Ever since the Government announced its intention to sell off a portion of Safaricom Ltd, there has been confusion about the company’s fair market value.


Vodafone PLC had offered $100 million about (Shs 6.7b) for an additional 10 per cent stake but the Government refused saying that the offer was too low. At that price, Vodafone had valued the company at Shs 67 billion (6.7 x 10 = 67). Then in this year’s budget, the Government announced that it expects to raise Shs 35 billion from the sale of 25 per cent of Safaricom through an IPO at the Nairobi Stock Exchange. That puts the value pf the firm at Sh140 billion (35 x 4 =140).


But recently, ODM, when criticising the sale of 51 per cent of Telkom Kenya to a strategic investor, stated that with 8 million subscribers, the fair value of Safaricom is about $8 billion or Sh520 billion.


Is the fair value of Safaricom Sh67 billion, Sh140 billion, or Sh520 billion? Investors value a company based on its potential to make good returns. This is assessed from profits and value of net assets. Safaricom made Sh12 billion in 2006/07 and had Sh33 billion in net assets at the close of the financial year. To get a fair value, we compare it to an equally profitable company and one in a similar line of business.


In the first category, East African Breweries Ltd (EABL) is appropriate. It made a profit of Sh6.1 billion 9after tax) in 2006/07 and its shares are valued at about Sh150 each at the stock market. EABL ahs 659 million shares, therefore, its market value at the NSE is about Sh99 billion. This means that investors are willing to pay about 16 times the profit for ownership of this company. If we apply the same ratio to Safaricom, we get a market value of Sh192 billion (Sh12b profit times 16).


The net assets of the two are Sh19 billion for EABL and Sh33 billion for Safaricom. That is, EABL’s value is about 5.2 times its assets. Therefore, using the same factor, the market value of Safaricom should be Sh 172 billion (5.2 x Sh33b).


Among those listed at the NSE, the company in the closest line of business is Access Kenya. It made Sh47 million in net profit in 2006 and had Sh130 million in net assets on 31st December 2006. Its current market value is about Sh3.6 billion. Applying the same factor to Safaricom yields a value of Sh924 billion- higher than the total value of all the companies at the NSE! Comparing the net assets of the two companies yields a Safaricom value of Sh 913 billion. The average value from the above calculations is Sh550 billion.


Nonetheless, the government expected Sh 5 billion from the sale of 51 per cent of Telkom Kenya but it got almost Sh 27 billion. If it can repeat that feat, then we can expect to get about Sh190 billion from the sale of 25 per cent of Safaricom. That translates to Sh760 billion.


(Article appeared on Sunday Nation 25th Nov 07. Article by Mungai Kihanya – www.mungaikihanya.com)

I am not good at announcing my blogging sabbatical leaves and returns. I just vanish and reappear in the hope that I do not have fanatical disciples whose daily bread is my lost mind. Sometimes I feel like I was abducted and re-engineered to do their bidding. Not fans. Aliens. Not a good cause!


Rose Kimotho of Regional Reach, well known for Kameme 101 FM has done it again! This time with a 24 hour news channel, Channel 29, dubbed ‘K24’ – All Kenyan, All Time. I thought it will be a TV version of Kameme FM. Nay. It has shed the expected vernacular focus. K24 has a sizeable number of new faces in the media industry. In its top cream team is Eric Latiff who started in Kameme, went to KTN as a news anchor and is now back to his roots. Another media golden chap is Bernard Otieno, former Nation TV sports news presenter and a mid-morning presenter at Nation FM, now Easy FM.

As usual, we sit in the periphery and observe its progress. Going by the fact that it is only one week old, broadcasting test transmissions, with big shots in the corporate world choosing to advertise on it, it is on its way up or down.


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I have heard people singing worship to NTV’s ‘Cobra Squad’ scripted and directed by Alfred Mutua, the Kibaki Government Spokesman whose hobby is into scripting action movies. Ha! It reminded me of the days of KBC ‘Tahamaki’ the crime bursting action series in my boyhood. Maybe it is the age gap, but Tahamaki made me shiver to the point of nearly wetting my pants. It made me harden my resolve to check under the bed, an unconditional reflex routine to date.


Cobra Squad is naught! The storyline may make some sense to be less harsh on Mutua but the characters are fake and unconvincing! The storyline is a plot not a reality. The stunts are bogus! The gun shots are flashy! The toy house bursting into flame was phoney! Dubai is a mirage, super-imposed images! Alfred should focus on making his characters internalize their roles. Mutua should watch more of Tahamaki re-runs.


NTV should invest in something better, maybe rekindle Wingu la Moto. Just like KBC should find something better for Inspekta Mwala to do.


On the other hand, thumbs up to ‘Tahidi High’ on Citizen, ‘Makutano Junction’ on KBC and ‘Papa Shiradula’ on Citizen. Mama Kayai and Ojwang’ in Vitimbi and Ondiek and Alexander Josphat in Vioja Mahakamani still make my increasingly stone-faced face crack a smile if not a laugh.


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I bought a loaf of bread the other day. It has been a while since I bought one and was shocked to be charged Shs 32 for the 12 or so slices of 400grams of puffed up wheat. The kiosk mama told me that is one of the cheapest brands! What’s wrong with our economy? What happened to the 22 slices of bread we used to share in a family of six? Really, times have changed and things are better, aren’t they?


Surely, this would not have been enough for our gluttonous stomachs then! Such spiralling prices remind me of the Kibaki’s much touted 7% growth. High bread prices mean better prices for wheat farmers, they say. I have slight of doubt about that but not feeling fiscal and monetary at the moment.


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And the dollar! Kibaki is so good it has depreciated and our Shilling is much stronger. In a matter of months other African countries will base their currency to the strong Kenya Shilling. I think it is time we shifted our base currency to the Euro or even better the Japanese Yen. Our export producing farmers and tour operators are not having a ball.


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Into politiks, ‘mirror, mirror on the wall, who is the fairest of them all?’ I always wonder whether either of them has the future of Kenya at heart. If so, then, we have very patriotic, nationalistic and angelic individuals among us, whose interest it to better the lives of Kenyans.


To consider the good of others before theirs. Ready to die for the world in general, Africa particularly and Kenyans specifically! No selfish interest, no vengeance, no hate, not tribal, just the general good of mankind. For whom is heaven created for? Kenyans are screwed! Damned if they do, damned if they do not.