... hugely in safaricom (-KES 98M), then EABL (-KES 12M). Inflows in BBK, KCB, Equity, Kengen, Uchumi

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Kestrel has this morning stamped ACCUMULATE rating on Safari with Target Price of KES 6.45

Its obvious that now its time for the market to tank. When was the last time we saw such heavy supply vs demand ? or foreigners being net sellers? and we know what happened then. Question is how far down we'll go.
Time to get ready to splash some cash at the bargains that may arise.

We issue an ACCUMULATE recommendation on Safaricom with a fair value price of KES 6.45, implying upside potential of 12.2%. We expect a stable operating environment over the next year precipitated by a predictable tariff regime and profitability growth resulting from steady revenue growth and cost containment initiatives. In 1H13 (half year results for the period ending 30 September 2012), Safaricom managed to post a 93.7% y/y increase in EPS driven by higher call rates, improving cost management and recovery from a KES 1.0bn foreign exchange loss in 1H12. For FY13, we expect an EPS of KES 0.41. In the longer term, we see higher earnings driven by higher revenues and stable costs. The stronger earnings will lead to higher free cash flows which will consequently result in higher dividends as capital expenditure slows and debt is repaid.

Positives
· Larger subscriber numbers (forecast 3yr CAGR of 4.1%) and increased minutes of usage (forecast 3yr CAGR of 4.1%) will drive organic growth in voice revenues · The new higher call rates (+33.3% on-net, +25.0% off-net) will lead to strong voice revenue growth and an improvement in EBITDA margins in FY13E (+270bps y/y)
· Increase in call rates by competitors (an average increase of 20.0%) will reduce Safaricom churn rate
· M-PESA and Data now account for larger portions of total revenue. (M-PESA +176bps y/y to 17.6% of total revenue, Fixed data +44bps y/y to 1.7% of total revenue and Mobile data +11bps y/y to 5.0% of total revenue)
· Increases in M-PESA revenues and earnings will be driven by more active users and larger trans-action numbers and sizes (M-PESA ARPU increased 18.5% y/y in 1H13)
· M-Shwari will help grow M-PESA revenues as well as add a new separate revenue line in the medium to long-term with little risk to Safaricom
· Strong market share (68.7% subscriber market share) and sustainable pricing in mobile data is likely to lead to a sustainable competitive advantage
· Investment in extending its fibre optic network (from 600km to 2,400km) will help grow Safari-com’s fixed data revenues
· Continued cost management is expected to drive EBITDA margin expansion (+270bps in FY13E, +67bps in FY14F and +103bps in FY15F)
· Lower finance costs following the repayment of debt in the next 3 years should lead to higher earnings
· Higher free cash flows and lower debt should lead to higher dividends (+50.0% y/y in FY14F)

Risks
· Mobile Termination Rates will continue coming down (-20.3% y/y on 1 July 2013 and -13.9% y/y on 1 July 2014) putting pressure of voice revenue growth
· The introduction of excise duty on M-PESA (10.0% of the transaction fee) creates some uncer-tainty on M-PESA revenues and/or earnings · Foreign exchange losses or gains could significantly affect earnings as they did in FY12 (KES 1.0bn loss in 1H12 and KES 1.0bn gain in 2H12)
· Safaricom is attracting a smaller percentage of new subscribers (46.8% of new subscribers)

I want to accumulate some this FEB.