We Study Billionaires - The Investor’s Podcast Network - TIP829: Kaspi Stock ($KSPI): The Cheapest E-Commerce Monopoly in the World w/ Daniel Mahncke and Shawn O'Malley

Episode Date: July 9, 2026

Daniel Mahncke and Shawn O'Malley take a deep dive into Kaspi.kz (NASDAQ: KSPI), the Kazakhstani super-app that combines payments, e-commerce, and fintech into a single platform that most of the country uses every day. They unpack why its dominance at home has been so hard for competitors to challenge, and how a company this profitable ends up trading at only around seven times earnings. IN THIS EPISODE YOU’LL LEARN: (00:00:00) Intro (00:01:49) How Kaspi became Kazakhstan's No.1 superapp (00:16:56) What business units Kaspi operates (00:35:38) What role the fintech business plays (00:37:54) How the marketplace differs from Mercado Libre and Shopee (00:45:11) What the competitive environment in Kazakhstan looks like (00:52:30) What the Turkey expansion means for the business (01:23:43) Valuation discussion of Kaspi (01:27:11) Whether Kaspi is valued attractively (01:30:34) Whether Shawn and Daniel add KSPI to the Intrinsic Value Portfolio Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences. BOOKS AND RESOURCES Join the exclusive ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The Intrinsic Value Mastermind Community⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Track ⁠⁠⁠⁠⁠⁠⁠⁠The Intrinsic Value Portfolio⁠⁠⁠⁠⁠⁠⁠⁠. Learn more about how to join us in NYC for our ⁠Intrinsic Value Conference⁠. Portfolio Review Submit Tool. Kaspi CEO Presentation. Interview with the CEO, Mikhail Mikheil. Chris Paryse Pitch on Kaspi. Business Breakdowns Episode on Kaspi. Response to Culper’s Short Report. Check out our previous Intrinsic Value breakdowns:⁠ Amazon⁠⁠, Sea Limited, Mercado Libre, Shopify. Related ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠books⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ mentioned in the podcast. Ad-free episodes on our ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Premium Feed⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. NEW TO THE SHOW? Get smarter about valuing businesses through ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The Intrinsic Value Newsletter⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Check out ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The Investor’s Podcast Starter Packs⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Follow our official social media accounts: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠X⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ | ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠LinkedIn⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ | ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Facebook⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Try our tool for picking stock winners and managing our portfolios: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠TIP Finance⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Enjoy exclusive perks from our ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠favorite Apps and Services⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Learn how to better start, manage, and grow your business with the ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠best business podcasts⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. SPONSORS Support our free podcast by supporting our ⁠sponsors⁠: Plus500 Netsuite Shopify Vanta References to any third-party products, services, or advertisers do not constitute endorsements, and The Investor’s Podcast Network is not responsible for any claims made by them. Learn more about your ad choices. Visit megaphone.fm/adchoices Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm

You're listening to TIP. So I think you saw, but I was just so excited about this one. I pulled a Daniel last night, right? You saw me in the Google Docs till like 3 a.m. prepping for this episode. Usually that's my job, so I was a bit surprised seeing you in the document that early. Well, I never thought we would speak about a company based in Kazakhstan on this show. So that's part of the excitement.

Well, I did have a hunch we might get there eventually, at least once I realized what covering one company week actually means in terms of looking at, you know, dozens and dozens of companies per year. It's a lot of companies. It's also a lot of fun. And yeah, I also remember, you know, back when we were in Montana last September, you mentioned something about Caspi. So it's a company that's been loosely on my, my radar for a while. Yeah, I came across investors in Caspi quite a lot, actually, over the last couple of years, but I never looked into the company myself. So I thought at some point, it's time and that time has come today. Time is come. Let's do it.

Since 2014, with more than 200 million downloads, we have interviewed the world's best investors, studied deeply the principles of value investing, and uncovered many compelling investment opportunities. We focus on understanding businesses and intrinsic value, investing accordingly, and sharing everything we learn with you. This show is not investment advice. It's intended for informational and entertainment purposes only.

All opinions expressed by hope. and guests are solely their own, and they may have investments in the securities discussed. Now for your hosts, Sean O'Malley and Daniel Manker. All right. Where do you want to start? I think we should start with the history today, because it's actually quite interesting where this company came from. Today, we kind of know it as this super app and, you know, a major e-commerce company, but it actually used to be a normal tier two retail bank. So that was in the early 2000s and the banking market was back then in Kazakhstan, dominated by the so-called

Halleck Bank, which is the old Soviet savings bank. And it's actually still the biggest bank at Kazakhstan today. And the one little thing that Caspi had going for it was that it had a banking license. And as we also learned in the New Bank Act Basard, which is a company you covered a long time ago by now, it's also in our portfolio, a banking license in a developing financial market. And probably you could also say in a developed financial market, those licenses are not easy to get and they can be quite valuable for pretty much every business because you don't necessarily need to be a bank, especially in today's tech world. There are so many things that you can do and kind of restructure your business. And that's also what Casby did.

Yeah, we really learned in detail about what New Bank was able to accomplish in Brazil. And, you know, it's fitting because they're now a portfolio holding of ours. But that's a company that really truly defied the odds. They started with a credit card product, as you know, and they leveraged that massive popularity into getting a banking license. And then because they were an upstart bank in a more digital era, they actually had a huge cost structure advantage compared to legacy banks where the older incumbents were basically running on outdated and very messy IT systems. Whereas new bank's ability to really start from scratch, which is a simple mobile app, that helped boost its popularity and usability correspondingly pretty dramatically. And so

