- So far, the telco's share has maintained a daily average drop of at least two per cent since the beginning of the year.
- On Wednesday, it traded Sh20.60 per share , recording a 2.4 per cent drop from its previous closing price of Sh21.10.
Image: FILE
Safaricom's share touched a low of Sh20 as investors embarked on a panic sale in early hours on Thursday before stabilising to close at 21.75.
The live stock market trader tracked the telco's share at Sh19.95 between 9.45am to 9.50am, before it started picking to gain 5.58 per cent compared to the previous trading day.
On Wednesday, it traded Sh20.60 per share , recording a 2.4per cent drop from its previous closing price of Sh21.10.
So far, the telco's share has maintained a daily average drop of at least two per cent since the beginning of the year and 41 per cent year-to-date.
Safaricom began the year with a share price of Sh24.15 but has since lost 14.7 per cent off that price valuation, ranking it 61st on the NSE in terms of year-to-date performance.
Shareholders’ worries are compounded by the fact that it has lost 17 per cent of the stock’s value from December 16 to date.
Market analyst Mihr Thakar says the yield on US dollar fixed income instruments has increased significantly in the current high-interest rate environment, hence less incentive to take risks in frontier markets.
According to him, Safaricom's growth trajectory has been affected by government interference in controlling its charges and what it can charge for, effectively a confiscation of property without compensation.
"There are also indications that its corporate governance is being targeted by the government, amounting to overbearing decision-making," says Mihr.
In September last year, the telco announced a 50 per cent overall reduction in Fuliza tariffs starting October 1, in a press conference that saw President William Ruto make a surprise appearance.
The head of state said that the reduction in Fuliza charges are part of his government's initiative to ease access and affordable credit to those at the bottom of economic pyramid.
Two months later, the government launched Hustler Fund, a product rivaling Fuliza and embedded it on Safaricom's mobile money transfer platform, M-Pesa.
Fuliza, an M-Pesa service that allows customers to overdraw on their M-Pesa account when they have insufficient funds to complete a transaction, was launched in 2019, in a partnership involving Safaricom, NCBA Group, and the Kenya Commercial Bank (KCB) Group.
Last week, the company announced a surprise resignation of its chairman, John Ngumi who had barely served three months at the NSE listed entity.
A stock market broker, Jabal Menjo fears further drop on the Nairobi bourse anchor share counter as shareholders rush to offload amid depreciating value.
"There is a huge Investor flight exiting frontier markets to high value ones on a strong US dollar. Expected changes at the firm's board following resignation of its chairperson is also a silent worry," Menjo told the Star.
The slide in the share price of Safaricom to a two-year low has seen its share of investor wealth at the NSE decline to below 50 per cent, easing market concentration concerns among the top four firms at the bourse.
The firm was valued at Sh835.9 billion which is equivalent to 47 per cent of the Sh1.95 trillion total market capitalisation of listed firms at the NSE.
At its peak in mid-2021, when its share price touched an all-time high of Sh44.95, Safaricom accounted for up to 63 per cent of the NSE’s total investor wealth after defying the Covid-19 storm that battered stocks at the market.
Crossing the 50 per cent threshold meant that Safaricom’s market worth exceeded the combined valuation of all the other listed companies.
The dominance created market concentration concerns given that the top five firms in the market led by Safaricom, were accounting for more than 80 per cent of the NSE’s valuation, while also dominating daily trading volumes.
Other are Equity Group, KCB, EABL and Co-operative Bank.
This has now fallen to 72 per cent following the Safaricom share slide.
The Capital Markets Authority (CMA) has regularly flagged the influence the top firms have in terms of traded activity and investor wealth as market risk, terming it risky.
"Should such companies encounter a shock or fall into difficulties, the effect on the stock market would be far more pronounced", the regulator said in its latest Market Soundness report.
The high concentration of the market by few top market wealth has partly been caused by a lack of large listings at the NSE in the past decade, combined with a prolonged bear run that has seen investors seek safety in large blue chip stocks, protecting their valuations compared to thinly traded smaller companies.
Mihr is predicting better times for Safaricom ahead, insisting that the telco's share price is undervalued if it's Return On Equity (ROE) is anything to go by.
The firm's share is also likely to gain on expected ventures in Ethiopia after it recieved approval by the government.
Safaricom’s M-Pesa will compete with state-owned Ethio Telecom service dubbed Telebirr, which it launched last May, attracting four million users in weeks, a clear testament to the rich potential in the market.
In overall, experts believe that as a business, Safaricom remains sound and deeply embedded within Kenyan society, an aspect demonstrated by its high profits.
During the release of the April to September financial results, it announced a profits after tax of Sh30.2 billion dropped from Sh37 billion the previous year.
This was a Sh6.8 billion drop and becomes the lowest profits the telco has reported in a half-year period over the past four years.I
t's revenue grew marginally from Sh146.368 billion in the first half of 2021 to Sh153.4 billion in the six months to September, a 4.8 per cent growth.
M-Pesa revenues grew by 8.7 per cent to Sh56.86 billion constituting 39.3 per cent of the company’s service revenues, mobile data revenues by 11.3 per cent to Sh26.3 billion and Fixed Line and Wholesale Transit Revenue by 23 per cent to Sh6.7 billion.