Safaricom’s share price now hits new high at bourse

Telecoms service provider Safaricom’s share price on Tuesday hit a new high of Sh11.10 at the Nairobi Securities Exchange (NSE), doubling for the first time the Sh5.50 price at which foreign investors bought them in the primary market.

The share also hit an all-time average price peak of Sh11 in a trading session dominated by foreign investor sale.

Safaricom’s performance pushed the blue chips NSE20-share index to a new five-year high of 5,085.83 points or 17.46 points above the previous day’s performance and above the 5047 points peak of July 28, 2008.

The company trade 53 million representing 66.46 per cent (or two-thirds) of the day’s volume and positioning it as the main driver of the surge in market capitalisation.

“Safaricom continued to stir the market with 53 million shares changing hands at between Sh10.95 and Sh.11.10,” the NSE said in a statement released at the end of the trading session.

The share movement was mainly driven by foreigners selling to locals after the price more than doubled for the first time since listing.

“Safaricom was the day’s top mover with foreigners selling off the counter on profit taking and local investors accounting for the bulk of demand,” said Standard Investment Bank its analysis of Tuesday’s trading.

Kestrel Capital, a brokerage firm based in Nairobi, has put the highest possible price of the share at Sh11.66 and recommended that investors should buy more when the price falls below Sh9.65.

The Kestrel Capital analysts used the valuation of South Africa’s MTN Group to show that Safaricom was still relatively cheap at below Sh10 given its recent financial performance showing that its profits grew by 45 per cent in the six months to October.

“Using MTN Group’s multiples, Safaricom should trade at between Sh9.95 and Sh11.66, much higher than the close of Sh9.65 (last week). We maintain our ‘accumulate’ recommendation on the company,” said the investor note prepared by Kuria Kamau, an analyst.

Mr Kamau said the “share price is attractively valued at current levels relative to regional comparables.”

Other analysts using valuations of other African and Middle East telecom companies have argued that Safaricom share is overpriced. Old Mutual Securities, for example, have put a maximum fair price of Sh10.21 for the shares.

READ: Safaricom stock the ‘priciest’ of Africa, Middle East peers

Pushed by Safaricom’s appreciation on Tuesday, NSE’s market capitalisation moved closer to Sh2 trillion at Sh1.98 trillion, Sh14 billion higher than on the previous day. Volumes and shares traded were also higher.

Turnover soared to Sh1.55 billion on a hefty tally of 80 million shares, up from Sh667 million on 28 million shares realised on Monday.

Safaricom has posted a 113 per cent rise in its price since January. Investors who bought shares at the 2008 IPO price of Sh5, are now able to sell at more than double the initial price.

The telecom firm’s share price has sunk to as low as Sh2.50, meaning those who bought at the rock bottom price can now sell at more than four times the buy in price.

At Sh11, the price is not only above that of the IPO, but is also above inflation. Considering inflation trends over the past five years, Safaricom needs to be at Sh9.60 to keep investors at the same place they were in June 2008.

Besides telecoms, the banking sector traded 11 million shares, representing 14.40 per cent of the yesterday’s traded volumes.

CfC Stanbic sold one million shares at between Sh84.50 and Sh86.00, KCB down 25 cents to Sh48.75 moved 2.2 million shares while Co-operative Bank moved 3.5 million shares and closed at Sh18.50.