In Kazakhstan, though, my question for you is, would you say that the setup was similar to Brazil, where New Bank basically managed to disrupt decades-old incumbents that honestly had accumulated an outrageous degree of political pressure to try and ensure that new competition couldn't arise? Is that sort of what the competitive landscape looked like in Kazakhstan, or was it a more level playing field? Well, you did certainly have these rather slow-moving oligopolis, and they were mostly serving the rich people in Kazakhstan, while the majority of the population, similar to Brazil, was mostly unbanked, and there was certainly a lot of political pressure to basically keep this oligopoly going, maybe even more than it was the case in Brazil. But Casper was not this newly established high-tech bank like New Bank, which made it somewhat

easier in this political environment because you don't start from scratch. So what changed the game for Caspi was a management transition in the early 2000s, and I'm certainly going to butcher the name. I actually kind of tried it a couple of times already, but the two guys taking over were Vyajaslav Kim, who was a well-known Kazakh businessman with a retail background, and Mikhail Lomtadzzi, who was Georgian, who also had a Harvard MBA, so he actually studied in the States at some point, and he had been a partner at the so-called bank or P.E. Fund bearing Vostock, which was one of the biggest private equity funds in that part of the world back then. And Mikhail is also the current CEO

of the company. And I got to say, the more I watch from him, especially interviews, the more I'm convinced that he's not only a pretty smart guy, but that he was basically the one with the vision for the company. And I think if you, you know, take over a bank in Kazakhstan in the early 2000s, you sort of have to have a vision for where that's supposed to go if you suddenly want to turn into a super app. So you basically had someone with local knowledge who saw the value in having this banking license and then an outsider who sort of knew this could be much bigger than just a bank. It's beginning to be a bit of a running trope on the show that we first started out. Of course, we appreciated the importance of management, but it's only become more and more apparent to us

over time, just how important great management teams are and how special that is. And, you know, no CEO could do everything on their own, but the vision and strategy are what make the difference between companies becoming, you know, 10 baggers and 100 baggers. And you could say the same for New Bank, right? It's a phenomenal business. But if there hadn't been a person like David Veles, who saw the gap in the market and the advantage that a tech first player could have, that company wouldn't exist today. And honestly, millions of consumers across Latin America would be worse off.

They would have probably not the same level of access to financial services and credit that they have now. That's a fascinating thing, right? I mean, Brazil just wouldn't be as a country where it is today is in terms of digitalizing the banking and the payment infrastructure, although I've got to say Melly likely would have got the job done as well. But, I mean, honestly, I mean, it's kind of crazy to think about the impact that some companies can have on entire countries.

And I think there are a few better examples than Caspi. I mean, it basically transformed all of Kazakhstan and will kind of get to how they did it and why they did it. But, yeah, Mikhail and Kim kind of saw this opportunity. to create a super app that covers not only banking and payments, but also e-commerce, logistics, delivery, and even government services. So it doesn't really matter what you do. I mean, if you pay for your groceries, you do it with Caspi. If you order them, you'll probably do that on Caspi's marketplace. And if you file your taxes, you can also do that using Caspin. Actually,

I heard the fact that now there are way more people filing their taxes simply because it's so much easier since Caspi has been doing it, that it's actually a benefit for the entire country that you can do it. But even more things. I mean, you can also apply for your driver's license on Kaspi. You would also register the car that you would then hopefully get afterwards on Kaspi. And you could even apply for marriage registration. So there's pretty much nothing that doesn't touch Kaspi at some point if you live in Kazakhstan. I'm imagining some like absurd advertisement where they're just going down the list of every possible thing you can do with Kaspi. Because at this point, it almost sounds a little ridiculous. I mean, the lock-in to everyday life

is really incredible. And obviously, Kazakhstan doesn't have the same size of the U.S. or even some other Asian countries where this super app concept is more widespread. But we are talking about a country of 20 million people, right? And that's how you get a company with a $14 billion market cap because it's so deeply entrenched into the lives of this population of people that isn't the biggest, but it is not entirely modest. You're still talking about a significant number of folks that you can.

can tap into. I would say it's big considering just how entrenched Caspi is. So you might expect that in a country that's maybe a tenth of the size, but certainly not for 20 million people. And we'll get into detail later on how that was possible. But I think why it started was really quite simple and also important to know. I mean, just as in Brazil, again, these legacy banks didn't really solve most people's problems.

And even simple things just like paying with the credit card, for example, were just such a headache that most people couldn't do it. even the merchants, I mean, card terminals were pretty expensive and then also just unreliable. And the worst thing that could happen is you actually have a customer in your shop and then he wants to pay, but he can't because the terminal is not working. So that basically caused a lot of, especially small merchants to not offer car terminals. And that obviously also means that if you're the customer and you go to a store, you can't pay with a card. And even if you wanted to send money to someone, I mean, you basically needed their 20 digit account number and then wait four days

until it's cleared. And I even heard that if you wanted to pay your utility bill, that basically meant going and standing in line at an office during working hours. Gosh, I feel's kind of unbelievable. I'm somebody guilty of, I feel like I do almost my entire life remotely, right? We work remotely. And I can't imagine standing in line to file paperwork in that way. So just imagine the productivity gains that Kazakhstan has made thanks to Kavok.

be, right, by cutting out all of that bureaucratic inefficiency that we take for granted in countries like the U.S. and across Europe. Because you have citizens that no longer have to stand in line to pay utility bills. They can do much more productive things with that time. It's sort of the dream for a German, you know, suddenly you can do Texas and it's way easier. And now you can also have at least, it's a one or two hours back that you can spend with someone more fun than standing in line, which, you know, for example, working is. I'm just kidding. It's a good use of time and probably, you know, the Kazakhstanian government likes that. But I would assume that knowing you, you probably even have a special credit card

or something like that for utility bills because I do know that you have one for most other things in life. And they always give you this nice payback rates. I knew you were going to bring up my credit cards today. I just had a feeling when the company were talking about. Yes, I have a credit card that I used to pay my mortgage with that Daniel teases me about. And I actually do have a card that I think gives me some special perks, some special cashback for utilities if I use it. I just knew it. I thought this would be the one thing that you probably don't have. And then I was joking about how Caspi might launch one and then you could move to Kazakhstan and use it. But obviously, you already had that. But jokes aside, the interesting thing about Caspi is that it really just

