Capital Markets

Safaricom share drops to four-month low

nse

Nairobi Securities Exchange. The Exchange plans to seek an upgrade of the market to a secondary emerging status in the next 18 months in a move meant to attract high volume investments into the country. . Photo/Salaton Njau

Safaricom stock this month has slid amid selling pressure from foreign investors, pushing it below the Sh12 level and a four-month low.

The stock that hit an all-time high of Sh13.40, Tuesday closed at Sh11.95, its lowest level since March 25.

The share has lost 6.2 per cent since the beginning of July when it was trading at Sh12.75.

Standard Investment Bank analyst Eric Musau said investors exiting the stock now may have come in at a lower price. The stock gained 66 per cent over the past one year and its large number of investors makes it a prime candidate for profit taking.

“It is because of foreign selloffs primarily, and even though there has been local buying, it has not been sufficient to cover the supply from foreign investors,” said Mr Musau.

The company sold 10 billion shares to the public at a price of Sh5 a piece in 2008, attracting local and foreign investors who placed bids worth Sh231 billion, causing an oversubscription of 360 per cent.

The stock had held below its Sh5 IPO price between September 2010 and December 2012, locking in many investors who did not wish to take a hit on the initial investment.

After breaking above the Sh6 level in April last year, the it has maintained a rally that has led to its current double-digit trading price, with investors largely attracted by the financial performance and improving dividend from the telco.

In the last two weeks, Safaricom has registered net foreign outflows of Sh832 million, leading the market in outflows.

Safaricom has been in the news lately concerning the Sh14.9 billion police communication tender and its opposition to the Equity Bank MVNO licence award.

The telco has also recently sealed a deal with KCB Group to offer a suite of services to SMEs through its network that include bank account opening, website domains as well as talk time and text message services, dubbed Biashara Smart.

READ: Equity seeks to halve transaction costs with mobile licence

Even though the launch of the service came before the rollout of Equity’s mobile virtual network, both KCB and Safaricom played down suggestions of a link between the two.

Mr Musau said, however, that while some issues around the Equity MVNO licence and the security tender licence have to be cleared, these have had little effect on the stock in the market compared to the supply-demand dynamics.

Earlier this month, Safaricom announced it had opened its M-Pesa agency network to its rivals, meaning the estimated 85,000 M-Pesa shop owners can now also sign as agents of Airtel Money and Orange Money (offered by Telkom Kenya) under the same premises.

This potentially opened a new competition to its M-Pesa platform which brought in Sh26.5 billion in revenue in the financial year ended March 2013, compared to Sh21.8 billion in the 2013 financial year.