SBG Securities says Safaricom #ticker:SCOM shares are a worth buy backed by growth of mobile money and data revenues and ahead of its expected entry to the Ethiopian market.
The investment adviser has projected a share price increase of 12.1 percent to Sh37 from the annual average of Sh33, and earnings before interest and taxes (EBIT) at Sh105 billion for the current financial.
Safaricom has in recent days traded at Sh31.50.
The analysts estimate growth of service revenue at a three-year compound annual growth rate (CAGR) of seven percent, driven by M-Pesa, mobile data and fixed data, all with there-year CAGR of 13 percent, 14 percent, and 13 percent respectively.
“In our opinion, the growth in M-Pesa and mobile data revenue will mostly be because of increased usage while the growth in fixed data is likely to be as a result of more active subscribers,” SBG said.
The telco posted Sh55. 3 billion after tax profit for the full year ending March 2018, representing a 14.3 percent growth compared to the previous year, attributed to M-Pesa and data revenues.
“While the telco's traditional income streams appear to be slowing down, mired by a predatory tax regime, there is still growth in one-month active data customers that grew by 14.8 percent in HY20
Mobile money growth is expected to continue, with higher single digit percentage growth even when it matures in the distant future,” financial risk management and investment analyst Mihr Thakar said.
According to Mr Thakar, Safaricom has shown higher operating performance on every year profits, equivalent to more than half of its capitals.
“Its HY20 long-term debt using an accounting standard uniform to a similar period was just Sh1.77 billion, equivalent to only 7.6 percent of its cash and cash equivalents at the end of the relevant period,” Mr Thakar said.