Safaricom CEO Bob Collymore. The telecoms operator becomes first listed
company in Kenya to touch the Ksh1 trillion mark in market valuation
during trading. PHOTO | FILE | NATION
Kenya's telco giant Safaricom shareholders have
enjoyed a Ksh214 billion ($2bn) gain in their wealth this year after the
telco’s share hit a new all-time high of Ksh25($0.24) on Friday.
The
share price rally on the Nairobi Securities Exchange (NSE) saw the
telecoms operator become the first listed company in Kenya to touch the
Ksh1 trillion ($9.6bn) mark in market valuation during trading.
It
has gained 28 per cent this year on the back of increased demand by
foreign investors eyeing dividends. It opened the year at a price of
Ksh19.25 ($0.19).
The stock closed Friday at an average
price of Ksh24.50 ($0.24), earning it a market capitalisation of
Ksh981.6 billion ($9.4bn)— which is 42.9 per cent of the total value of
all the 63 firms listed on the NSE.
At this level of capitalisation, the company is now valued at nearly a seventh of the country’s GDP of Sh7.1 trillion ($68.2bn).
Steady payouts
Safaricom’s share price has received a big boost recently from its steady dividend payouts.
Investors
raced to be on the telco’s book ahead of August 30 deadline for paying
dividend of Ksh0.97 ($0.01) a share from the financial year ended March.
Last
December the firm paid out a total of Sh1.44 ($0.01) a share in
dividends, of which 76 cents were for the year ending March 2016 and 68
cents in form of a special dividend.
“Earnings margin
improvement and reduced capital expenditure intensity are expected to
sustain generous dividend payments going forward,” said Dyer & Blair
Investment Bank head of research Linet Muriungi in a coverage note on
the telco last week.
The firm has reported consistent profit growth in recent years, leading to a build-up of its cash reserves.
This has seen it grow dividends in recent years, making it a safe bet for investors.
The
telco has been paying out about 80 per cent of its net earnings as
dividends, an attractive prospect for investors in a market where a
rising number of firms are cutting back on retained income.
Higher earnings at Safaricom have been driven by growth in Internet and its M-Pesa mobile phone-based payments business.
Revenue from calls also grew in the year ending in March.
Safaricom
announced a 27.1 per cent rise in net profit to Ksh48.4 billion
($465.3mn) in the year ended March as sales increased 8.8 per cent to
Ksh212.8 billion ($2bn).
The stock has been flirting with the historic mark for weeks, trading around the Ksh23 ($0.23) level since early June.
Safaricom
listed at Ksh5 ($0.05) a share in June 2008, but shareholders endured a
few years of subsequent low prices that culminated in the stock sinking
to an all-time low of Ksh2.50 ($0.02) a share in 2011.
Long
suffering investors who held on to their shares are now being rewarded
for their patience, having added billions of shillings in capital gains
that have been coupled with a consistent increase in dividends over the
years.
Analysts have been upgrading Safaricom’s fair
value as its price goes up, with Dyer & Blair issuing it a one-year
target price of Ksh26.75 ($0.26).
It remains to be seen, however, whether the company’s earnings will grow at a pace to justify the lofty valuations.
Safaricom
is also one of the few counters at the stock market which bucked the
slump experienced between March 2015 and March of this year.
The
telecoms operator now accounts for about 42 per cent of the entire NSE
valuation of Ksh2.32 trillion ($22.3bn), meaning that any move on the
stock has a significant effect on the main indices — raising concerns
over its influence on the Nairobi bourse.
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