Market Commentary:
- The All Share Index gained by 2.1% to close the day at 137.37. We attribute this mainly to Safaricom gaining 4.4% to close the day (VWAP) at KES 29.35. Activity on the counter accounted for 34.6% of the day’s traded value. The NSE 20 Share Index however eased by 0.7% to close the day at 1,874.33 as majority of the constituent counters posted price declines.
- Equity turnover increased by 136.4% to KES 524.2 million as number of shares traded increased by 71.7% to 16.5 million. Foreign investors emerged net buyers in today’s trading session with 80.3% of the total purchases against 55.5% of the total sales. There was notable buy side activity on Safaricom and Jubilee.
News Highlights:
Safaricom Smartphone Financing Plan
Safaricom has partnered with Google to increase the number of subscribers owning 4G devices. The campaign is targeting increasing 4G device ownership by facilitating acquisition of about 1.0 million 4G devices.
This will be achieved through a financing plan dubbed “Lipa Mdogo Mdogo” which is expected to begin from 28th July 2020.
Customers will acquire the handsets on credit and make a daily payment of as little as KES 20 for up to a year. All phones are covered by the offer with daily repayments being higher for high value smartphones.
The company is looking to boost mobile data growth to cushion the decline in the voice segment by converting about 4 million 2G and 3G enabled phones to 4G. During the last investor briefing, management stated that mobile data revenue up until June experienced continued growth in volumes/usage (30-40% growth in volumes).
The company is keen on growing 4G coverage across the country from the current 77% and sees the pandemic as an opportunity to leverage on digitization. Increasing 4G device ownership will increase utilization of its 4G network.
Commentary
This is a positive step towards increasing 4G device ownership. There were 6.1 million active 4G devices on Safaricom’s network at end of FY2020 ( which translates to about 21.6% of active customers and 27.7%nof active mobile data customers). Higher 4G device ownership couplednwith the right pricing can translate into higher mobile data usage and mobile data revenues.
Recommendations:
Long Term Buy- KCB, Equity, Absa, Stanbic, NCBA
Hold- Safaricom
Sell- Stanchart, Bamburi, HF