reports
- Chris Hoare
Sub-Saharan African Telecoms Solid top line, decent overall performan...
Q1 was a solid quarter for the Sub-Saharan African operators, especially from a top line perspective. Airtel Africa continued to outperform peers overall. We continue to think that fundamentals for AAF and MTN are strong and deserve more attention. Valuations are compelling too.
- Chris Hoare
- Chris Hoare
Sub-Saharan African Telecoms Decent quarter in a challenging macro en...
Q3 was a decent quarter for Sub-Saharan African (SSA) operators. Fundamentals remain strong. We have updated forecasts post Q3 results, and our recommendations and target prices remain unchanged, except for Safaricom. AAF remains our preferred play in Africa.
- Chris Hoare
Safaricom (Neutral, TP: UR) 1H FY24 Quick Take: A solid quarter, Keny...
Safaricom reported a solid set of 1HFY24 results today. Service revenue growth accelerated driven by a solid performance from M-PESA and mobile data. EBITDA growth slowed but remained robust. The Group has lifted its EBIT guidance for Kenya this year (+KHsh 12bn), it also lifted capex expectations given the KES depreciation but by a smaller degree (+KHsh 3bn). FY24 guidance for Ethiopia is unchanged, so was mid-term guidance for capex and EBITDA.
- Chris Hoare
- David Lopes
New Street: Sub-Saharan African Telecoms Q3 22 review: Underlying fun...
Sub-Saharan African (SSA) operators continue to benefit from strong fundamentals with accelerated growth. Vodacom improved the most following the reduction in mobile money levies in Tanzania and a better DRC performance. Specific to the SSA region, we see MTN and AAF as our favoured play, while exposure to Africa is a key part of our Orange Buy thesis.
- Chris Hoare
New Street: Safaricom (Neutral) 1H FY23 Quick Take: Some slowdown, up...
Safaricom reported its 1HFY23 results today. Service revenue growth slowed on slower M-PESA revenue during the Election Year. EBITDA declined YoY on higher M-PESA commissions and handset costs. On balance, the Group’s FY23 EBIT guidance remains intact, with the KShs 8bn downgrade in Kenyan EBIT target being offset by the KShs 8bn upgrade in its Ethiopian unit. Capex guidance remained at KShs 100-108bn. We highlight below the key takeaways from the results and the outlook.
- Chris Hoare
- David Lopes
New Street: Sub-Saharan African Telecoms Q2 22 review: Decent growth;...
Sub-Saharan Africa (SSA) operators saw a decent Q2 as subscriber growth remained strong. However, ARPU growth eased, in part due to the e-levies and reduced P2P fees on fintech services. Airtel Africa (AAF) was the outperformer again while MTN’s EBITDA margin was more resilient.
- Chris Hoare
- Ayobami Omole
Safaricom: The never-ending price war and regulatory risk
The Communications Authority of Kenya (CA) plans to cut the mobile termination rate (MTR) from KES0.99 to KES0.12 per minute. The MTR is the service charge a mobile network operator (MNO) pays to another MNO for terminating calls on the latter's network. For instance, for every call an Airtel Kenya user makes to a Safaricom user, Airtel Kenya must pay Safaricom KES0.99 per minute (or KES0.12 per minute under the proposed change). The new rate was supposed to become effective on 1 January, but...
- Faith Mwangi
Kenya Banks: Sector Q3 21 PBT jumps 68% yoy, and outlook for Q4 is pos...
Kenya banks' sector-wide profit before tax (PBT) grew 68% yoy in Q3 21, according to the latest data from Central Bank of Kenya. On a cumulative 9M 21 basis, PBT increased 63% yoy. Of our covered banks that have released results, KCB Group leads the pack with a 131% yoy jump in 9M 21 PAT, Equity Group comes in second with a 78% yoy increase and Co-op Bank comes in third with a 19% yoy rise. Some key trends in Q3 21 earnings performance include: 1. Improved asset quality with industry NPL rati...
- Faith Mwangi
Kenya banks: Lucrative SME potential undercut by low yields and asset ...
The Central Bank of Kenya (CBK) has released a new study on small and medium-sized enterprises (SMEs), already an important sector for Kenyan banks but one with a great deal of growth potential. Our key takeaways on what the report means for the banks we cover: 1. SME SEGMENT ACCOUNTS FOR 20% OF INDUSTRY LOANS, BUT THERE IS UNTAPPED POTENTIAL The management teams of the Kenyan banks we cover argue that the SME sector is the next growth frontier. In our view, though, the majority of their loan...
- Faith Mwangi
Kenya Commercial Bank: 9M 21 – impressive results and management's 202...
