Safaricom market value rises past Sh400 billion
Posted Wednesday, November 6 2013 at 21:29
- The company’s shares crossed the Sh10 per mark in Wednesday morning trading a day after it announced a 45 per cent rise in after tax profit that analysts said were higher than expected.
- The mid-morning share price rally came after analysts raised dividend expectations to between 43-45 cents a share before it closed the day at an average of Sh9.70.
- The rise in Safaricom’s share price has been so sudden and robust that investors have made not only book or accounting profit, but also economic gains in sense that it has beaten inflation.
Safaricom shareholders Wednesday had the value of their investment in the telecom firm more than double since they bought shares in the primary market five years ago.
The company’s shares crossed the Sh10 per mark in Wednesday morning trading a day after it announced a 45 per cent rise in after tax profit that analysts said were higher than expected.
The shares traded at a price of Sh10.20 at the Nairobi Securities Exchange (NSE) on expectations of strong annual results.
The share price rally pushed Safaricom’s market capitalisation to Sh408 billion or equivalent to a fifth of the entire Sh1.9 trillion stock market wealth and more than double the Sh200 billion valuation during its listing 65 months ago.
The mid-morning share price rally came after analysts raised dividend expectations to between 43-45 cents a share before it closed the day at an average of Sh9.70.
“We are expecting that the dividend for the whole year to stand at 44 cents a share going by the fact that the company pays out 85 per cent of the free cash flow,” said Kuria Kamau, a research analyst at Kestrel Capital.
Standard Investment Bank (SIB) forecast the dividend payout for the year at a high of 45 cents a share.
Safaricom paid a dividend of 31 cents a share for the year ended in March 2013, and payout of 45 cents would amount to an increase of 14 cents a share or 45 per cent growth. The forecasts are supported by the fact that the Safaricom management has raised the 2014 free cash flow estimate from between Sh15.5 and 17.5 billion to between Sh20 and 21 billion.
Since its listing on the NSE in June 2008, Safaricom has struggled to rise to touch the price of Sh8 a share. It only did so ahead of the announcement of the latest results.
The telecoms operator has had little to show in terms of market performance despite making investments worth more than Sh100 billion in the past five years.
The company has had an equally turbulent net profit growth in the five years since listing – having returned a drop in net income in some years.
The price of Sh10.20 recorded during Wednesday’s morning trading, the worth of government shares stood at Sh143 billion — almost half of the budget deficit for the current financial year.
The deficit stands at Sh330 billion, amounting to 8.1 per cent of the gross domestic product (GDP).
The wealth of other shareholders, including Vodafone and individual investors, also rose considerably to stands at Sh265 billion going by the early morning price.