Safaricom’s share price (NSE:SCOM) hit a new record Thursday, earning investors Sh78.13 billion in a week and lifting the Nairobi Securities Exchange (NSE) to a 39-month high.
The stock closed at a volume-weighted average of Sh43 on the Nairobi bourse Thursday compared to Sh41.05 on Tuesday last week.
The gains sent the telco’s valuation to a new high of Sh1.722 trillion, representing 61.2 percent of the combined investor wealth at the NSE.
Safaricom’s stock rally has pushed the entire market value to a 39-month high of Sh2.815 trillion, helped by other top counters such as Equity, KCB and Co-op Bank whose gains over the seven trading days stand at Sh4.71 billion, Sh3.05 billion and Sh880 million respectively.
The NSE’s combined wealth was last seen at this level on April 13, 2018 when it closed at Sh2.819 trillion.
Analysts say Safaricom stock is still benefiting from the news of its Ethiopia entry and the confirmation that the Horn of Africa country will soon allow the Kenyan firm to add mobile money to its telecommunications offerings.
“The clarity on mobile money service has helped drive up the share since investors equate this to increased prospects for more revenue and therefore higher return,” said Sarah Wanga, head of research at AIB-AXYS Africa.
Ethiopian authorities said last week that the Safaricom licence would be upgraded to include money transfer services when the award of the second telecoms operator permit is concluded.
Foreign investors have been net buyers on the Safaricom counter, having bought 985.67 million shares since Monday compared to the 231.65 million they sold during this period.
Genghis Capital senior research analyst Churchill Ogutu said recently that investors see Sh43 as Safaricom stock’s resistance level—a level at which further gain is hindered by an overwhelming preference to sell— but the Ethiopian news has sustained it at these highs.
Safaricom’s gain is also coming ahead of the payment of Sh36.86 final dividend at the end of the month. It closed its dividend register last month.
The telco has pledged to maintain a dividend policy of paying out 80 percent of its net profit despite the over $8 billion (Sh873 billion) required to be injected by its consortium in the Ethiopia market spread over a decade.
In May, the consortium led by Safaricom secured the first telecommunications licence, which does not have a permit for mobile financial services like M-Pesa.
The consortium will start operations next year when Ethiopian authorities say the telco will have the right to operate mobile financial services.
This marks a departure from last year’s directive that only allowed locally owned non-financial institutions to offer mobile money service.
Ethiopia sold only one of two full-service licences on offer in May, citing a lower-than-expected price for the second one, which it now wants to offer again.
The government expects prospective bidders to include firms that had expressed interest in the previous attempt to sell the licence but whose bids were deemed insufficient.
Mobile financial services have become a significant part of African telecoms operators’ businesses since Safaricom pioneered them with M-Pesa in 2007, giving people an alternative to banks.
The NSE has now cumulatively added Sh465.65 billion since January and looks set to benefit further from banks as they release the first half results this month.
Banks have seen a gain on their stocks after the first quarter results announced in May pointed to a recovery in contrast to last year.
The Central Bank of Kenya data released last week showed that commercial banks’ five-month profits before tax jumped 41.7 percent to Sh76.4 billion, defying an overall economic downturn due to the Covid-19 pandemic.