Kaspi.kz Joint Stock Company (OTC:KAKZF) has integrated itself into the daily lives of Kazakhs via a ‘super-app’ platform spanning three core services – fintech (virtual credit card Kaspi Red and Kaspi Kredit), e-commerce (Kaspi.kz marketplace), and payments (Kaspi Pay). The company has leveraged its platform into quarter after quarter of impressive financial growth, most recently outperforming consensus estimates yet again in Q3 2023 on the top and bottom lines.

Management hasn’t provided updated guidance numbers for Q4 due to regulatory restrictions ahead of a potential US primary listing, which could mean heightened volatility in the meantime. But valuations aren’t stretched at all – even on the heels of its quarterly earnings momentum. Note the stock is only priced at ~8x fwd earnings relative to 40-50% earnings growth throughout the first nine months of this year. While waiting, Kaspi investors get paid a well-funded ~10% dividend yield (per the newly recommended payout in Q3) and an additional $100m buyback via the depositary receipts (GDRs).

The key valuation hurdle remains Kaspi’s primary listing on the relatively illiquid Kazakhstan Stock Exchange and its tightly held float (management owns a large chunk of the shares). Management is actively working to change this, however, by listing in the US. Barring any unforeseen hiccups in its registration with the Securities and Exchange Commission (SEC), a US share listing is likely on the cards in the coming months, which will expand the investor base and inject massive liquidity into this thinly traded stock. Ahead of a US listing catalyst that doesn’t yet seem to be in the price, all signs point to a major re-rating on the horizon.

No Shortage of Growth in Q3

Kaspi’s Q3 results saw robust growth across all of its core segments, driving overall revenue growth to +51% YoY. Within Marketplace, customer numbers and transaction frequency moved significantly higher yet again, resulting in a +50% YoY gross merchandise value growth and an increased ~9% take rate. While the e-commerce performance was no doubt helped by a record Juma sales event (Kazakhstan’s version of Black Friday), the extent of this quarter’s YoY growth highlights the underlying momentum in Kaspi’s ecosystem.

Fintech was less of a P&L driver this time around due to pressure on Kaspi’s spreads. That said, the fintech business has done well in the context of the cyclical swings in the broader Kazakh economy – the total finance value, a gauge of loans and financing product issuance through the platform, notably grew at a +41% YoY pace. On average, loan growth also reached +35% YoY for the quarter, well-matched by a further expansion of Kaspi’s customer base and average deposit balances. And any headwinds to overall loan yields (still very strong at ~19%) were largely due to a growing share of lower-yielding products like ‘buy now pay later’ rather than any structural weakness.

Similarly on the payments side, transaction values were up +42% YoY on both higher payment customers (+15% YoY) and balances (+22% YoY). B2B payments, in particular, are showing strong growth (albeit off a low base) and should continue to support segment performance. Continued cash flow generation from its core businesses also means management has ample balance sheet headroom to expand – without tapping into external funding. Thus far, new growth initiatives like e-groceries, travel, and classifieds are already flowing through to core revenues and, unlike many other ‘super-app’ peers in emerging markets, haven’t been massively cash-burning.

No Guidance for Now, but Plenty of Momentum

Despite the Q3 beat, there wasn’t a guidance raise this time around. No negative signal here, though, as the silence was more to comply with the SEC’s registration process for a future US listing. That said, management did cite more momentum at the start of Q4 despite the broader economic headwinds in Kazakhstan. There’s also another Juma campaign in November, a timely boost for the Marketplace segment. Given the momentum in the nine months to date, I have no issues underwriting more upside into Q3. And if current valuations are anything to go by, there’s likely still ample room for more upward revisions ahead.

Adding to the bullish Q4 outlook is Kaspi’s announcement of a KZT850/GDR dividend payout (implied ~10% yield), as well as an additional $100m GDR buyback – in both cases, well-covered by its cash generation and robust balance sheet. Even after the big payout, there will be more than enough left over to reinvest in core growth – key focus areas here include business penetration on the Payments side and capturing digitalization opportunities for Marketplace. Plus, there’s an attractive basket of growth options that’s being built out, for instance, e-grocery penetration (already reached profitability) and online classifieds expansion (into transactions vs. the current advertising-based model). Many of these synergize well with the Kaspi ecosystem and reinforce its already ‘sticky’ moat – a key driver behind its rising engagement versus other ‘super apps’ globally.

Compelling Growth Story with a US Listing Catalyst

Kazakhstan’s ‘super-app’ Kaspi.kz has unjustly flown under the radar in recent years. Not only has it continued to outpace expectations through the cycles, but unlike many other emerging market ‘super-app’ platforms, Kaspi is growing without sacrificing profitability or diluting shareholders. The YTD adj earnings growth of +46% YoY (+40% YoY in Q3) isn’t reflected in the current ~8x fwd P/E valuation either, leaving ample room for upside from here. Further adding to the appeal is a strong capital return policy (high-single-digit to ~10% dividend yield and a $100m buyback of its GDRs) – virtually unheard of for high-growth ‘super-app’ names. Things could change quickly, though, with management currently negotiating a US listing, that will drive better coverage, liquidity, and much broader investor ownership. This should, in turn, see the stock re-rate higher in line with its elevated growth trajectory. Net, I think current levels offer investors a compelling entry point.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.