On Tuesday, Wolfe Research began coverage on Kaspi (NASDAQ:KSPI), a Kazakhstan-based digital commerce company, with an Outperform rating and a price target of $130.00. The firm highlighted Kaspi's significant role in digital commerce enablement across Kazakhstan and Central Asia, noting the company's evolution from a financial services platform to a robust commerce ecosystem.
The research firm pointed out that approximately 70% of Kazakhstan's population uses Kaspi's services, emphasizing the company's potential for Average Revenue Per User (ARPU) growth. This potential is driven by factors such as the increasing digitization of commerce, favorable macroeconomic conditions that boost credit and discretionary spending, and the opportunity for existing Monthly Active Users (MAUs) to adopt additional products and services. Wolfe Research also sees room for the company to expand its Total Addressable Market (TAM) through new product introductions and regional growth.
Wolfe Research anticipates that Kaspi could experience margin expansion in the future, despite current Marketplace margin deterioration. The firm expects that declining interest rates, economies of scale, and cross-platform synergies will act as incremental levers for margin improvement. Moreover, Kaspi is recognized for its attractive capital allocation, with a dividend payout ratio around 70% of adjusted earnings, translating to an 8%+ dividend yield based on the current share price.
Despite Kaspi's robust top-line growth of roughly 40% over the past two to three years, Wolfe Research has set a more conservative forecast for revenue and EPS growth of 22% and 23%, respectively, for the fiscal year 2024. The firm suggests that a normalized multiple for Kaspi's asset mix and growth profile would range between 18x to 20x, but due to emerging market risks, a finite TAM, and the need for Kaspi to demonstrate success in international markets, a multiple of approximately 9-10x was applied to the CY25 EPS estimate of KZT 6,341.
The price target of $130.00 for year-end 2024 is based on a projected USD/KZT exchange rate of around 450/1. Wolfe Research's initiation of coverage reflects their view of Kaspi as an attractive investment opportunity, considering the company's current valuation is less than 7x their CY25 EPS estimate.
InvestingPro Insights
As Wolfe Research commences coverage on Kaspi with a bullish outlook, the data from InvestingPro provides additional context to their analysis. Kaspi's P/E Ratio stands at an attractive 9.44, aligning with Wolfe Research's valuation and supporting the investment thesis that the company is trading at a low P/E ratio relative to near-term earnings growth. Moreover, with an impressive Dividend Yield of 7.4%, Kaspi demonstrates its commitment to returning value to shareholders, a factor Wolfe Research noted with its significant dividend payouts.
InvestingPro Tips also highlight Kaspi's position as a prominent player in the Consumer Finance industry, which corroborates Wolfe Research's emphasis on Kaspi's significant role in digital commerce enablement. Additionally, the company's liquid assets exceeding short-term obligations provide a level of financial stability and flexibility, which may contribute to potential margin expansion and ARPU growth that Wolfe Research anticipates.
For investors seeking a deeper dive into Kaspi's financial health and prospects, there are additional InvestingPro Tips available that can offer further insights into the company's performance and potential. By using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription to access these tips and more detailed metrics. In total, there are 7 additional InvestingPro Tips listed for Kaspi, providing a comprehensive analysis for informed investment decisions.
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