fixed all of those things. That was the first time for me personally. Do you have a look at a company that I would really not only consider a monopoly in a certain part of the market, but it really seems to be that the entire country is only working because that company is so entrenched in all of the processes. The innovative nature of these companies plus the favorable growth conditions and demographics as some emerging markets offer is partly why I've gotten slightly more comfortable investing in emerging market businesses. I would say Daniel has helped kind of pull me out of my shell a little bit out of my comfort zone. And here in the U.S. or for you in Germany, there is an inertia to daily life. People have banked, shopped, and filed a

documents the same way for 40 years. And in a place at Kazakhstan, there's less to unlearn and fewer habits that you have to change. So people are actually more willing to try new features. So you often see in emerging markets that adoption of new technology unfolds on a much faster timeline. And it's like the catch-up time is very, very quick because you don't have these drawn-out adoption periods, as you sometimes see in developed countries. I still believe that to some extent that's also why they have these super apps because it all goes so fast because once you make the transition to digital, the progress just sort of compounds. And again, Caspi as an app went from a banking tool to a payments app, then to a marketplace, to a lending business. Then eventually you have the super app where you can do everything important for daily life.

I talked about some of the companies like C, Limited or Melly, for example. And what they are so good at is focusing on what the customer needs and then basically creating a product just for them. And if you do that, you mostly end up with these ecosystems, because obviously there's more than just one thing that customers want. So it's not just payments. They also want to buy stuff. So you end up with marketplaces, with payment tools.

And that's basically what Caspi did. So you always see new tools being introduced. So for example, in 2020, they launched Caspi Pay on the merchant side, which was, I would say the final step to turn their ecosystem into this sort of fully functional. to set the network. You know, there's, for example, someone paying with a QR code that obviously generates data, that then improves credit scoring. So a merchant who signs up for Caspi pay suddenly has access to 15 million customers, basically the customer base of Caspi. And then a borrower who shops on the marketplace is showing Caspi exactly how they spend,

which is, again, we discussed it in so many episodes, one of the most important data points that you can have. We've covered Mercado Libre, C-Lemited, and Amazon. So you probably feel like you've seen this story play out dozens of times. I do. And usually you and the audience can tell that by me just bringing up those companies in pretty much every second episode and probably five times. So I do feel like I have seen how that works. But I do got to say that I got a better understanding with each company that I look at. And why they all look pretty similar on the surface, they all have important differences that kind of affect how they evolve and also how successful they are in the long term. Something I like to see across all these companies.

is that they're founder-led or have been for a long time. And the founders own significant stakes usually. So I'm assuming that's also true here for Lamatta and Kim. Is that right for Caspi? Yes. And they might actually own the biggest stakes that we've yet seen. So Mikhail owns about 22% of the company. And Kim owns about 20%.

So just between the two of them, they own more than 40% of the entire company. And if you look at all the officers and directors, so basically the entire management team, combined, they've insider ownership north of 46%. So almost half of the company is owned by the members of the management team and therefore also by the people who actually make the decisions. Good for them. That's great to see. I love that. At the current valuation, despite the stock being flat over a five-year time horizon, that would mean that Mikhail's stake is worth what, about $3 billion? And it's probably similar for Kim. And so with those stakes, I would expect or hope that

they're mainly making money from stock appreciation and not from eight-figure salaries. Yeah, fortunately, that's not something that we see here. It's sort of a similar structure to Copa, the Panamanian airline that I covered in, think about two weeks ago. And they also had a high level of insider ownership. They have a pretty healthy dividend, which, you know, goes to investors and is part of the thesis. But they also have pretty low salaries for the management team. So basically the entire management team of Caspi earned around $1.4 million last year. And that's basically the median CEO salary times 10, if you would look at the S&P 500. So I should add to all of this, just sort of a note that especially talk about the CEO stakes,

that Kim is currently selling some of his shares in Caspi to finance a stake in a regional bank that he not too long ago bought. And that's a bit of selling pressure, obviously on the stock. I mean, again, he owns 20% of the company. But I don't really take it as a bad sign beyond the fact that they're selling pressure, especially since Mikael kind of continues to buy shares and we'll probably also talk about it later in the episode, but they are quite sizable investors that are invested and also Tencent, for example, coming in, buying some of those shares.

And I can also say there's good news on the SBC stock-based compensation front as well. While most of the U.S. listed tech companies that we look at have quite sizable stock-based compensation, which is never a good thing for us to see, Caspi has less than 0.5% of revenue in stock-based comp. So basically, if you will look at the share count, it's completely flat over the time, and they don't need to spend a lot of money on buybacks to keep it that way, which is also kind of good because sometimes you look at companies and they have high SPC, but they also buy-back stock. So, you know, the share count doesn't move. But in the end, it actually means that you as a shelter are paying for that because instead of giving money back to shelters, they're spending

the money on, you know, burning issued shares in the first place. I thought we took a deeper look into the business ecosystem here because Caspby's got a lot going on. There's going to be a lot of different things for us to try and wrap our head around today. You already mentioned some of the features, but that term super app is definitely thrown around in Caspi's context. And as someone who hasn't experienced one yet, right, we don't really have these super apps in the U.S. in the way that people in Asia would think about it. I definitely want to better understand what that actually means. And so I recently asked you whether you had heard of a company.

RAPE, which is an upcoming South American super app. And your response is that you don't fully understand how this will become a super app, given that e-commerce, payments, ride sharing, and many other things already have local champions with the point being they're going to have to conquer a lot of verticals before they can accomplish their goal of being a super app. So maybe you can speak more to that. And to be sure, before I get flamed on the comments, I don't know the company quite well. you asked me about it and, you know, sort of I heard about it, which wasn't the case.

