Despite being bullish, analysts project a bearish performance from Safaricom shares at the bourse, with some expecting the stock to fall in 12 months time, from its current Sh43 following recent deals.

Bloomberg analyst vote shows that the stock should trade at Sh38 a share in what could shave off significant wealth on the NSE investors.

“It’s recommendation consensus which measures analyst confidence on a scale of 1 to 5 stands at 2.77, the lowest on record. Analysts have a 12-month target price of Sh38.61,” says Bloomberg.

The next 12 months will be critical for Safaricom after recent expansion to Ethiopia, 5G rollout and its Spark Venture Fund making inroads as tech startups boom. 

Analysts have raised concerns over political risk in Ethiopia and the amount of capital it would need to roll out the Ethiopia business from scratch.

According to the Financial Times data, “ten analysts have a median 12-month target of Sh39 a share with the highest at Sh44 and lowest at Sh31,” says the Financial Times. 

The capital intensive project could affect the company’s ability to pay dividends given that Safaricom last year borrowed money to pay dividends.

Safaricom  however maintains that it will maintain a dividend policy of 80 per cent of its net profit despite committing billions of shillings to expansion into Ethiopia through a consortium.

A consortium majority controlled by Safaricom pledged to invest Sh909.5 billion ($8.5 billion) in their network over the next decade, including the Sh90.9 billion ($850 million) licence fee.

This has raised analysts’ fears that Safaricom could cut dividends to fund the Ethiopia operations through a mix of debt and internal revenues.

Safaricom’s Sh54.89 billion dividend for the year ended March was higher than the Sh33.82 billion that Kenya’s top tier banks such as Stanchart, Barclays, Equity, KCB, I&M, Stanbic, DTB. NCBA paid combined.

The Safaricom-led consortium said they borrowed Sh53.9 billion from the US International Development Finance Corporation (DFC).