Safaricom hits record 60.2 pc of NSE wealth

Safaricom’s #ticker:SCOM share of combined investor wealth at the Nairobi Securities Exchange (NSE) has hit a record 60.2 percent on a sustained price rally, deepening its significance at the bourse.

The telecommunications company’s valuation has risen by Sh84 billion since the year started, closing yesterday’s trading at Sh1.45 trillion.

Safaricom’s latest share of wealth on the NSE is a significant climb from 58.7 percent at the end of December last year or 42.5 percent two years ago.

The telco’s share price closed at Sh36.35 as at Monday having gained 6.13 percent on year to date, continuing with the rally that started late last year on news that the Central Bank of Kenya had ended the zero-rating of M-Pesa transactions of up to Sh1,000.

The Safaricom stock hit a high of Sh37 last week on intra-day trading, a gain from opening price at Sh34.25 on January 4, with foreign investors continuing to turn as net buyers.

Genghis Capital research analyst Gerald Muriuki attributed the gain on the high interest held by the investors on tech stocks and the expected rebound in revenue growth on M-Pesa business.

“The interest is pushed by the general sentiment around the tech stocks,” Mr Muriuki said.

‘’There is also the anticipation of long-term performance of its mobile money platform, M-Pesa despite the slashing of the transaction charges.”

Data from AIB-AXYS Africa Capital shows foreign investors bought Sh2.098 billion worth of Safaricom shares in the first two weeks of New Year trading that closed last Friday.

This is in contrast with the Sh1.25 billion value of shares sold in the review period, meaning that foreign investors have accumulated an additional Sh839 million of Safaricom shares in 10 days. 

Over the review period, total net foreign investor buying was at Sh527 million, meaning that while the foreigners were dumping some of the NSE stocks, they were accumulating their holding at Safaricom.

The share gain has helped lift the benchmark NSE 20 Index, which tracks the performance of select blue chip stocks like Safaricom and East Africa Breweries Limited #ticker:EABL (EABL), by more than three percent.

The NSE total market capitalisation is now at Sh2.42 trillion — the highest in over 11 months — lifted by Safaricom.

While M-Pesa revenue dipped by 14.5 percent to Sh35.89 billion on free transactions, the transaction volumes grew by 14.9 percent to 5.12 billion in the half year ended September.

Safaricom is banking on the increased number of users on its mobile money platform amid the running charges to raise revenue. 

M-Pesa transaction value grew by 32.9 percent to Sh9.04 trillion as the business added 3.2 million one-month active customers.

Four other key counters—Equity #ticker:EQTY, KCB #ticker:KCB, Cooperative Bank of Kenya #ticker:COOP and EABL — have failed to keep up with the Safaricom rally, giving the telco the dominance.

KCB, NCBA #ticker:NCBA, Stanbic #ticker:SBIC and Stanchart #ticker:SCBK, have dropped by 3.15 percent, 4.67 percent, 5.29 percent and 3.12 percent respectively.

Analysts have linked the fall in the KCB share, for instance, to high net sell-off associated with investors’ jitters following plans to acquire a 62.06 per cent stake in Banque Populaire Du Rwanda (BPR).

‘’KCB shares started to fall when they talked about its acquisitions in Rwanda, Equity Bank pulled off from Rwanda but (its) DRC is a good move,“ said Kenneth Minjire of AIB-AXYS Africa.

Eyes will be on foreign investors and share prices of key sectors such as banks which were last year hurt by profit falls and high provisioning for loan defaults as customers sought loan restructurings.

Foreign investors last year withdrew a record Sh29.01 billion from the NSE in contrast with Sh1.378 billion added the previous year as they dumped equities in a Covid-19 environment.

All the three indices — NSE 20, NSE 25 and NSE all share — were down 30.2 percent, 17.4 percent and 9.3 percent respectively.

Only nine out of the 62 NSE stocks posted share price gains last year, with the only large stock being Safaricom which touched an all-time high of 34.25.

NSE chairman Kiprono Kittony expects a recovery this year, hinged on the return of foreign investors, improved business environment and the attractive prices of many stocks.

“We expect increased foreign investor flows because of the recent upgrade on the Morgan Stanley Capital International (MSCI) emerging markets index which gives Kenya increased allocation due to higher weighting,” said Mr Kittony.