Safaricom share down to Sh19 amid NSE investor flight

Analysts link the shift to fears from foreign investors over the ability to repatriate profits due to the dollar shortage in Kenya.

Safaricom Plc, currently the most valuable stock on the Nairobi Securities Exchange (NSE), with a market capitalisation of Sh785 billion, saw its share lose at least 6.3 per cent of its value to Sh19.30, from Sh20.60 last week.

It traded at Sh19 as of Tuesday 2.30 pm, amid a high turnover of over 3.1 million shares.

The telco, which nevertheless continues to dominate the market with about 43.9 per cent of the entire NSE equity, has witnessed a drop in its stock since January, with year-to-date recording a 41 per cent fall. 

Its share opened the year at an average Sh24.15.

The NSE has witnessed a huge offloading by investors who are seeking more profitable investments abroad, mainly in the US whose recent back-to-back Federal Rate hike has attracted inflows.

Market capitalisation–the total value of a publicly traded company's outstanding common shares owned by stockholders–has dropped to Sh1.8 trillion.

The bourse has shed more than Sh130 billion since last week, with Safaricom, EABL, Equity and KCB Group accounting for about 98 per cent of the loss.

This came, as the US Federal Reserve signalled yet another interest rate hike this month, even as economists observe there could be no increase.

“In light of the stress in the banking system, we no longer expect the FOMC (Federal Open Market Committee) to deliver a rate hike at its next meeting on March 22,” global investment banking, securities and investment management firm Goldman Sachs’ economist Jan Hatzius, notes.

Kenyan-based Financial Risk Analyst Mihr Thakar noted that 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.

“The issue facing Safaricom now going beyond fundamentals as panic sets in over the macroeconomic environment. Fears from foreign investors over ability to repatriate profits over the dollar shortage and expectations of a global financial crisis over systematic weaknesses in the US banking system,” Thakar noted yesterday.

This means the pressure is not only on Safaricom shares, but it remains the most impacted in such circumstances owing to its huge market cap share and daily turnover.

In 2021, the telco's share, which was offered at Sh5 during the 2008 IPO, hit a record average of Sh41.75.

While the market factors are seen to weigh down stocks at the Nairobi bourse, management changes and financial performance has traditionally influenced investor behaviour, which could also be linked to Safaricom, which has had a board and senior management shake-up.

For instance in January, advocate Adil Arshed Khawaja was appointed the new board chairman after his predecessor John Ngumi resigned from the post, barely six months after he was appointed in July 2022.

There has also been speculation over changes in the CEO office which current boss Peter Ndegwa has however dismissed.

Last month, the company made key changes among them the appointment of former KCB Bank Group director of corporate banking Esther Waititu as its new Chief Financial Services Officer. 

Insider Boniface Mungania has been appointed director–public sector digital transformation, effective April 1.

Safaricom has also tapped Zizwe Awuor Vundla from Diageo, South Africa where she was the Head of Marketing and Innovation since 2019, to become Director – Brand and Marketing.

According to Ndegwa, the changes are part of the company’s strategies to support continued delivery and enable performance ambition.

“We are currently in the final quarter of our financial year and have a great opportunity to finish strong and deliver our FY 22/23 mission, which is to accelerate new growth areas delivering superior customer experience,” Ndegwa said in a statement on February 1.

The government is also seen to have its push on the company’s corporate governance.

The telco has trimmed its interim dividend by Sh2.4 billion on the back of reduced earnings in the half-year period, the first since it started distributing profit to shareholders.

Its board has approved a payout of Sh0.58 per ordinary share, or an equivalent of Sh23.24 billion, for shareholders on record by March 15.

The total interim dividend, which is lower than the Sh25.64 billion paid last year, will be wired on or about March 31. 

The 9.38 percent drop in interim profit distribution to shareholders follows a 10 per cent drop in net profit for the six months ended last September, to Sh33.5 billion as the Ethiopian expansion weighed down performance.

According to Ndegwa, the company has invested $598 million (about Sh77.7 billion) in Ethiopia operations and is encouraged by the early uptake of services in the new market.