Lesaka Technologies Inc (NASDAQ:LSAK) is a Nasdaq-listed fintech in southern Africa that is a good way for investors to profit from the large potential growth of fintech in Africa. Reports in USD in GAAP financial statements and they file full 10ks and 10qs with SEC. They also report financials in South African Rand.
Management
Ali Mazanderani (click here to see his bio) is the Executive Chairman as of March 2024. Ali has a great deal of emerging markets fintech experience. Most recently, he personally founded European fintech Teya (he is now Chairman), which was recently valued at $9 billion when Teya raised $500 million from investors like Tiger Global and Lone Pine Capital. In addition, he has been an investor and/or board member in several successful public fintech companies. like StoneCo in Brazil (STNE), Network International in Africa (NETW), and Fawry in Egypt (FRWY). He led the fintech group at PE firm Apis for 10 years where he made fintech investments around the world, including Pine Labs in India (most recently valued at $5 billion).
Business
As a reference point, Lesaka is similar to StoneCo (STNE) and Pagseguro (PAGS) in Brazil, or Square (SQ) and Toast (TOST) in the US. Lesaka sells a bundle of digital financial services and software to merchants (B2B) and consumers (B2C), primarily in South Africa, but also in four other southern African countries. They have the broadest product offering in the market which should help them earn a high take rate by offering a superior value proposition to merchants and consumers, compared to competitors, who are mainly banks. LSAK has compelling unit economics with a high ratio of customer acquisition cost (CAC) to Lifetime Value (LTV) of a customer. They are riding the secular tailwind of the digitization of cash in southern Africa and the rise of the middle class.
They currently have 120,000 merchant customers, 1.7 million consumer customers, and they process more than R250bn ($14.4 billion) in throughput per year. Roughly 3,300 employees (250 engineers).
Guidance for YE 6/30/25
2025E revenue guidance of R10.0bln-R11.0bln and EBITDA of R900m-R1.0bn. At today’s exchange rate, that is 2025E revenue guidance of $580 million-$638 million and EBITDA of $53 million - $58 million. That’s revenue growth in the high teens YOY and EBITDA growth north of 35%. This includes the recent acquisition of Adumo (closing 10/1) but does not take into account cross-selling or synergies.
Large TAM
According to Boston Consulting Group, Africa is poised to be the fastest-growing fintech market globally over the next decade, increasing 13x to $65 billion by 2030. LSAK estimates their aggregate addressable GDP is $557bn and 140 million consumers, larger than that of Mexico or Japan. Within South Africa, GDP is $381bn and population is 62 million.
Barely penetrated market
Within South Africa, their roughly 120k merchant customers are only 5% of an estimated TAM of 2.7 million merchants. In their consumer business, their roughly 1.7 million consumer customers are only 6% of an estimated TAM of 26 million consumers within their targetted segment in South Africa.
Macro tailwinds
South Africa’s future is the brightest it has been in a decade. New government as of June 2024. Interest rates are being cut and inflation is abating. Valuable non-core asset: LSAK owns roughly 10% of Indian fintech Mobikwik, which filed for an IPO in Jan. 24. LSAK values its stake at roughly $75 million. Assuming 20% taxes, it’s potentially worth $60 million. Assuming 63.8 million shares, it’s worth roughly $1 per share.
Near-term valuation potential
2025E EBITDA guidance is 1 billion zar or $56 million. The stock currently trades at 9x 2025E EBITDA. We think it should trade at 10x considering how fast EBITDA is growing. 10 x $56mln=$560 million. Subtracting net debt of $100 million results in a market cap of $460 million, divided by 63.8 million shares gets you to $7.20 per share. Including the Mobikwik stake of roughly $1 per share, you get $8.20 per share, up 82% from the current stock price of roughly $4.50.
Catalysts
Mobikwik IPO, the closing of the Adumo acquisition, and other accretive acquisitions.
Other acquisition opportunities
The fintech sector in South Africa is fragmented, and management has stated its intention to grow both organically but also via acquisitions. LSAK is well positioned, with its Nasdaq listing and solid balance sheet, to consolidate the space to achieve scale. The company already accretively purchased the Connect Group, Touchsides, and Adumo. Chairman Ali Mazanderandi has been involved in many fintech acquisitions and has stated the company will only make accretive acquisitions.
Balance sheet
Net debt to EBITDA of 2.5x
IR ramping up
After the Adumo deal closes in October, the company will ramp up its Investor Relations efforts and seek to improve trading liquidity.
Insider buying
Insiders have been buying stock recently. Chairman Ali bought $1 million of stock in December ‘23.
About the Author
The writer of this article is the founder of is a New York-based long/short hedge fund manager focused on TMT opportunities in public and private markets. Prior to founding his hedge fund in 2006, the writer was the Chief Investment Officer (CIO) of a family office.