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Citi revises Safaricom stock recommendation from Buy to Neutral

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Citi research has reviewed Safaricom shares to neutral and increased the target price from KSh27 to KSh28.80 based on its research findings. Citi rates Safaricom as a growth company whose revenues are expected to keep expanding mainly driven by income from data and M-Pesa services. The leading telecommunications firm expects increased revenues from its e-commerce and payments platform in the future.

According to Citi, the mobile operator’s net profits for
2019 are projected to jump up by 11 percent to reach KSh61.2 billion from KSh55.3
billion booked in 2018. The company’s new product, Fuliza, is expected to drive
up Mpesa revenue and contribute to the overall growth in total revenue. The overdraft
facility has gained over 4 million customers since its launch in January. Safaricom
users have spent more than KSh17 billion on Fuliza in the three months it has
been in the market.

Citi highlights several risks that the mobile operator may
encounter such as government interventions that favor the smaller telecommunication
companies, entry of international digital payment firms into the East African
market, and macroeconomic risks.  

Additionally, the consolidation of Safaricom’s main rivals; Airtel and Telkom Kenya is projected to put competitive pressure on the mobile giant. Nonetheless, Safaricom has a solid infrastructure and good financial records to stay ahead of its local rivals.



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