh12 billion short of the Sh400 billion capitalisation mark in yesterday’s trading, reflecting sky-high investor expectations of the firm’s performance in half-year results set to be announced today
• The telecommunication firm’s share price touched an all-time high of Sh9.90 in intra-day trading before closing at an average of Sh9.70, which put its market valuation at Sh388 billion

Safaricom’s market value surged to just Sh12 billion short of the Sh400 billion capitalisation mark in yesterday’s trading, reflecting sky-high investor expectations of the firm’s performance in half-year results set to be announced today.

The telecommunication firm’s share price touched an all-time high of Sh9.90 in intra-day trading before closing at an average of Sh9.70, which put its market valuation at Sh388 billion.

Beer maker East African Breweries, which is NSE’s second biggest company by market capitalisation, is valued at Sh254 billion while the third largest, KCB, is worth Sh145 billion.

“Safaricom continued to see strong foreign investor demand,” said the Standard Investment Bank in a market report attributing the high demand for the stock to anticipation of today’s results announcement.

The closing share price of Sh9.70 is the highest that the stock has hit since listing at Sh5 in 2008. Safaricom announced an increased dividend of 31 cents for the full-year ended March 2013.

There have been expectations of rising dividend payout as flattening capital expenditure frees the company’s cash flows.

In the past one week, high foreign investor demand has been met with reducing supply from local investors, who may be keen to hold on to the share that has appreciated by 91 per cent this year to emerge one of the top performers at the bourse.

“Supply on the telco remained low ahead of the interim results,” said the SIB brief.

Safaricom remains the most liquid and heaviest mover at the NSE owing to its large float of 40 billion shares that account for almost half the total listed stock at the bourse. Its rising share price has been key in raising total market capitalisation close to Sh1.9 trillion.

ABC Capital manager for corporate finance and advisory Johnson Nderi said that investors are keeping an eye on Safaricom’s performance, especially given the positive economic growth in the period from March.

“M-Pesa and M-Shwari, and basically data, should be the growth areas in this first half,” said Mr Nderi.

Market observers have variously pointed at the company’s prospects for growth in income and dividends as key factors in attracting the recent investor inflows to the counter.

Rich Management managing director Aly-Khan Satchu earlier told the Business Daily that the share would touch Sh10 this year.

Foreign investor

Mr Satchu said the defining characteristic of the bull market at the NSE which has run since mid 2012 has been the foreign investor component, with this group continuing to reach for the large cap equities of which Safaricom is the biggest.