We reiterate our Buy recommendation on KCB Group with an unchanged target price of KES54.0 KCB released 9M 21 results posting a 131% yoy jump in PAT, which we see as positive results. As expected, the 53% yoy decline in loan loss provision charge boosted performance. Revenue performance was poorer than expected, with fee and commission income failing to deliver the expected growth to make up for shrinking net interest margins. On the positive side, there was an improvement in asset quality,...
- Ayobami Omole
Safaricom: Sharp recovery from Covid repercussions in H1 22
Safaricom's total revenue grew by 18% yoy, primarily driven by M-Pesa's revenue growth of 45%. In turn, this was driven by an increase in transfer revenue – as charging on transactions resumed, growth in volumes outweighed the reduction in transaction fees. EPS grew by 12% to KES0.92. The result is better than our expectations, and we expect H2 22 to be strong as well. However, we remain conscious of the low base effect from H1 21. M-PESA REGAINS MOMENTUM M-Pesa's revenue grew by 45.8% yoy to...
- Alastair Jones
New Street: Safaricom (Neutral, TP: KES37, -5%) H1 22 results strong,...
Safaricom has reported a very strong set of results. In particular, growth rates have benefitted significantly from easier comps when P2P transfers were free of charge through the pandemic. The result is that m-Pesa revenues grew 46% y/y, which given it makes up 38% of revenues drove overall service revenue up 17% y/y.
- Ayobami Omole
Ethiopia at war: Safaricom flees
GOOD STORY TURNED SOUR The telecoms opportunity in Ethiopia is huge, but the civil war has escalated, bringing with it heightened risk, damages, and killings. An unconfirmed press report said that Safaricom has evacuated some of its staff from Ethiopia. Other counties including the United States, Denmark and Italy have also advised their citizens to evacuate the country. The Safaricom-led consortium won the only telecom license that has been issued in Ethiopia this year after it bid US$850mn,...
- Ayobami Omole
- Rabail Adwani
- Rahul Shah
- Rohit Kumar
Safaricom: MPesa’s premium pricing comes under the spotlight – we cons...
On the back of the current hearings by Kenya’s Senate Committee on Information and Communications Technology, we take a closer look at MPesa’s role in boosting financial inclusion, and at the firm’s pricing. Airtel Kenya and Telkom Kenya have both argued that the market leader is abusing its dominant position, and have asked for price cuts to be imposed. We find some merit in this assertion but think discriminatory pricing is not the key driver of the firm’s success. MPESA HAS CATALYSED A BIG...
- Faith Mwangi
Safaricom, KCB and NCBA earnings to be boosted by strong H1 21 Fuliza ...
The value of Safaricom’s Fuliza (an M-Pesa overdraft facility) borrowings increased 25% yoy in H1 21, according to media reports. WHAT IS FULIZA? In partnership with Kenya lenders, NCBA and KCB Bank, Safaricom operates an overdraft facility dubbed ‘Fuliza’, a product that enables customers to access an unsecured line of credit by overdrawing on M-PESA to cover short-term cash-flow shortfalls, subject to an applicable pre-determined limit. Fuliza is underwritten by Kenyan lenders, NCBA and KC...
- Faith Mwangi
Kenya Commercial Bank: H1 21 – Low cost of risk and better efficiency ...
KCB release impressive H1 21 results with PAT increasing 102% yoy. The bank's performance was boosted by a decline in cost of risk to 2.2% in H1 21 from 4.0% in H1 20, and increased efficiency following a modest 7% yoy increase in operating costs. So far, management is ahead of its FY 21 targets on cost of risk with asset quality in H2 21 expected to be supported by no lockdowns and steady economic recovery. REITERATE BUY – SHARE PRICE STILL ATTRACTIVE Year-to-date, KCB group's share price ha...
- Faith Mwangi
Kenya banks: Profit before tax up 97% yoy in first two months of Q2
According to the latest data from Central Bank of Kenya, the country's banks recorded a 97% yoy increase in profit before tax (PBT) for the first two months of Q2 21 (April and May). In the first five months of 2021, PBT increased 42% yoy, which is still a strong performance for the banks. We believe the performance was mainly on the back of three factors: 1. Lower provision charges given that Q2 20 saw banks accelerate their cost of risk to counter the asset quality weakness related to Covi...
- Faith Mwangi
Kenya Tier 1 banks benefit from agency banking surge; Equity Group lea...
According to new Central Bank of Kenya (CBK) data, total agency banking transaction value in H1 21 grew by 52% yoy to KES3.3bn. This was on the back of a 10% yoy rise in registered mobile money accounts to 67mn and a 23% yoy increase in overall agency transaction numbers. The growth in overall transaction values tallies with the continued shift to digital transactions that the pandemic has accelerated. The value per transaction increased by 11% yoy to KES3,029, boosted by clients increasingly...
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