Equity Analysis /
Kenya

Safaricom: FY20 results preview – EPS +13%, buoyed by M-Pesa and mobile data growth

  • We expect 13% growth in EPS, driven by 6% revenue growth, lower network costs and M-Pesa commissions

  • We maintain our Buy recommendation pending feedback from management on FY21 forecasts

  • The key risk to our forecasts is adverse pressure from Covid-19 measures on revenue performance

Tracy Kivunyu
Tracy Kivunyu

Equity Research Analyst, Telecoms

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Tellimer Research
22 April 2020
Published byTellimer Research

Safaricom will release its FY20 results on 29 April. We expect 13% yoy growth in EPS to KES1.77 with a DPS of KES1.41.

Our revenue growth forecast of 6% to KES265bn is driven by 20% growth in M-Pesa revenue and 11% growth in mobile data revenue. We are bearish on voice and SMS revenue, declining at -1.1% and -10% respectively.

EBITDA margin forecast expansion from 50% in FY19 to 53% in FY20 is based on the positive effects of IFRS 16 and continued moderation in network-related expenses. In addition, EBITDA continues to benefit from a slowdown in M-Pesa commissions paid out due to reduced incidences of cashouts. 

We expect EBIT growth of 16% to KES103bn, which is 6% above the top end guidance of KES93-97bn.

Key themes we aim to discuss with management include:

  • An update on Safaricom's move into Ethiopia
  • Overdraft service Fuliza's operating performance (KES2.45bn expected in FY20)
  • Impact of M-Pesa tariff cuts on M-Pesa revenue in FY21 and any plans to extend the tariff reduction past 90 days.
  • Impact of COVID-19 on capex and revenue
  • Update on measures to increase 4G handset penetration and data usage