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Market Report – 13th May 2021

Faida Research - May 17, 2021 - 0 comments

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Market Commentary:

  • The All Share Index (NASI) eased by 3.1% w/w while the NSE 20 Share Index remained flat to close the week at 165.76 and 1,863.25 respectively. The market was characterized by an increase in market turnover (14.2% to KES 3.1 billion) and volume of shares traded (9.5% to 81.0 million shares). Safaricom eased by 3.4% w/w to close at KES 39.40 as the company announced a 6.8% y/y decline in after tax profits to KES 68.7 billion for FY2021. The company’s total dividend payment for the financial year (Interim: KES 0.45; Final: KES 0.92 – Total: KES 1.37) was slight lower than the previous year (first &final: KES 1.40). Notable price gains were posted on; HF (8.7% to KES 4.00), Stanbic (2.5% to KES 83.00), DTB (1.2% to KES 65.00), Equity (0.5% to KES 40.95) and Absa (0.5% to KES 8.80).  We expect increased activity on banking counters ahead of the first quarter results release.


News Highlights:

Safaricom PLC Posts a 6.8% Decrease In After Tax Profits for FY2021

Safaricom’s after tax profits declined by 6.8% y/y in FY2021 to KES 68.7 billion from KES 73.7 billion registered in FY2020. The performance was characterized by:

  • 3% y/y dip in service revenues to KES 250.4 billion (FY2020: KES 251.2 billion). The decrease was mainly owing to voice, messaging and M-PESA revenue segments.
  • Voice and Messaging revenues declined by 4.6% y/y and 11.7% y/y to KES 82.6 billion and KES 13.6 billion respectively. The two segments combined now contribute 38.4% of service revenue. While promotional campaigns (Tunukiwa talk campaign) increased voice traffic (+19.1% y/y outgoing minutes per subscriber) and grew voice market share (4.5% q/q to 69.2%) this was not enough to compensate for the lower yields.
  • MPESA revenues dipped by 2.1% y/y to KES 82.7 billion with the segment mostly taking a hit in the first half (-14.5% y/y), owing to:
  1. waiver of fees on person-to-person (P2P) transactions worth KES 1,000 and below
  2. waiver of fees on transfers between bank accounts and MPESA wallets
  3. zero-rating of paybills and tills for hospitals and dispensaries
  4. zero-rating of Lipa na MPESA transactions below KES 1,000

2H2021 saw a recovery in MPESA revenues (+10.1% y/y) buoyed by the resumption of charges in 4Q2021. Tariffs were however lowered (up to 45.0%) for low value transaction bands below KES 7,500. The company retained the free transactions between bank accounts and MPESA wallets in line with the CBK’s directive to cushion customers during the pandemic. This has seen an increase in MPESA deposits, as customers load cash onto the MPESA wallets for onward transfers to bank accounts. 30-day active MPESA customers grew by 13.6% y/y to KES 28.3 million. Lending and savings contributed the highest (KES 1.9 billion) to MPESA revenues, mainly supported by Fuliza.

MPESA revenues now accounts for 33.0% of the service revenues.

  • Mobile data revenues rose by 11.5% y/y to KES 44.8 billion (faster growth in 1H2021 due to uplift in demand). The growth was supported by continued growth in 30-day active customer numbers (+8.1% y/y to 23.8 million) and customer usage (+32.7% to 1.5 gigabytes (GB)). The rate per MB continued to fall, easing by 21.9% y/y as the company maintained its focus on increasing affordability. The Average Revenue Per User (ARPU) rose by 3.7% y/y to KES 181.0.
  • Fixed service revenues rose by 6.0% y/y to KES 9.5 billion supported by a 49.1% y/y growth in fibre to the home (FTTH) revenue to KES 3.5 billion. The growth in FTTH was on account of higher number of customers working and schooling from home. FTTH customers grew by 31.5% y/y to KES 137,400. Fibre to the business (FTTB) revenues however dipped as businesses shifted to working from home due to the pandemic.
  • Direct costs grew by 7.1% y/y to KES 80.0 billion. MPESA commissions grew by 18.4% y/y to KES 28.2 billion on the back of increased MPESA deposits. Promotions and value added costs eased owing to movement restrictions with more focus on digital advertising. Direct cost intensity (direct costs/total revenues) rose from 28.4% to 30.3% due to a faster growth in direct costs than revenues (+0.6% y/y to KES 264.0 billion).
  • Expected credit losses edged up by 80.3% y/y to KES 3.0 billion driven by expected collection delays owing to the pandemic.
  • OPEX intensity (operating expenses – OPEX/total revenues) declined from 18.2% to 17.5% due to the improvement in operating expenses (-3.2% y/y to KES 46.0 billion). The company attributed the improvement in operational efficiency to smart procurements and increased digitization and is keen on investing further in technology.


The performance shows resilience amidst the challenging operating conditions. We were particularly impressed by M-PESA performance. The dip in M-PESA revenues was much lower than anticipated.  We remain optimistic on the segment’s growth prospects despite increasing regulatory uncertainty. Extending M-PESA to Ethiopia could also be a source of further upside. Unfortunately the company could not provide further details on the license terms due to confidentiality clauses (will do this at a later date once the licenses have been awarded). The company did confirm they could be allowed to offer mobile money services at some point in the future (timing unknown).

The recommendation is under review.



EABL – Long-term Buy

KCB – Neutral

Equity – Hold

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