Markets & Finance

Safaricom valuation overtakes combined value of top 5 NSE firms

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Nairobi Securities Exchange staff monitors trading on an electronic stocks board at the bourse. PHOTO | FILE

Safaricom’s capital gain in the midst of a general price decline at the Nairobi Securities Exchange (NSE) has pushed its capitalisation ahead of the five next largest companies in the bourse.

The company is now valued at Sh657.07 billion, while the combined market caps of the East Africa Breweries Limited (EABL), Equity Holdings, KCB, Cooperative Bank and BAT Kenya stand at Sh655.4 billion going by Monday’s closing prices.

Safaricom is currently trading at Sh16.40 at the NSE having gained 16.7 per cent since the beginning of the year. This has translated to a capitalisation gain of Sh94.2 billion.

“Safaricom’s financial performance is helping. It is one of the few which are seen by investors as safe bets going forward,” said ABC Capital corporate finance and advisory manager Johnson Nderi.

“The issue for the banks is that they are growing much slower this year, especially in the top tier. The smaller banks have also been weighed down by lower margins and higher non-performing loans.”

Safaricom net profit for the six months to September grew by 23 per cent to Sh18.1 billion, suggesting its full-year profit will hit Sh36.5 billion.

Standard Investment Bank (SIB) says in its latest valuation update on Safaricom that the firm is on track to beat its earnings per share forecast of 80 cents, based on the growth of EPS in half one and an increase in subscriber numbers that outperformed expectations.

“This (growth) was driven by a 14.9 per cent year-on-year jump in customer numbers to 25.1 million,” said SIB in the valuation report by analysts Eric Musau and Faith Waitherero.

READ: Safaricom’s full year profit forecast moves to Sh36bn

Meanwhile, all the bank stocks in the NSE have taken a hit this year.

The banking segment has shed 24.8 per cent or Sh214 billion in capitalisation, to stand at Sh650 billion.

KCB is down 29.8 per cent this year at a price of Sh40, while Equity is 20 per cent lower for the year at Sh40. Cooperative has on its part shed 10 per cent to Sh18 a share.

The NSE 20 share index, where the top six firms are all constituent stocks, is 22.5 per cent down this year at 3968 points, with the negative run coming at a time companies are having to weather a tough economic climate.

The total market capitalisation stands at Sh2.036 trillion, having fallen by Sh260 billion since January.

This year 12 companies cutting across five sectors of the market have announced profit warnings, spooking some investors due to the possibility of lower dividend yields.

“These profit warnings are not helping. Even some hedge funds are starting to ask if the market will hold without further decline,” said Mr Nderi.

Other than telecommunications—whose only stock is Safaricom— the only other segments registering gains are agriculture and investment services, the latter a single-stock segment where NSE is the only stock.

Manufacturing stocks EABL and BAT, which are respectively the second and sixth largest companies at the NSE in capitalisation, have shed 9.7 and 13.7 per cent in value respectively this year to Sh278 and Sh784 a share.

According to investment firm Cytonn, there remains very few pickings in the stock market that promise value gain, with the lower earnings likely to keep the market subdued.

Foreign investors are also likely to reduce their risk appetite for securities in emerging markets such as Kenya, shifting capital to the US due to the impeding rate increase by the Federal Reserve.