If You Have Money To Invest, Then Safaricom is your BEST BET at the NSE for the 2018/19 period
Data: History lays a pattern for how the future unfolds
Benjamin Graham once said that Outright speculation is neither illegal, immoral, nor (for most people) fattening to the pocketbook. I believe he was talking about Kenyans and their unique ways of investments.
Graham further noted that there is intelligent speculation as there is intelligent investing. But there are many ways in which speculation may be unintelligent. Of these the foremost are:
1. Speculating when you think you are investing
2. Speculating seriously instead of as a pastime, when you lack proper knowledge and skill for it
3. Risking more money in speculation than you can afford to lose.
In all honesty, this simply described how we Kenyans invest and how we seek out investment options, like a loaded missile in the dark without the guiding tech to send it to its target.
We invest with information gotten from bars, from Google, from twitter and facebook and WhatsApp chats and this is where we always go wrong but it’s like we never listen. The need for instant gratification is the Achilles of our generation.
Paul Samuelson put it very well when he said Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.
I believe as a trade analyst that games are won by players who focus on the playing field –-, not by those whose eyes are glued to the scoreboard. If I am to echo the famous strategy of Warren Buffet.
This year started on a shaky ground with the prolonged politics and the uncertainty that surrounded the same. We have now done two quarters and us all taking stock of how we have performed.
Investor wealth at the Nairobi Securities Exchange has fallen 241 billion shillings in the second quarter of the year as blue-chip stocks slid under the weight of profit-taking.
The decline significantly reversed the gains that investors made in the first three months of 2018, when the market turnover rose 296 billion shillings, leaving a net gain of Sh55 billion for the first half of 2018 as reported by Business Daily.
So, many investors are asking, where are the chances, where are the opportunities to invest. Where do we tie our monies to so that we can also do some profit taking?
The biggest challenge to investing is how to identify an opportunity or chance. How do you tell this will work? How do you measure the level of risk, how do you tell if it’s not a con?
These are the many questions that we ask and eventually hold us back from investing and we miss the opportunity.
The NSE presents us with the best opportunities to invest, with calculated risks and modules to monitor, enabling us to react when a crisis comes hence being able to control what we invest.
Safaricom is the denominator of the NSE. When it sneezes, everyone else catches a cold. Its daily movements have a great and significant impact on the market.
To be able to understand how best to invest with Safaricom as a shareholder, its key to understand its numbers in every aspect. I did a project that by end of 2019, the Safaricom share will be retailing at 35 shillings per share and this will be one of the best shares anyone can buy. This is why.
Numbers never lie. They leave a footprint of truth and certainty
The brand has been raking in crazy profits for the past 8 years, something that has a direct bearing on the performance of the share at the NSE. In 7 years, the profit change for the brand has been 41.7 billion shillings.
Have a look;
1. 2011 =13.6B
2. 2012 =12.6B
3. 2013 =17.54B
4. 2014 =23.02B
5. 2015 =31.87B
6. 2016 =38.1B
7. 2017 =45.44B
8. 2018 =55.3B
This is more than amazing. This alone should make anyone invest in the share for the long term, sit back and recoup the principal amount through the dividend channel.
The image below, shows Safaricom’s profits for the last 8 years:
2018 FY Results have shown why the share is the best bet for a long-term investment with an estimated return on investment being 37 percent annually.
Service revenue for 2018 was 224.5 billion shillings. Profit before tax was 79.9 billion shillings. Profit after tax was 55.3bn. Imagine paying 24.6B in taxes. You can already ask yourself how much was going to the shareholders through the dividend channel then.
Safaricom Profits in a line
Proposed dividend per share was 1.10 shillings. For shareholders who bought shares 5 years ago at a share price of 7.15 shillings, returns have increased 4-fold to a price of 29.2 shillings in the month of May 2018.
This is a 400 percent return in five years, making it one of the best investment options anyone could have made, not to mention the returns via dividends every year and other perks that the brand dished out.
M-PESA moved 8.114 trillion shillings in 2017. Of this, 1.966 trillion shillings were deposits, 1.927 trillion shillings were transfers, 1.684 trillion shillings were withdrawals and 2.537 trillion shillings were other transactions. This is a key factor in deciding if the share is a good investment option because this is a key service that is basically controlling the mobile money ecosystem and will continue to do so until and unless these changes and the chances for that are unlikely.
According to the latest financial results, MPESA revenue grew by 16.2 percent from 25.87 billion to 30.05 billion shillings for the half-year that ended 30th September 2017.
The mobile money revolution is driven by the over 156 MPESA Agents and 11 transactions per customer per month. This is core indicator that the share is stable, on a vertical projection and the perfect fit to invest in, with as much as one can.
Other key factors are;
1. Total Shares Issued are 40,065,428,000.
2. Market Capitalization is at 1,201,962,840,000
3. Innovative products and services on the MPESA platform like the #Jitambulishe aspect, creating a secure eco-system for mobile money transactions
4. Its philanthropy is ever growing with the #LewaMarathon foundation and other conservancy efforts
5. Safaricom has a 64.7 percent subscriber market share
6. Home fiber (consumer trends indicate that more and more people are opting to work from home and with increasing tech that is making the mobile phone a powerful gadget to reckon with)
7. B2B fiber that is targeting the SME eco-system. Its big push on data for this aspect is critical to the Kenyan economy
8. Innovative mobile bundle products, making it keep its control of the eco-system from the competition.
9. Stable and secure management style by the CEO, Bob Collymore has continued to create a much-needed confidence by investors, shareholders, and policymakers in the brand, even when he took medical leave.