And I think it's just that the term is so overused by now. Because just because you play in, you know, different verticals, it doesn't necessarily make you a super app. I mean, Caspby is one, in my opinion, because the three major business units, the major businesses that it operates are all market leaders by a wide margin. And, you know, if they would be standalone businesses by itself, they would be monopolies. So for context, well, that 70% of Kazakhstan's population actively uses Caspi. And when I say they actively use it, that means they interact with the app more than 77 times

a month. So, I know, if you compare that to international players or maybe the Western equivalence, and sometimes it's not the most accurate thing you can do. But if you would do it, I would say that Caspby kind of looks on the payments fund like Visa Plus Square. On the marketplace, you could probably compare it to Amazon and also eBay to some extent. And on the fintech side, it's something like a SO-Fi plus a firm. So in the West, just by naming all of these, these companies, you can kind of get the idea that it's pretty much unthinkable, that there's just one companies that covers all of them. But in this country, Kazakhstan, which again, still has 20 million people, that pretty much all is one app. It's really incredible. And if we just take them one

at a time, perhaps we start with my favorite area, payments, which I say sarcastically. I have historically not been known for enjoying the complexity of payments businesses, or at least I find them to be complex. But, you know, it makes sense since Caspi started. as a bank for us to look at this payment side of thing. So I assume that that was sort of the foundation and everything else followed. Yep, that's how it is. I mean, they currently run about 18 million transactions a day. Of course, your payments at, you know, merchants, peer-to-peer, transactions, bill pay, and then also some B2B transactions. So I think the total volume is about $100 billion last year. And the best thing is that this business unit is certainly what drives

margin. So it's responsible for only 16% of revenue, but about 40% of net income. So if you do the math, that's higher than 65% as net income margin, which is just incredible. More than 65%, I think it's higher than visas, which speaks to really the quality of the business here. And with a number that high, though, I do wonder if that's going to be sustainable long term, either due to competition or government intervention. It actually is higher than visa and I checked before. But I think the reason is that Caspi owns the entire payment ecosystem. So I don't want to get into the details who then bore you. But let's say when you scan a QR code at a merchant or let's say a cafe, for example,

the money would go straight from your Caspi account to the merchant's Caspi account. And that basically means there's no middleman. It's all about Caspi's own rails. And that's obviously where usually Visa or MasterCard would take these interchange fees in the middle, but because that's not the case and there is no middleman, that means there's a whole lot of margin for Caspi to add. So every merchant who sets up a QR code and every person who pays their bill in the app is almost pure profit for Casper because, again, processing one more transaction costs him pretty much nothing and there is no middleman to take a cut. And the newest product in the payment ecosystem is also kind of crazy.

And it's kind of making me wonder sometimes how far ahead some countries are in regards to their tech. And I know it's not politically correct, but sometimes you feel that you're sitting here in Germany and you should, in theory, go into a shop and should pay with, you know, the newest thing out there. But then you learn that in Kazakhstan, Kaspi has just dropped a product, which is called Al-Aqan, and it's basically a pay-by-palm ecosystem or system, basically. So you can just scan your hand, and that's it, and half a million people already signed up in the first 90 days.

And not that I'm talking about it, I think a while back, perhaps it was when we covered Amazon, you talked about a similar technology, and I think it was in Whole Foods, isn't it right? Or maybe I'd just mix it up. Well, I think they were ahead of their time, because it doesn't seem like it really caught on.

I thought it was the coolest thing ever. I saw this like palm scan technology at the self-checkout for Whole Foods. And then I finally set it up and I was like, there's no way this is going to work or it's not going to scan my hand properly or, you know, sometimes when you're checking out with groceries, you're like, I don't want to sit here and spend five minutes, like setting up an account. It's when I pack my groceries and go. And I finally did. It was pretty easy to set up.

And it is incredible. I found myself, my wife used to tease me and say that I would go to Whole Foods to shop just So I could scan my hand at checkout because I thought it was so cool. But unfortunately, I think Amazon is fading them out. So that technology, at least in this case, hasn't caught on in the U.S. for whatever reason. And so going to Caspi's marketplace, though, in one of our more recent calls in our TIP mastermind community, you talked about the concept of the e-commerce ladder. And so maybe you can elaborate a bit more on that concept and tell us where you see Caspi's

marketplace fitting in and what that means for the moat and economics of the business. Yeah, so the general idea is to categorize e-commerce companies into three buckets, or you could also say levels. On level one, you have companies that are in the early e-commerce stages, so they're basically offering more low-quality products. Oftentimes that means they're unbranded and potentially clothing, for example. Usually you also have a pretty slow logistics network that is mostly covered through third-party carriers.

and there's no ecosystem surrounding the ecommerce operation yet. So you don't have payments, you don't have your own logistics network. It's pretty much just the ecommerce side. And then you kind of try to figure out how to get the product to the customer. So a company on that level is, for example, TikTok shop and perhaps also to some extent, Pinduo Duo, but that kind of depends on how you look at it. There's certainly also an argument to make that Pinduo Duo might be closer to level two. Let's take a quick break and hear from today's sponsors.

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for these companies, right? They're just really, it's about serving a different customer. Right. I mean, to some extent, at least, in the long run, you do want to move up the ladder and basically create an ecosystem around the marketplace because obviously that's where you build a mode and that's also where you make most of your margin. But you are right, that level one companies are important because they serve customers who otherwise just wouldn't be able to participate in ecommerce at all. And that can also be quite profitable as well. The only problem is that obviously the barriers to entry by level one are not that high. So, you know, mostly your margin gets competed away over time, which is why you want to move, move upwards the latter. And the customers mostly live

in these tier two or tier three cities. And obviously, they prioritize price over convenience and quality. And in part, that's because most purchases on this, you know, level one are impulse purchases. So simply because, you know, level one marketplaces are built to evoke such purchases. So it's less about the customer generally and more about what the marketplace is incentivizing you to do. And if you buy something that you didn't even know you wanted two minutes ago, you also tend to not care too much about if it takes a bit longer for that product to arrive because essentially it's not a good that you need for everyday life. And then companies on level three are basically the exact opposite. So their customers have a clear purchase intent when they visit the platform.

