Capital Markets

Sigh of relief for Safaricom investors as stock price jumps from panic lows


A Pedestrian walking past Safaricom Shop along Kenyatta Avenue in Nairobi on May 7, 2023. Safaricom expands value through its Daraja API and M-Pesa Super App ecosystem. PHOTO | EVANS HABIL | NMG

Safaricom’s share price has gained by nearly one third since hitting multi-year lows driven by a major sell-off by foreign investors.

The stock had taken a hit from the company’s performance with the telecommunications operator having posted a third consecutive year of declining profits from contracting voice revenues and new capital spending in Ethiopia.

The new venture is expected to slow down the firm’s profitability in the short to medium term with the telco expecting the investment to break even in four years.

Read: Safaricom posts third profit fall to Sh52.5 billion

Safaricom’s share price closed at a low Sh13 on March 15 in days following the disclosure of its full year financial results on a day that saw the firm’s shares change hands for as low as Sh12.70.

The telco share price has since climbed from the 52-week low by 30.4 percent to trade at Sh16.95 at the close of trading on Friday to mirror returning interest in the NSE’s most traded counter.

The rebound of Safaricom’ share price has been accompanied by a general rise in activity at the Nairobi Securities Exchange (NSE) which has helped lift the bourse from the floor.

The Nairobi all share index has for instance seen a 13 percent liftoff to 105.1 points from 93.04 points on March 15.

At the same time, the NSE 20 and NSE 25 index have gained by 6.1 and eight percent to 1556.55 and 2699.78 points respectively.

Meanwhile, the NSE market capitalization now stands at Sh1.637 trillion in contrast with Sh1.448 trillion at the start of the review period.

The performance of individual stocks has nevertheless been a mixed bag with some firms witnessing a rally while others book a slump.

KCB Group and East African Breweries Plc (EABL) have for instance recorded a 10 and nine percent share price appreciation in the period to Sh31.90 and Sh154.75 respectively.

On the flipside, Equity and BAT have posted a 5.8 and 7.9 percent share price plunge over the same period to Sh38.15 and Sh424 each.

The plunge in Safaricom’s share price had sparked market wide debate over the firm’s valuation at the stock market as the share traded below the intrinsic valuation by analysts.

The stock’s rise in recent weeks is however partly explainable by its sharp price discounting which could have proved as an attractive entry point for new investors.

Read: Safaricom eyes return of interest-free loans for shopping

Safaricom traded at Sh34 a piece at its 52-week peak in July last year.

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