Capital Markets

Safaricom hits highest price since NSE listing

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An investor at the NSE. FILE PHOTO | SALATON NJAU | NMG

Telecoms operator Safaricom’s share #ticker:SCOM rallied 4.7 per cent during yesterday’s trading to close at a new record high of Sh28 as foreign funds rushed back to the Nairobi Securities Exchange (NSE) with the easing of political tension following Monday’s Supreme Court decision that confirmed Uhuru Kenyatta as the winner of the October 26 presidential poll.

The share price appreciation pushed Safaricom’s valuation to a record Sh1.12 trillion and helped lift the market’s capitalisation by Sh57 billion to Sh2.52 trillion.

The telecoms giant — which is the most capitalised company on the NSE — was the main beneficiary of increased foreign investor activity that analysts expect to continue in the coming weeks.

“Some foreign funds are heavily accumulating Safaricom shares,” said Elizabeth Wangechi, the head of trading at Genghis Capital.

“Investors are pricing in the company’s growth potential and the innovative ventures it is undertaking.”

Safaricom shares have rallied 48 per cent so far this year, more than double the average gain of the entire stock exchange.

The company’s share price hit a trading-high of Sh28.50 at one point during Wednesday’s session when it accounted for more than 16 million out of the total 27.3 million shares traded at the bourse.

Safaricom touched a trading-high of Sh27.25 per share on August 29, before the Supreme Court shook the market with its groundbreaking decision to annul a presidential election on September 1.

Turnover dropped and share prices dipped in the subsequent weeks as the market absorbed the likely impact of the decision that called for a fresh vote in 60 days. 

The Supreme Court on Monday upheld Mr Kenyatta’s win in the repeat vote, a decision that has been largely seen as clearing some political clouds over the markets.

READ: NSE shares up Sh50bn as markets react to ruling

Boycott

Uncertainty, however, remains over the main opposition Nasa’s next course of action and the Kenyatta government’s response to it.

Nasa, which stayed out of the repeat presidential poll, has maintained that it does not recognise the legitimacy of Mr Kenyatta’s presidency and has urged its supporters to resist it by all means, including boycott of companies deemed to be supporting it.

Nasa has named Safaricom, Brookside and consumer goods maker Bidco as companies whose products its supporters should shun.  

The Safaricom share price slipped in days after the Nasa boycott began but analysts said the movement was largely due to internal market dynamics and had nothing to do with the boycott.

READ: Safaricom sheds Sh20bn in week of Nasa boycott

ALSO READ: Safaricom dealers say agents harmed after boycott call - VIDEO

Traders said they expected the share price rally to continue if the political situation continues to improve and investors move their focus on the company’s business.

“We’ve seen a lot of interest from foreign buyers in the last few sessions. This is expected to continue as the market recovers from the election slump,” said Stella Wambugu, a dealer at Standard Investment Bank (SIB).

The company boasts owning the most used mobile money platform, M-Pesa, and has more recently ventured into e-commerce business.

More than 20 million people regularly use M-Pesa in Kenya. The platform and other non-voice sales accounted for Sh52.3 billion — more than half — of the Sh98 billion revenue the company made in the six months to end of September.

E-commerce

Safaricom’s e-commerce platform Masoko has already signed up 200 vendors offering 20,000 different products ranging from electronics, mobile phones to everyday household goods, Safaricom’s strategy director, Joseph Ogutu, said on Tuesday.

Masoko is set to take on Africa-wide online retail platform Jumia and other smaller players, who have in recent years tried to break into Kenya’s untapped e-commerce market.

READ: Safaricom’s online portal set to sign up foreign vendors - VIDEO

Earnings

Safaricom announced a 9.5 per cent rise in profit after tax to Sh26.2 billion, on the back of growing earnings from non-voice offerings, including data, mobile money and smartphone sales.

The telecoms firm now accounts for nearly half of the NSE valuation, a development that has raised concerns over its influence on the bourse.
At Sh1.12 trillion, Safaricom’s valuation is bigger than the next 11 largest listed companies in banking and manufacturing.

Its growth into a trillion-shillings company comes at a time when other companies, including banks, have announced profit warnings as they registered lower profits in a tough operating environment.

Banking stocks, which are among the most traded on the bourse, have over the last one year witnessed a drop in their share prices on reduced earnings and concerns after a rate cap law came into effect and cut their main revenue source on interest income.

Agricultural companies also struggled to remain profitable this year after a drought cut production and consequently earnings. This hurt their share performance at the bourse.

Ms Wangechi said she expected the “heavily discounted” share prices to attract investors back to the NSE in the coming weeks if the political hangover dissipates.

“We should expect the same trend to go on for the rest of the year. We could close higher than we are now,” she said.