And that's why you expect high quality products and also fast delivery. And in exchange, prices can obviously be higher, and most often customers are also willing to pay for, for example, faster shipping, even if that happens through a subscription like Prime, because obviously nobody likes to pay extra for shipping, but still in theory, they're doing it. And judged by Kaspi's ecosystem, I think it's fair to say that they're level three e-commerce players. Is that right? Yeah, I mean, I would certainly categorize them as level three, although it's quite interesting because Kaspi's ecosystem is obviously incredible, and you have of them at the highest level, judged by the flywheel and their mode. But usually, level three

e-commerce companies have spent billions of dollars on their logistics flywheel. Of course, to, you know, have only the best products and especially make sure that you deliver them fast. Melly, for example, has dozens of massive logistics centers. They have thousands of delivery vans. And as you also know, they have their own fleet of airplanes. Caspi, on the other hand, still relies on asset light third-party logistics network. So the deliveries go through a network of, I think it's more than 10,000 so-called self-service parcel lockers. They call them poster mats. And this is quite fast and effective. I mean, 84% of orders ship free and about half of them show up in under 48 hours. That's pretty comparable to, for example, merely or C-limited,

but it's also quite easy to copy. And so actually this kind of reminds me of a manga quote. I think you once said that the young man knows the rules and the old man knows the exceptions. And usually I would look at Caspi's Acid Light Logistics Network and say, well, that's certainly a weakness. But then you have to consider all of the other parts of the ecosystem and the benefits that come from that. And just sort of the ridiculous customer lock-in that all of that creates. And when you do that, you sort of realize that the model works perfectly fine for them, at least in their home market. Daniel, I think you're dating yourself with that quote there because Munger made it. when he was probably 60 years older than we are. So I'm not sure how helpful it is.

Well, I think that's fair. And to be completely honest, when I looked up this speech where manga said this, I actually thought the quote went, the smart man knows the rules and the wise man knows the exception. So that would have made us wise man. Unfortunately, now it doesn't fit that well anymore. And I actually believe that there's probably a pretty good chance that I publicly at some point misquoted manga a handful of times on that quote. But getting back to Kalsby's marketplace, it is responsible for about 47 percent of revenue in 20. 26% of net income. And the gross merchant's value are often called GMV is surprisingly low, actually, at 19 billion.

And that also includes what we will still talk about later, which is an acquisition of a Turkish e-commerce company, which is called HESB, which is at a GMV of about 4 to 5 billion. So if you would basically deduct that from the GMV of only the Kazakhstan home market, you would only get 14 billion in GMV. But then again, we also talk about the dominant player in Kazakhstan. It's not South America. It's not Brazil. It's not Europe.

And certainly also not the US. How does the take rate look here? I mean, when I look at the ecosystem, Caspi looks pretty mature in terms of all the verticals that it's expanded into. But it's still going fast in many of these business units. So it is more like a Mercado Libre or a shoppy, which is a subsidiary of C-Limited. Or, you know, does the company look more like Amazon in the U.S.

where you have better take rates, but lower growth. It's sort of in between. As some business units are more mature and payments is such an example, where others are still in the relatively early stages, so e-commerce is probably the one that I would categorize as being closer to Melly or Shopify. Amazon's all-intech rate, for example, is in the 30 to 40% range. So they pull about 30 to 40 cents of revenue from every dollar

that goes across the platform. and that's slightly more when you add the advertising and also the logistics business or basically delivery to it. And Caspi's take rate on the marketplace alone is 12%. And then when you add delivery and also adds to that, you would get to about 16%. So it's not very low, but it's also certainly not where Amazon is. And in part, that's due to the geography, but also considering it's a monopoly in Kazakhstan, you could imagine that this gap will probably close over time. And that's mostly about, you know, how quickly can they scale up the ads and the logistics business.

And pure sales commission, I think we talked about that also in some of the other episodes, they're more or less the same. And you kind of don't want to, you know, push your merchants to pay more money without actually giving more value to them. So that's why you usually don't try to expand your take rate on just pushing up the seller fee. And what you do instead usually is, you know, you have more advertising opportunities which is obviously delivering value for the merchant because they can get their product before more. eyes on the marketplace or you build the logistics network and you charge for delivery, which once again is a good customer experience and that's why it also benefits the merchant. So you basically increase the takeaway by charging those fees only if you add value. So if you look at the advertising product of Caspi, which is, you know, the on-platform promoted listings and certainly the highest margin,

it is actually going at over 70% here. So there's certainly a long way to go for it. I think it's about 7% of merchants that is still today part of the advertising business. So there's plenty of opportunity for further growth and also margin expansion. The great thing to me is that we don't really have to guess and try to figure out if the business model will work, right? The advertising business works with pretty much every dominant e-commerce platform we've seen. And so there's really no reason to believe that it shouldn't work with Caspi. Right. It's pretty much a proven model that just needs time to grow. But I do see it as having a high, high likelihood of succeeding, obviously. I mean, delivery is somewhat different. Again,

Caspier is special because it's the only level three e-commerce company that I haven't seen with a major logistic network. And the fact that it relies, to a large extent, at least, on these third-party carriers and the self-past lockers, it's not only quite unique, but it's also obviously kind of setting a ceiling for how much you can charge for delivery. Because, you know, if you are not a huge part of the ecosystem that actually delivers the parcel from, you know, your warehouse to the doorstep, you cannot really charge the same amount of money that Amazon and maybe in the future also, Melly will be able to charge. And I should say that Caspi is already monetizing it. So in the beginning, I thought they don't make any money from it, which is not true. They do have a take rate

on delivery as well. But again, the ceiling on the take rate that it can achieve there is not comparable to what Amazon or Melly can take in the long run. To be fair, Caspi is making its margin with the financing and fintech business, which is much more mature and profitable than Melly's Fintech and lending business today. Yeah, that's right. Okay, so speaking about the finance and fintech business, what should we know about that? Any color you can paint there? Yeah, I fear that I have to go into much detail again because obviously it's a great comparison for both Melly and also C-limited, which also is also its own payment arm or fintech arm by now. And maybe first I start by saying that fintech is about 38% revenue and 33% of net income,

so about a third of the business, both in terms of revenue, as well as in terms of net income. That's generated on about $24 billion of lending last year, because mainly for products. You obviously got the buy now, pay later at checkout, which is what you see with every single marketplace out there. Then you have more regular consumer loans. Then you have financing for merchants and small businesses. And then you also have car loans. And I wasn't surprised to see that Caspi has a relatively cheap funding source too, because obviously it was a bank when it started out.

