Equity Analysis /

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

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