Two days ago Safaricom announced half year net profits of Shs 11.3 billion with a projected pre-tax profit for 2012/2013 of Kshs 32 billion. This good news enticed investors at NSE and for the first time since Safaricom went public its share price reached a new height of Shs 10.2, which is slightly over 50% of the IPO that was set at Shs 5 in 2008. This means that the valuation of Safaricom has also risen by 50% since it went public.
The bullish feel around Safaricom’s shares has pushed its market capitalization to be at Kshs 408 billion, making Safaricom control more than 21% of the NSE by value.
The new value of Safaricom and that the fact that seemingly the profitability of the teleco is yet to reach the peak, shareholders have all the reasons to smile. At the IPO I was one of the many skeptics who could not see a way Safaricom could pass the Shs 5 IPO price, especially in the days that the price per share price plunged to be as as Shs 3. My the then boss however remained optimistic that the share price would more than double, but his timeline for “within two years of IPO” has way too optimistic.I wonder why he never bought Safaricom shares though despite advising all the interested investors to invest in Safaricom shares.
But is 50% interest in 5 years worth it? I think yes as this comes to 10% per annum. Very few banks or investment options will give back 10% annual interest on savings/investment.