The key to investing is understanding what you are doing and the company you plan to invest in. Kenyan Wall Street provides valuable insights into Safaricom.
(Kenyan Wall Street) Safaricom Limited is a Kenya-based telecommunications company.
The company provides a range of products and services for telephony, broadband internet and financial services.
The company’s integrated telecommunication services include mobile and fixed voice, short messaging service (SMS), data, internet and M-PESA.
Its network is on second generation (2G), third generation (3G), fourth generation (4G) and Worldwide Interoperability for Microwave Access (Wimax) technology.
It also offers a range of devices, such as mobile handsets, mobile broadband modems, routers, tablets and notebooks.
M-PESA enables users to send and receive money, and pay for goods and services through mobile phone.
It offers a range of messaging services, such as basic SMS and multimedia messaging service (MMS).
Its other services include access services, such as wireless, fixed line and mobile solutions, including fibre and leased lines, and dedicated Internet solutions for enterprises and hosted services.
Safaricom Limited recorded a market share of 66.3 per cent (July – September 2015) which is a 1.7 per cent decline from last quarter’s 67.0 per cent. Airtel also lost its market share by 0.3 percentage points to stand at 19.1 per cent. Orange Kenya and Equitel (Finserve Africa Limited) on the other hand gained market shares to stand at 11.8 per cent and 2.9 per cent respectively.
Mobile Money Transfer
The total number of mobile money transfer subscriptions grew by 3.0 per cent to stand at 28.7 million during the quarter under review up from 27.7 million subscriptions posted in the previous quarter. The net gainers within the quarter were M-Pesa, Equitel Money and Mobikash by 3.7, 24.3 and 2.3 percent respectively. Airtel Money and Orange Money lost by 0.2 per cent and 0.6 per cent respectively. The total number of active mobile money transfer agents stood at 135,724 during the quarter up from 129,357 active agents reported during the last quarter.
According to billionaire philanthropist and founder of Microsoft Bill Gates, mobile banking exceeded its optimistic projections. He mentions that “A new report by scholars at the Brookings Institution shows that many countries are making national commitments to financial inclusion and helping mobile banking reach critical mass. Kenya is a good example of what’s possible. Today 75 per cent of adults there have accounts with a bank or mobile-money provider, up from only 42 per cent in 2011. Other countries that are making huge strides include Brazil, Rwanda, Tanzania, Bangladesh, and India. I love the fact that when I travelled to these countries, I’ve seen digital financial innovation that’s even outpacing what we see in rich countries.”
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Half Year Summary (Period Ending 30 September 2015)
For the six months ended 30 September 2015, Safaricom Limited revenues increased 23% to KES97.22bn.
Net income attributable to common stockholders increased 23% to KES18.08bn.
Net income also reflects Net Financing Income increase from KES166.3mln to KES1.02bn.
Safaricom issued a full year 2016 guidance during its half year investor briefing; it expects:
- Net Income to be in the range of KES 35.5 – 36.5bn (from KES 32 – 34bn)
- Free Cash Flow to be in the range of KES 27.5 – 28.5bn (from KES 25 – 26bn)) due to expected payments from the Government for the construction of the National Police Security Network.
Top Line Performance
Safaricom is undoubtedly a growth story, have a look at the chart below which illustrates its continuous steady growth year on year.
Five Year Financial Performance Data
Voice Service Revenue
Mobile Data Revenue
Fixed Service Revenue
Other Service Revenue
Connection and other Revenue
Total Revenue (KES Bn.)
Contribution Margin %
Operating Costs % of Total Revenue
EBITDA Margin %
Depreciation & Amortization
Net Finance Income/ (Cost)
Forex Gain/ (Loss)
Share of Associate Profit (loss)
Asset Purchase Gain
Net Income (KES Bn.)
EPS (Earnings per Share)
Free Cash Flow
Dividend Paid (Bn.)
