Safaricom share price surges to five-year peak

By Macharia Kamau

Nairobi, Kenya: Safaricom stock has sprung into life after five years of underperformance that left many retail investors selling the share at a loss.

The share price of East Africa’s largest telco hit a new high of Sh11.75 on Friday more than double the initial June 2008 public offering (IPO) price of Sh5 a share. This moved the company’s market capitalisation to Sh470.5 billion from Sh120.1 billion when the share price was Sh3. Safaricom traded below its IPO price of Sh5 per share for close to four years.

The share price slid marginally Monday to Sh11.65 and a total of 19.4 million shares traded. Total market capitalisation stood at Sh1.9 trillion, meaning Safaricom’s stock controls a quarter of the total shareholder wealth.

Eric Musau, an analyst at Standard Investment Bank, noted that the rally in the share price has been mostly due to the impressive half year results announced by the company in November as well as strong fundamentals.

“The first half numbers are still a catalyst… the company fundamentals also appear good given the information that we have,” he said.

The company, which is 40 per cent owned by British telco Vodafone, posted a 38 per cent growth in profit before tax for the six months to September to Sh15.9 billion, up from Sh11.5 billion over a corresponding period in 2012.

The company’s revenues grew to Sh69.2 billion, a 17 per cent improvement from Sh59.1 billion in the first half of last financial year. The growth was on the back of increased spent by subscribers as well as an increase in the contribution of non-voice services including data and mobile money.

Maintain momentum

He added that to maintain the momentum, the firm had the challenge of ensuring that the profitability remained up.

The surge in the share price has also been driven by foreign investor participation, who have increasingly bought the stock before and after the company announced its half year results in November.

Local retail investors have been disposing the share after years of frustration having borrowed from commercial banks and sold personal property to buy into the IPO.

The stock, however, grossly underperformed in the initial years of trading at the bourse, forcing many to cut their losses and sell their shares at prices that were way below the offer price.

At the time of listing in June 9, 2008, Safaricom introduced 10 billion shares to the NSE out of the 40 billion issued shares in a move meant to ensure shares of the corporation were spread to more Kenyans.