Analysts from Freedom Broker recommend buying shares of Kaspi.kz, a fintech company, following the publication of its third-quarter 2024 financial statements. They expect the price of the company’s American Depositary Share (ADS) to rise by 22%, increasing from $108.40 to $132 on Nasdaq.
«We have updated overall financial indicators in our valuation model, most of which have remained at the same level. We have also reduced the equity value, resulting in a price update for one ADS of Kaspi.kz, now set at $132, with a 22% growth potential from the current price. Thus, we have upgraded our recommendation from ‘hold’ to ‘buy,’» the broker said in a statement.
Freedom Broker assessed the company’s statement for July to September as «moderately positive,» mainly due to the updated records for the quarter revenue (+31% year-on-year, to $582.6 million) and income (+18% year-on-year, to $562.1 million).
Analysts also view the $1.72 billion purchase of the Turkish Hepsiburada marketplace as a highlight. However, Freedom Broker notes that this price was significantly higher than the market value of $643 million, «which is perfectly normal, given the controlling stake.» Nonetheless, this difference has been factored in as a current negative effect in the valuation model.
«Acquisition of Hepsiburada offers great growth opportunities for the company, considering the limited market penetration of e-commerce in Turkey. However, the company’s current low profitability and the unstable macroeconomic situation in Turkey remain key concerns. Furthermore, since the purchase price was significantly higher than both the asset’s current market value and its value before the deal was announced, we have lowered our valuation,» the experts explained.
Analysts also noted that Kaspi.kz financing the deal entirely in cash introduces additional risk. They believe that the full impact of the transaction on the company’s value will be assessable once the acquisition process is complete.
Positive factors impacting the value of Kaspi.kz assets include surpassing its own growth forecasts for 2024 and recording a second consecutive quarter of growth in Kaspi.kz app users, reaching 9.6 million (+9.1% year-on-year).
«The company keeps justifying its forecasts. Although they have slightly worsened, they still stay within our expectations in the valuation model. Management’s forecast for net income growth also remains unchanged,» the analysts added.
For instance, between July and September, the volume of profitable transactions in the Payments segment increased by 38% year-on-year and 24% year-on-year for January to September, while management’s expectations implied a 20% increase.
Moreover, quarterly revenue for the Marketplace segment grew by 145% year-on-year, significantly exceeding management’s expectations of 70%. The Fintech segment reported a 24% increase in revenue over the first nine months of the year, also surpassing management’s expectation of 20%. Additionally, the company’s loan portfolio rose by 38% year-on-year and 8.1% quarter-on-quarter, with an average annual yield of approximately 24%.
As of Oct. 25, depository shares of Kaspi.kz were valued at $108.40 per share on Nasdaq, representing a 1.6% decline compared to the previous trading day. On the Kazakhstan Stock Exchange (KASE), the global depositary receipt rate dropped by 0.5% to $113.50. The current value of the common stock is $113.89.
