Under-the-Radar Stocks: Interview with Qiwi interim CFO Varvara Kiseleva

Qiwi (NASDAQ: QIWI) stock may not have fared as expected since its public offering in May 2013, but the Russian financial services firm had a pretty good run at the market this year. The stock has gained 35% since the beginning of 2019 and analysts, on average, currently expect a further 50% growth over the next 12 months.

Notably, Goldman Sachs Group last week initiated coverage on the stock, with a buy rating, as well as a bullish price target of $27, representing almost 42% upside.

Last month, the company had reported its third-quarter financial results that were stronger than what Wall Street anticipated. Adjusted revenues grew 15%, driven by a 29% jump in the Payment Services segment.

In an exclusive interview with AlphaStreet, Qiwi’s interim CFO Varvara Kiseleva talked in detail about the firm’s recent management rejig, dividend policy and more.

On the recent management rejig

Earlier this month, the Nicosia, Cyprus-based firm announced changes to its senior management team. Co-founder Sergey Solonin will step down as the CEO of the firm, effective January 15, 2020, but will take up the strategic role of Executive Chairman of the Board. Meanwhile, the current Board Chairman Boris Kim will succeed Sergey at the top post.

Even though nobody was leaving the firm, the stock still fell over 10% following the announcement. Kiseleva stated that the stock movement didn’t come out as expected, as Sergey’s focus on Qiwi’s long-term strategy was well known among those who were following the firm’s story. With this appointment, Sergei would primarily be looking over the company’s growth strategy and maintenance of its DNA.

The CFO alluded that the stock movement may have been emotionally spurred, due to the slew of management changes that have happened recently. She added that the company is likely to be more settled with the recent set of appointments.

Kiseleva, who has been serving as the interim CFO since Vladislav Poshmorga stepped down in October, said the company is in the process of finding a permanent replacement and is hoping to make the announcement sometime in the beginning of next year. 

On the Kazakh one-off item in Q3 

Qiwi operates its e-wallets in Kazakhstan through a third-party bank, which in October, faced certain financial stress due to some regulatory procedures. This, in turn, affected some of Qiwi’s clients as well. However, Qiwi immediately shifted its operations to another banking partner and compensated clients through its own funds. The firm hopes to recover from these one-time items over a short period of time.

On SOVEST, Tochka and key long-term growth strategy

Qiwi’s pay-by-installment card project SOVEST is expected to hit breakeven in 2020, according to Kiseleva. “It’s performing in accordance with the budget and heading in the direction that we have historically planned,” she said.

LISTEN TO: QIWI Plc Q3 2019 Earnings Conference Call

Meanwhile, its digital banking service Tochka that provides services to small and medium enterprises has already started reporting profits this year. Tochka is gaining more clients and continuing on its growth trajectory, while at the same time investing and growing its market share, she added.

As to new projects with long-term growth prospects, the executive stated the firm continues to be committed to this, but sidestepped from giving any specifics. “We are developing different offerings of financial and payment services and mostly focusing on key payment services business.”

On international expansion

The CFO said the company continues to see lots of growth opportunities in Russia, and hence expansion into new international regions is not on the agenda, at least for the next couple of years. Apart from Russia, the company currently operates in some of the CIS nations including Moldova, Romania, Kazakhstan, and Belarus, but this makes up for a small portion of its business.

On Rocketbank sale

The company declined to comment on the progress of the sale. The CFO, meanwhile, expressed hopes of completing the deal in the first half of 2020.

READ MORE: Q&A section of Qiwi Q3 2019 earnings conference call

On the dividend policy

During the first quarter of 2019, the company had reviewed suspension of its dividend pay-outs, in view of the anticipated level of investments this year. The Board also declared a quarterly dividend of 28 cents per share, at a payout ratio of 65-85% of adjusted net profit.

The CFO said Qiwi would continue to pay dividends going forward even as it reviews the pay-out ratio in the future.

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