Kestrel is the largest Foreign investors handler. They have just released a warning to the same investors as follows.
Dear International investors
We recommend Dump if not lighten on Safaricom with a fair value estimate of KES 2.78; we hold the view that the current valuation offers a low risk-return balance, hence our underweight recommendation. Our risk assumptions encapsulate lower growth projections over the forecast horizon due to the challenges we foresee on Safaricom’s voice business, which remains our key long term concern for the company. Blending our DCF valuation with some peer comparables, we also note that Safaricom is currently trading at a 19.2% premium (on a forward P/E basis) compared to our Africa telecoms sector peer group based on FY12F estimates. We argue that lower EBITDA margin expansion rates over the forecast horizon should justify discounted earnings multiples vis-à-vis the peer group.
Wisdom to detect when share prices hit rock bottom.
When interest on bonds keep going up, you know the bear run is on high street. When interest on bonds start leveling, the bear has met the bull and they have hit rock bottom. When the interest rates on bonds start coming down, the bull has overpowered the bear and you better be riding the bull.