Analysts project steady Safaricom share run

Market observers say risk aversion is lower compared to the heady days of the global financial crisis, translating in capital chasing higher yields in frontier markets.

But although a potential exit of investors cannot be ruled out, an attraction of higher dividend payments stands as a possible attraction for long term investment positions.

Morgan Stanley analysts estimate that Safaricom’s future cash flows will grow by 60 per cent next year and Safaricom will have net cash of Sh10 cents per share.

According to the analysts, this suggests potential for a higher dividend pay out next year than the current 36 cents dividend per share, a 65 per cent payout ratio.

This will however be put to the test with signs that Safaricom has to raise it capital expenditure to support further revenue growth.

Still, the option of capital gains over a dividend pay out still hold sway with the dividend pay out per share of 10 cents hardly enticing enough to lock foreign investors in.

For investors who had held onto the shares, the rising profile of Safaricom makes a compelling case to gradually exit from the counter.

Still, Safaricom remains one of the most profitable firms in the country and provides an excellent exposure for investors seeking an entry into the region’s telecommunications growth.

The firm’s dominance in Kenya’s mobile telephony market is yet to be seriously challenged with opportunities in voice, data and money transfer segments favouring Safaricom’s early entry into the market.

For market players, whether Safaricom’s steady stride will hold is of crucial importance.
The run could be the elusive trigger that will see the return of retail investors and herald the full recovery of the stock market.

For now, news that Safaricom is on the up and up –whether sustainable or not- remains an encouraging tune for stock market players.
Experience however, still remains the best and sometimes harsh teacher.

Should some predictions turn out to be true and foreign investors exit Safaricom just as retail investors are trickling back to the stock market, another prolonged bear run cannot be written off.