SIB upgrades Safaricom valuation as subscribers and share earnings rise

Money Markets

 

Safaricom subscribers increased by 1.8 million to hit 25.1 million total in the first half of the year that ends in March 2016. PHOTO | FILE 

By GEOFFREY IRUNGU, girungu@ke.nationmedia.com

Standard Investment Bank (SIB) has upgraded its valuation of listed telecoms giant Safaricom following its increased subscriber numbers and a jump in earnings per share (EPS) in the first half-year.

The investment bankers said the EPS of 45 cents showed the full-year figure is likely to exceed its earlier forecast of 80 cents.

“The company posted a 22.9 per cent year-on-year jump in EPS to Sh0.45 on target to beat our financial year 2016 EPS target of Sh0.80,” said SIB research analysts Eric Musau and Faith Waitherero in the report.

The company’s subscribers increased by 1.8 million to hit 25.1 million total in the first half of the year that ends in March 2016.

“In financial 2016 (ending next March), Safaricom is on track to deliver the largest annual increase in new subscribers in over five years with 1.8 million additional subscribers in 1H16 (April-September 2015) alone,” said the analysts.

READ: Safaricom’s full year profit forecast moves to Sh36bn

The report raised the fair value of the company’s share by 32.7 per cent to Sh18.50, indicating a potential upside on yesterday’s price of Sh15.75. The fair value is the price of a share justifiable by its fundamentals.

“In our estimates, despite the resilience of voice, we expect it to start contributing less than 50 per cent of total revenue from 2018 onwards (2015 – 55.9 per cent) driven by growth in data and financial services revenue,” the analysts wrote.

To show the declining role of voice in the firm’s operations, non-voice revenue now accounts for 47 per cent of revenue up from 42 per cent of the previous year, with M-Pesa revenue up 24.1 per cent year-on-year to Sh19.4 billion while mobile data was up 40.9 per cent at Sh9.2 billion.