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Capitec - where to from here?


A couple of days ago, when CPI went through the R900 mark, I posed this question on twitter - where is this share going, along with a short poll. Out of 36 people: 33% = 'good to buy'; 45% = 'hold'; 22% = 'overpriced - sell'. Some of the people who still believe it’s a buy at this level are convinced it’s another Naspers. Anyone who bought CPI a year or two ago is sitting pretty. Don't even get me started on anyone who bought it eons ago...


Now I've had some very interesting debates around Capitec. And all have been a variation of the model above. I don't own CPI but I find the company fascinating nonetheless.  


Firstly, I’m curious to know their strategy around the middle income bracket market their targeting. There are a number of points worth going into here. Capitec’s initial target market was the low-income band. This means they had to process fewer transactions – which is why they could afford to keep their prices low.


However, higher income earners will result in higher transactions, both in frequency and volume – so how will they deal with the cost of these transactions? Should we expect a new pricing model to work with their credit card and middle income target market?


Other than that, at R900 – a look at what the bank offers vs the others makes you wonder what the next step is? Is Capitec going to stick to its existing model? If they expand (there’s been talk of venturing into vehicle finance) will that be a success or not? How will it be managed? And should we expect a corporate banking structure that caters to SMEs?


And to the long-term CPI holders out there, I'll ask the same question I asked my twitter followers: is it a buy, hold or sell? And why?

Occasional Contributor

Why would anyone want to sell? Voted top bank on the planet x2, great management and conservative lending. Whatever they do, they will do well and improve shareholder value, not diminish it. Sure, earnings will start smoothing so the market may make an adjustment to the PE. So what, with management like that, you put them in the drawer and go surfing. Heck, I wish I had more of them.


No doubt the fundamentals are solid. I also think there's stil plenty of rrom to grow ito operational functions. I'm sad I sold mine when I did. I feel like I've missed the boat on it so all I can do is sit on the outside, looking in and shake my head at my own foolishness.