So Melly and C are still kind of trying to set up customer deposits at scale to fund the credit book through that because it's just way cheaper than actually getting other funding sources. Caspi already has over 6 million customers with deposits totaling about $14 billion. And those deposits then again fund the loanbook. The strong thing about Caspi's loan book is that it's based on data that makes even Melly's data and it's not easy for me to say that look quite bad. I mean, as a super app, they obviously know everything about the customers. and by the time someone applies for a loan,

Caspi knows about their income because, you know, obviously their salary lands in their Caspi account, knows their spending because they use Caspi pay dozens of times a month. It knows whether they actually pay things back because it's watched them on past Caspi loans. And they even have all sorts of government service activities. So they approve 99.9% of applications automatically, no person involved in under six seconds.

And you can also see that in the NPLs, which is a metric that we always look at, and it's standing for non-performance. forming loans. So despite still growing the loan book or the portfolio by over 20% a year, NPL's at only 6%. And that's pretty much the same level as NewBank, and it's about 10 percentage points lower than Mercado Libre. One thing that I do see the data, though, is that their NPL coverage is below 100%. And for Mellie, it's over 150% for contact. So is that a risk that concerns you here? Yeah, when I first looked at it, I thought it was a bit weird. I think it was back in Malta when I was

visiting one of our mastermind members. And we talked a bit about Caspi and he talked about the company and I was looking it up just, you know, at the first glance. And I looked at the numbers and I kind of didn't know why that was happening. So as a quick explanation, NPL coverage is the ratio of provisions. So basically money set aside for expected losses to the NPL balance. So 78% coverage means that for every dollar of 90 day overdue loans, Caspi holds about 78 cents of provisions against it.

Intuitively, you would say, well, that's 22 cents. short, at least. But there also depends on what the lender expects to recover on the non-performing loans. So a secure loan, for example, doesn't need 100% coverage since you can recover a lot chunk of the loan. So car loans, for example, right? You still have the car, even if the borrower can can pay, so then you recover a lot of that loan. So my second thought then was to just check the credit mix shift and kind of see what percentage of the loans were actually securitized or backed by an asset. But it turned out it wasn't a lot. It was kind of comparable to Malley. So So that was kind of surprising to me because that obviously makes the lending business pretty

risky. And that's not the impression I had from the management team. I didn't think that's how they operate. But then I looked at the so-called LDG ratio, the loss given default. And it turns out that CUSB does recover significantly more or larger chunk of an unsecured loan than most other companies, despite it not being asset backed. And the reason is that it has, again, the best data and also just an uncomparable market position. So since Caspi knows everything about you, they know when money is coming in and also how much.

And since Caspi is pretty much vital to almost every person living in Kazakhstan, they just can't afford to lose access. So Caspi recovers many loans even after the 90 days when most other companies, including Mellie and C Limited, can't even dream of getting their money back anymore. Well, that's pretty cool, actually. And potentially something we can hope for with Mellie at some point. And with both Mellie and C. Limited, we discussed the importance of. increasing order frequency and order quality to improve their data. And as you said, Caspi can work with data from 77 transactions a month per user, which is just absurd.

Yeah, it's about, you know, if I do the quick math, about two and a half transactions per day, which I don't know, it's kind of insane. I mean, the average American uses their debit card about 25 times a month, though I could imagine it might be a bit more for you, but Caspi's users are transacting three times as often. And even the government services add this new layer of stickiness. So over 12 million people pull up official documents through Caspi. And while Caspi makes no money on that, at least directly, it sort of builds engagement and trusts that strengthens the rest of the ecosystem.

So for example, thinking back to COVID, when the government picked Caspi to hand out pandemic relief, that certainly was a way better ad campaign than you could have ever paid for. Or you get me wrong, Daniel, is that I don't use a debit card. I only use credit cards. Got to get those cash back in points, right? But anyways, is there also a messaging app or something similar that's integrated for Caspi, right?

I mean, WeChat is arguably the biggest super app in the world, even if it's not well known to North Americans. And it started by running the most dominant messaging platform. And then they built into different verticals from there. And one of the advantages of starting with messaging is that it comes with huge, network effect benefits that you can then roll into these other types of businesses. Well, maybe we've now found the one weakness for why we should also call Casby not a super app because no, they don't have one. They are active on pretty much all the verticals that

you could think about, but not in messaging. And as far as I know, I think WhatsApp is the dominant messaging app in Kazakhstan. And the network effects of Caspe, therefore, you know, mainly come from its two-sided marketplace and its scale, which I think a lot of our portfolio companies benefit from. So it's not like we underestimate the same. scale and the network effects that two set of marketplaces benefit from. And Caspi, again, facilitates about 18 million transactions a day with over 14.5 million payment users and more than 750,000 merchants. And again, we're not talking about the US.

