Safaricom now valued at more than Sh420 billion

BY PETER KIRAGU

PROFITABLE: Safaricom now valued at 420 billion

Safaricom is now valued at more than Sh400 billion at the Nairobi Securities Exchange, more than double its value when it was listed in 2008.
The company's share price hit a record closing price of Sh10.05 on Wednesday raising its market capitalisation to Sh402 billion, making it the most valuable company at the bourse.
Safaricom was sold to the public at Sh5 valuing it at Sh200 billion at the time. The share price reached a peak of Sh7.50 after the listing but later hit  a downward trend. The stock hit a low of Sh2.50 in 2011, reducing the value of the company by half to Sh100 billion jolting the hopes of thousands of Kenyans who invested in the firm.
The stock has however taken an upward turn on the back of Safaricom's good financial performance driven by its mobile money service Mpesa and data offerings in addition to its tight grip on voice and SMS market. As a result, foreign investors have been in the market looking for the shares driving the price up leading to the current position.

“International investors have been in the driving seat since the beginning of 2012,” said capital market analyst Aly Khan Satchu who keeps a close eye on the stock.
Satchu says international investors have been increasing their equity allocation in Sub-Saharan Africa and Safaricom has been a magnet for this capital.
“This year the stock has posted a return in excess of 100 per cent (price + dividends) and we crossed 10.00 this week for the first time and like a hot knife through butter.”
According to Satchu, investors are encouraged by Safaricom's cash generative qualities which is reconfirmed with the recent upgrade of full year cash flow guidance.
Safaricom CEO Bob Collymore during the release of the half year results upscaled the firm's free cash flow position to the range of between Sh20 and Sh21 billion meaning a higher dividend is likely.
Safaricom reported a 15.9 billion profit before tax for the half year period, representing a growth of 38 per cent from last year's Sh11.5 billion. Profit after tax rose 45 per cent to stand at Sh11.3 billion.“Normally markets react according to the information they are receiving,” said Samuel Gichohi of NIC Securities.
Gichohi said Safaricom is being driven by the firm's innovations such as Mpesa and Mshwari and the fact that it has won a vicious price war mounted by rivals Airtel, Orange and yu.“We are also seeing a lot of activities from foreigners,” he said.
Satchu says the stock may rise to a high of Sh13.50 in six months which could see the company's valuation rising to Sh540 billion. NIC Securities research department however sees the price rising to Sh11.63 in that period placing its value at Sh465 billion.