10. Currently, they are still the leaders in the voice segment, ensuring the most coverage across the country. This, however, is at risk as other players, specifically Telkom, re-invents itself and purposes to leverage its infrastructure across the country.
A Safaricom Share bought at an average of 26 in December 2017 is now worth an average of 29 as at June 2018
More Numbers: A secure trail to invest in
Safaricom PLC continues to be a major contributor to government revenues remitting 43.85 billion shillings in duties taxes and license fees for the period ended in 30th September 2017. It has remitted 536 .5 billion shillings in taxes since inception. Now, ask yourself, how much have shareholders gotten since inception? This is the best option to invest in for the period 2018/19 and the numbers talk for themselves.
The company has signed over 100,000 Lipa-Na-M-PESA merchants and customers did 147 million LIPA NA M-PESA transactions for the same period, an increase of 63 percent. From a sentiment point of view, everything seems to be working in their favor and given that sentiment drives our market, over the technical aspect, meaning that the share will definitely be a key one to watch on a constant basis.
Mobile Loans: Controlling the mobile loans eco-system
Mobile loans have become the largest source of credit for Kenyans besides family and friends, signaling the growing allure of financial technology (FinTech) services in the country. This coupled with the essence of convenience makes it a better option for most. According to data from a new study on consumer trends by marketing research firm, Consumer Insight, four out of every 10 Kenyans polled rely on mobile loans for credit. This is against one out of 10 Kenyans who prefer bank loans.
‘’Mobile loans are steadily upsetting soft credit and are now the second most preferred avenue at 38 percent in sharp contrast to 10 percent for bank loans,” said Ruth Ruigu, a research director at Consumer Insight during the study’s release in Nairobi.
Mobile loans are the future in mobile money eco-system and the brand is leading without a doubt. The MPESA platform is the denominator on which mobile money is crafted and executed.
Safaricom now issues 3 (micro) loans every second through its partnerships with banks – M-SHWARI (CBA) and KCB’s M-Pesa. For other platforms that offer mobile loans, like the Barclays Timiza one, they rely on one’s MPESA history to quantify just how much you are worth.
Overall as per the last financial results, M-PESA accounted for 28 percent of service revenue, and mobile data was 16 percent reducing Safaricom’s earlier reliance on voice and SMS which together were still a significant 50 percent of revenue.
This means, the firm’s innovative module makes the share more attractive in its category and has the potential for minimum risk at a maximum return for an investor.
Philanthropy: A giving heart goes a long way
To really be of help to others we need to be guided by compassion. Safaricom is a brand whose ideology from how it handles itself, a brand guided by compassion for a better environment in which it operates in. This is something that the brand has distinguished itself in.
The Lewa Marathon has seen up to 13,000 runners from all over the world have taken part in the race since inception. Over 40 million shillings was raised in 2017 bringing the total amount raised over the 19 years to over 675 million shillings. As the title sponsor, Safaricom donated 14.8 million shillings in the 19th edition. This has endeared the brand to investors, consumers and policymakers. Driving positive sentiment around it.
The Youth: The current future market for the brand
As Nelson Mandela once said, that Education is the most powerful weapon which you can use to change the world. Safaricom has taken it upon itself to educate the youth, a target audience for its products and services on how best to handle themselves when it comes to life, entrepreneurship and their talents, through its product called BLAZE; BYOB. They have spent millions to traverse the country in a bid to empower the youth and make them more responsible in a move that has endeared them very well with the target audience, cementing a lasting relationship with the beautiful user experience.
Through BLAZE, Safaricom intends to invest close to 50 million shillings to roll out the seven experience zones in universities across the country. Since it started in May 2016 it has over 2 million youth on its network. The brand is creating a unique user experience and at the same time studying and understanding their target audience, hence being able to predict what kind of products and services they will need in the future.
The Sacco: The Investment Module
If you want to go somewhere fast, then you had better go alone but if you want to go far, then go with others. The brand has created a conducive, attractive and safe environment for its staff to invest and be able to create value for them in an eco-system that develops confidence. This alone is a key factor to consider when planning to invest in a listed brand.
The Safaricom Investment Cooperative currently boasts of a membership of 4200 up from 3000 one year ago when Ronald Musundi took over as CEO. The institutions’ capital base stands at 2.2 billion shillings while the asset base stands at 3.6 billion as at 2017 compared to the capital base of 1.8 billion and asset base of 2.5 billion recorded in 2016.
The Future; Innovative products and services
Ongoing creative innovations such as food security (Digi Farm and Connected Farmer) and healthcare, where for example the healthcare innovation, M-TIBA has over 1 million users. Safaricom recently created an agri-business department that will seek to deliver mobile-based solutions to address food security in the country. This is a big deal and if they can be able to pull it off, they will be able to disrupt the agriculture sector in ways not thought possible and this will shoot the share to unpredictable share prices, which will be good for the investors.
Safaricom is critical listed brand and it’s a sure good and positive investment opportunity for one to get into if they had the capital. As I pen this article, the share closed at 29.25 shillings per share as of 4th of July 2019. It’s a sure bet and I must eat some of that pie too.