It's still Kazakhstan. So you have this, you know, typical market and fintech flywheel, which is incredibly strong. So more consumers pull in more merchants. More merchants mean better selection and also better prices. And more purchases mean more data. Better data means better credit. Cheaper credit means more buying. It's the same kind of flywheel that we talked about with all of these companies, and any new entrant

would have to reach basically critical mass on both sides of the marketplace, which you know, you and I know that best, is nearly impossible. Not only because it's incredibly difficult to do generally, it's even more impossible if you already have, you know, an incumbent like Caspby, the scale and probably also the political connections in Kazakhstan. One of the major differences between the old incumbents and these new tech-first companies is that they seem to always be on the lookout for upcoming competitors to not fall prey to the innovator's dilemma. And so, you know, that's something we see worldwide. It doesn't matter whether it's with

Mercado Libre, Alibaba, coupang, shoppy, Amazon, or the other big tech companies in the U.S. All of them have won their market by disrupting old legacy players and then have maintained that market share and expanded into new verticals by being hyper-focused on not allowing the same thing to happen to them. And so that's essentially the rationale behind spending hundreds of billions of dollars on AI right now, right? I mean, this might be the first time a technology has emerged with the potential to disrupt their legacy business models for companies like Amazon and meta and Alphabet. So they have to front run it and ensure that they dominate on all things AI. So no other company can take their place and, you know, turn them into one of the negative outcomes of the

innovators dilemma. And so if the investments work out, that's great. But even if they don't, that does just really, in other words, mean that they keep their old business models and moats in place because, you know, AI doesn't end up being the disruptive force that they feared. We spent a lot of hours in the last couple of weeks discussing with some of our mastermind members, what it means to have these hundreds of billions of dollars invested in AI and data centers and what it could potentially mean for the future modes of companies like Google. And I guess you can say that it's just sort of justifying today's investments by saying, well, even if you just keep your market position, that's probably worth a lot of money.

Because if Google keeps being Google for the next 10 or 20 years, the cash flows, they will have 10 times, 20 times larger than whatever they could spend today on AI and data centers. And I mean, even if you look at SpaceX going public, at a $2 trillion valuation, that probably means the rules have changed to some extent. I know those are famous last words, but if I look at, you know, Google and compared to SpaceX, I'd much rather go with, you know, a company that has already built a mode and is printing cash like there's no tomorrow. I think we're on the same page there. And, you know, speaking of all the advantages Cassby has due to its monopoly-like position, I do want to bring up the topic of what their local competition,

if any, looks like. And at the beginning of today's episode, I was a bit surprised when you said that there is actually a local competitor that is the biggest bank in the country. That seems pretty antithetical to really this whole idea of Caspi being this deeply entrenched potential super app. And I would have thought that Caspi would be at this point considered the largest bank in Kazakhstan. So it's surprising to be that it's not.

So how should we think about this dynamic between Caspi and some of the other legacy banks and local competitors and whether they're really much of us. threat to Caspi's business at this point? Yeah, I think the bank you're referring to is called HALIC, and it's a great business as well. It is still, as you said, the biggest financial institution in Kazakhstan, measured by assets, deposits, and also corporate loans, and they earn more than a trillion tang in net income. They run 30 plus return on equity, and they also pay a huge dividend, kind of similar to Caspi.

And if I had never heard of Caspi, and I would look at Haleck, and I would say, you know, that's pretty dominant bank. And just as you said, I probably don't think it's possible to still have the sort of monopoly-like position that we described for Caspi. But I think the bet that the Holic Bank made was a very different one than Caspi. So for them, it was mainly about banking relationships and the banking business in general. And Caspi, back in the early 2000s, we doubled down on the consumer relationships. So we're talking daily payments. We're talking a B2C marketplace and so on. And it turns out, in the long run with a lot of hindsight buyers, the consumer side was the more valuable real estate. I mean, software businesses and banks are also data businesses today. And the data

Caspi could gather over all that time is certainly a competitive advantage that's impossible for a normal bank to match, even if you are the biggest bank in the market. And I think it's always easy now 20 years later to look back at how sort of the situation has evolved and say, why didn't Holic Bank kind of tried to go into the same direction? But 20 years ago, Few people could imagine how important the consumer side and the data would actually get. Of course, it was obvious that it would play a bigger role than in the past, but very few people knew how it would actually play out. And one thing I noticed when I listened to Caspi's CEO is just how focused he is on the

customer experience. Harlech optimized mostly for a banking product. So for them, it was about having, for example, the best credit card. And Caspby looked at things through more of the consumer lens. So how can I make the life of a consumer as easy as possible? and initially there was simplifying finance and payments, but over time, that kind of spilled over to all other parts of life. I don't want to throw a wrench in sort of the narrative here, but Halleck has released its own super app, I understand. And so has that taken chair from Caspby?

I mean, does that complicate the picture that you're painting here? Yeah, the super app was called Home Bank and was originally launched in the mid-2000. So it's not necessarily a new app, but for the longest time, it was just a new app. a banking app. And then in 2023, it was basically transformed and started to integrate things like payments, installments, also in marketplace, and also some of the government services that we talked about before Caspi. So they basically tried to do what Caspi was doing, but they have only about 10% of market share, for example, on the payments market. And I think they primarily succeeded in cross-selling the app to the bank's customers, which is not a small number of

accounts, but it's also not comparable to the reach that Caspi has. And HALIC basically handles the majority of Kazakhstan's corporate banking, state pensions, payroll programs, and sort of the government funding accounts. So pretty much the exact sort of legacy bank that we talked about in the beginning. So just by integrating e-government services and also the e-commerce engine directly into its super app, HALIC has converted a lot of these passive institutional accounts into active digital consumers, but it's a totally different part of the market than what Caspi is trying to capture. Well, I think that's the first time I've ever heard anybody to say e-government services.

