Sa­fari­com sheds Sh20bn in week of Nasa boy­cott

But an­a­lysts say move­ment mainly due to price cor­rec­tion after irst half re­sults

Business Daily (Kenya) - - FRONT PAGE -­tion­

Tele­coms op­er­a­tor Sa­fari­com’s mar­ket val­u­a­tion shed Sh20 bil­lion in the first week of op­po­si­tion coali­tion Nasa’s call on their sup­port­ers to boy­cott the firm’s ser­vices.

The mar­ginal drop in the share price is seen to sig­nal

the re­silience of the com­pany, which ac­counts for nearly 40 per cent of trad­ing at the Nairobi Se­cu­ri­ties Ex­change (NSE), and to be a re­flec­tion of the fact that in­vestors have yet to get enough in­for­ma­tion on the boy­cott’s po­ten­tial to move the mar­ket in ei­ther di­rec­tion.

Some an­a­lysts, how­ever, in­sisted that the po­lit­i­cal ac­tion was un­likely to af­fect the

com­pany’s share price in the longer term, es­pe­cially be­cause they ex­pect rev­enue growth to re­main on course.

“There is only a small el­e­ment of the boy­cott to Sa­fari­com’s share price per­for­mance, at­trib­ut­able to in­vestor sen­ti­ment. In our view, the slight drop is mainly due to a price cor­rec­tion after re­lease of first half re­sults, and pre­cisely be­cause the 9.5 per cent yearon-year profit growth was lower than an­tic­i­pated,” said Dyer & Blair head of re­search Linet Muri­ungi.

“We may, how­ever, see sub­scriber growth ei­ther sta­bilise or soften marginally in the short term, where the or­ganic growth in sub­scriber num­bers is off­set by those leav­ing.”

Ms Muri­ungi said she did not ex­pect a de­cline in ser­vice rev­enues be­cause the mi­gra­tion is more likely to be in the sub­scriber base that ac­counts for low value monthly credit us­age rather than among pre­mium cus­tomers who ac­count for the lion’s share of the ser­vice rev­enue.

Sa­fari­com’s per­for­mance at the bourse was this month ex­pected to re­flect its com­ing off a div­i­dend-in­spired rally, which be­gan after the clo­sure of books on Septem­ber 15 for the 97 cent pay­out for the year end­ing March 2017.

The div­i­dend chase saw the share price rise to an all-time high of Sh27.25 at the end of Au­gust. The Sa­fari­com share price has in the past one year os­cil­lated be­tween Sh16 and Sh27.25.

The firm an­nounced a 9.5 per cent in­crease in after-tax profit to Sh26.2 bil­lion for the six months ended Septem­ber 30, driven pri­mar­ily by a good per­for­mance in mo­bile money ser­vice, M-pesa, and data.

Ex­otix Cap­i­tal an­a­lyst Tracy Kivunyu says in a note on the com­pany that the pre­vail­ing po­lit­i­cal un­cer­tainty af­fects M-pesa more than the other rev­enue stream, and could be­come a source of dis­com­fort for the firm if it per­sists.

Al­ready, some of the firm’s agents in op­po­si­tion strongholds have re­ported ha­rass­ment, given that they are eas­ily iden­ti­fi­able in their branded booths and other out­lets where they op­er­ate.

Ex­otix says the pro­longed un­cer­tainty dur­ing the elec­tion pe­riod had re­duced ac­tive Mpesa pen­e­tra­tion from 71 per cent in the first half of 2016/17 to 69 per cent in the first half of 2017/18 – point­ing to a slow­down in growth of ac­tive M-pesa users at 9.5 per cent com­pared to growth of reg­is­tered users at the rate of 12 per cent.

“While we ex­pect a re­cov­ery in M-pesa in the sec­ond half of 2017/18, we re­main cau­tious of the po­lit­i­cal un­cer­tainty cou­pled with the on­go­ing 90-day boy­cott of Sa­fari­com ser­vices an­nounced by the Na­tional Re­sis­tance Move­ment [wing of Nasa],” said Ms Kivunyu in a re­port re­leased ear­lier this week.

One of the more dam­ag­ing ef­fects of any down­turn in the com­pany’s for­tunes is likely to come in the num­ber of lost jobs. Sa­fari­com said in its sus­tain­abil­ity re­port re­leased last month that its busi­ness sus­tained more than 823,243 jobs across all its sec­tors of op­er­a­tion in the year end­ing March 2017, down from the 845,846 in the pre­vi­ous fi­nan­cial year.

The Com­mu­ni­ca­tions Author­ity of Kenya (CA) also weighed in on the boy­cott ear­lier this week, warn­ing that it is likely to hurt jobs and in­vest­ments in the ICT sec­tor, which has been among the fastest-grow­ing in Kenya in the past decade.

Nasa called for a boy­cott of Sa­fari­com ser­vices last Fri­day when the share price stood at Sh25.25. The price had dropped to Sh24.75 by close of trad­ing yes­ter­day, cut­ting the com­pany’s mar­ket val­u­a­tion to Sh991.6 bil­lion from Sh1.011 tril­lion a week ago.

The op­po­si­tion has ac­cused Sa­fari­com of be­ing com­plicit in rig­ging of the Au­gust 8 pres­i­den­tial elec­tion, a charge the com­pany has de­nied.

Charles Mwaniki


DIS­TRESS CALL Sa­fari­com Deal­ers As­so­ci­a­tion chair­per­son Es­ther Mu­chemi speaks at a Press con­fer­ence on Mon­day.

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