Dividend Payout Ratio
According to KPMG this is how it views Safaricom’s ‘True Value’ in its 2015 True Value Report:
Top Ten Global Shareholders
- Vodafone Kenya Limited – 39.9%
- Cabinet Secretary To The National Treasury – 35.0%
- Standard Chartered Kenya Nominees LTD A/C KE002112 – 1.0%
- Standard Chartered Nominees Non-Resd. A/C 9069 – 0.6%
- Standard Chartered Nominees Non-Resd. A/C 9835 – 0.5%
- Standard Chartered Kenya Nominees Ltd A/C KE 19796 – 0.5%
- Kenya Commercial Bank Nominees Limited A/C 1019D – 0.5%
- Standard Chartered Kenya Nominees Ltd A/C KE20531 – 0.4%
- Standard Chartered Nominees Non-Resd A/C 9318 – 0.3%
- Standard Chartered Nominees Non-Resd A/C 9853 – 0.3%
Top 10 Kenyan Individual Shareholders
Investor Shares Held
- John Kibunga Kimani 11 005 800
- Mohamed Abdi Kadir Adan 9 932 500
- Ramaben Sumuntrai P. Patel 8 335 600
- Dharamshi Devshi Shah 5 962,400
- Mahendra Kumar K. Shah 5 706 800
- Mr Moses Thara 5 000 000
- Rajesh Dhramshi Shah 4 975 100
- Esther Wanjiru Muchemi 4 800 300
- Mr Gurbir Singh 4 774 200
- Mihir Amratal Shah 4 250 300
Top Institutional Investors
Data Source: FactSet Research Systems Inc. (Period: 31 Dec 2014 – 30 Nov 2015)
- Fidelity Management & Research Co.
- Schroder Investment Management Ltd.
- Morgan Stanley Investment Management, Inc.
- Norges Bank Investment Management
- FIL Investment Advisors (UK) Ltd
- Parametric Portfolio Associates LLC
- Genesis Investment Management LLP
- Harding Loevner LP
- Aberdeen Asset Managers Ltd.
- Wasatch Advisors, Inc.
Institutional Movers between 31 Dec 2014 and 30 Oct 2015
As shown above Wasatch Advisors reduced some of its holdings in Safaricom during that period. On the flipside, in Wasatch Advisors third quarterly comments from Lead Portfolio Manager Laura Geritz, CFA it was mentioned that “Safaricom Ltd., Kenya’s largest wireless telecommunication services company, historically has been a source of outperformance for the Fund. For the third quarter, Safaricom’s stock was down due to the possibility of a change in the regulatory regime. We’ve written about Safaricom in past letters and revisited management this past quarter in Kenya. While we have reduced our weight due to Safaricom’s valuation and the regulatory pressure, our recent meeting reinforced that the company is one of, if not the most innovative companies in the world. The company has a deep bench of excellent management and its CFO, in particular, with his passion for creativity and ingenuity, reminded us of the reputation of the late Steve Jobs, founder of Apple.” Read the report here.
Share Price Analysis
Total Shares Outstanding: 40,065,428,000
Free Float: 25%
Current Share price (8 Jan 2016): KES 16.40
Market Cap: 657.1bn
P/E Ratio: 20.5
Dividend Yield: 3.9%
We maxed out Safaricom’s share price chart and clearly if you held positions since June 2008 at KES 7.45 and sold in the open market at the current price of KES 16.40 you would be pocketing a +120.13%. Solid Capital Gains
If investors managed to lock in and buy around March 2009 lows of KES 2.65 and to sell their stakes near the historic highs around April 2015 you would be +558.49% “in the money.”
We can derive that long term investment strategies can really pay off and an investor should always be able to see beyond the short term and have a strategic long term view.
Safaricom is an innovative company, most valuable company on the NSE in terms of market capitalisation. In 2015 it was up almost 20% amidst a tough operating environment. Solid company, solid results, going forward we expect more improvement on both the top line and bottom line.
Sources: (Safaricom Annual Reports, Communications Authority of Kenya, Gates Notes, 2015 Brookings Financial and Digital Inclusion Project Report, Kenyan Wall Street, KPMG True Value Report, Factset Research Systems, Wasatch Advisors, Financial Times)
*This article first appeared on Kenyan Wall Street and is republished with its permission