Safaricom is expected to release the first half of 2020 results in October. According to a pre-earning and valuation update report by Genghis capital, there is a projection of 10.5% year on year growth in the telco’s net profit.
The broker estimates Safaricom’s fair value at KSh 29.35, a 6.6% increase from the current market price of KSh 27.55.
The projections and recommendations have been attributed to various factors. The broker expects M-pesa revenues growth to drop to 13.3% year on year from 18.20% that was reported in the first half of 2019. This is due to the decline in the performance of the betting industry which accounts for about 7% of M-pesa revenues.
Fuliza is expected to cushion M-pesa growth as in the past six months, it has been able to disburse overdrafts amounting to KSh 81 billion. Therefore according to the report, it predicts a KSh 108 billion overdraft disbursements as of September 2019 thus contributing 3% of M-pesa revenue in the first year of 2020.
Fuliza is expected to cushion M-pesa growth as it has in the past six months. The overdraft service has been able to disburse overdrafts amounting to KSh 81 billion. Therefore according to the report, it predicts a KSh108 billion overdraft disbursements as of September 2019 thus contributing 3% of M-pesa revenue in the first half of 2020.
Secondly, voice, SMS and mobile data revenue is expected to grow by 0.8%, 4.0%, and 5% respectively due to the high competition in the market and the move by management to onboard more customers under the bundle revenue structure.
Voice revenue contribution to Safaricom’s total revenue is anticipated to decline to 38.2% as mobile data revenue contribution remains steady at 15.9% and SMS revenue contribution is estimated to decline to 8.0%.
Thirdly, the fixed service revenue is expected to grow by 20% year on year. This is attributed to the accelerated roll-out of the fibre network that is targeting to connect over 200,000 homes by the full year of 2021 compared to the 107,800 homes that have been connected as at the full year of 2019.
Fixed service is estimated to contribute to the total service revenue in the first year of 2020 by 3.7% compared to its 3.4% contribution in the full year of 2019.
Lastly, according to the report, Safaricom has plans to venture into Ethiopia as discussions with the government still continue. The Analysts report states that there is a huge potential for growth in the Ethiopian mobile money market.
Related;
