Safaricom Group Plc announced its FY’22 results, reporting a -1.72% decline in Profit After Tax to KES 67.50Bn from KES 33.06Bn, this was the second year running of reducing PAT. The decline, in bottom line, was mainly powered by a faster increase in Direct Costs (+14.31% y/y), Operating Expenses (+19.90% y/y ) and Income Tax Expense (+39.10% y/y) compared to a slower growth in Total Revenue (+12.90% y/y). Additionally, the EPS fell below our expectations by recording a 1.75% growth to KES 1.74 from KES 1.71(below our KES 2.22 expectation) driven by adjustments for Ethiopian operations.

Dividend payment of an extra KES 0.75 (taking total dividend to KES 1.39 vs KES 1.37 in FY’21), was below our expectation, providing a dividend yield of 4.36%. We foresee investors viewing the dividend declaration as underwhelming and is likely to not lead to a share price rally. The counter is currently trading at a PE of 18.30x above the current market valuation PE of 8.30x.