You know, we were joking about that earlier, about how Caspi does so many different things. You can do anything with Caspi, and that's, you know, part of the value add and probably helps, you know, their relationship with regulators. But that does weaken the kind of bull case if other companies are actually able to offer these governmental services too, right? I mean, it's not a totally unique offering that Caspi is able to provide. You know, for a second, I thought you were making fun of English being my second language, but saying you never heard of your governance. No, but you're right. I mean, government services run on government rails, and they are obviously open to the public, and that means to multiple banks. And the Holic Bank is one of them, and there

a few others too. But I think why I think of it as more of the Caspi service is because Caspi is dominating again, the consumer relationships. And it doesn't sound like a huge mode, especially with other banks also opening up super apps. But there's just no reason, in my opinion, for a consumer to actually go and change and basically, you know, spend time on another app. Because there are just these deeply integrated habits and network effects and all of that stuff. And if it's already sitting on Caspi, I just don't see it moving away. There are plenty of examples showing how difficult it is to change deeply ingrained consumer habits. And Apple once tried to do peer-to-peer payments on iMessage and on paper that made a whole lot of sense,

but it did not gain much traction. I don't know many people who are sending payments over IMessage. Another good example was also in our Spotify episode because, you know, I have YouTube premium and it's one of the best decisions in my life. So in theory, I would also not need to pay for. Spotify anymore because I can just use YouTube music, but I never do it. And if I ask my friends who also are subscribed to YouTube premium, and none of them is using the music feature. So I think there are many reasons for that, but sometimes it's as easy as saying people like to stick with what they know,

especially for things that are sort of their daily habits. I take it that you don't believe Caspi will have its monopoly status challenged anytime soon. Is that fair? That's fair. I think when I said that Pabrai invested in Caspi with the, you know, heads I Win, Tails, I Don't Lose Much Philosophy, then Kazakhstan is the tails part of that equation. So highly profitable business with a huge mode, still growing quite fast. And also, you know, the source for sizable dividend. You could also look at Caspi as Marvel Growth Story. And that's mostly coming from an investment made in late 2024 and kind of early 2025. That's when the deal actually closed. And that's when Caspby bought a 65% stake in one of the leaders.

leading Turkish e-commerce companies called Hepsi Burrada for $1.1 billion entirely in cash. And for context, Hepsi has about 16 to 20 percent market share, depending on the data that you look at. And Turkey has 85 million people versus Kazakhstan's 20 million people. So in theory, in one move, Kasby roughly five-axed the size of the market it's going after while owning a dominant player in the country. And the bull's framing, I would think, is that five times the addressable market and doing so in a country that's structurally and culturally similar to Kazakhstan in some ways makes it, you know, a great place to invest with a team that has run a similar playbook before. And yet on the other hand, I kind of wonder whether the expansion

into Turkey suggests the home market is saturated, right? It's more mature. So they're having to look abroad for growth, which comes with pros and cons. That's what I thought about as well. I mean, in an obviously limited episode, I kind of mentioned how impressed it was, but their ability to expand into Brazil with the success that they had. But you also wondered why they don't just double down on Southeast Asia, instead of spending billions to be the number two somewhere across the globe. And in Caspi's case, I think the answer is slightly easier. I think they're completely dominating Kazakhstan,

but it's also a small market. And while there is still growth potential in many of their business segments, so for example, e-commerce, you know, being one of them, the highest margin business undoubtedly is the payment part of the business. and the financial and the banking segment are already quite mature. So I think it makes sense to kind of see what market is similar to what we have been successful and then expand over there. Let's take a quick break and hear from today's sponsors.

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finding issues, drafting fixes for you, and cutting vendor assessment time by up to 50%. Whether you're a fast-growing startup or a global enterprise, Vanta is here to help you automate your security and compliance and earn, improve trust. Get started today at vanta.com slash t-i-p. That's v-a-n-ta.com slash t-I-p. All right, back to the show. I'm not going to pretend to be an expert on the Turkish e-commerce market, but at first glance, right, I mean, it does look somewhat similar to Kazakhstan. So Caspi has a blueprint on how to succeed in this kind of market. And, you know, it's similar to why I think C-Llimited was able to successfully expand into Brazil, despite the fact that they're operations were originally focused on Southeast Asia. And they seem to have had some early

success, talking about Caspi here. Right. Purchase activity has increased 19% in Q4 last year. GMV grew at a low teens rate and revenue has grown in the high teens. And we're also seeing some operating leverage. So there are definitely signs of early traction, even if I'm a little bit skeptical of their likelihood of, you know, having the same level of success that they had in Kazakhstan. I think that's fair. And we'll get to some of the reasons. I think what's mainly different is the competition.

So Hapsi is, again, the number two. But the other big player in Turkey is Trendyol, which is backed by Alibaba. And again, we kind of have to talk about it. It's limited also competed and Alibaba backed competitor in Southeast Asia and clearly won that battle. But it's sort of not the same. And just as you, kind of doubt that the same will happen for Caspi and Turkey. I think the Turkish market is sort of similar in terms of culture, citizens, wealth, and perhaps also demand.

But Caspi just won't have some of the very important advantages that it had in its home market. It's hard to kind of overstate how important the monopoly-like position is for Caspi. And yes, of course, it didn't start out with it. But as you said, kind of the political environment and also the fact that you had these legacy banks completely miss out on the majority of the population, that sort of was a good playing field for Caspi to get. into and then gain market share. I'm not quite sure it's the same now in Turkey. And another thing that we need to mention is Caspe didn't need the logistical infrastructure because there were no international competitors in Kazakhstan. And now going to Turkey, they sort of have to do that.

I mean, you know, the monopoly-like position is also why Caspe didn't need the logistical infrastructure of international competitors and why Caspe has some of the best payments data in the world. Why, you know, they don't have to cover 100% of their non-performing loans. And I could keep going with this list for hours, my main point is that a lot of the advantages Caspi had in Kazakhstan do not exist for HAPC in Turkey. Well, it sounds like neither of us are bullish on the Turkey expansion. I think it kind of comes down to how Caspi approaches it and what success would look like in Turkey.

I mean, if Caspi is trying to build a similar ecosystem in Turkey through Haspi, I think that would mean a lot of Cappax and a low chance of success. But if they know they can't replicate that success and instead kind of try to just copy some of the best practices in e-commerce and finance operations, I could see that as a great opportunity that doesn't come at a huge cost. So that would basically mean improving metrics like order value, order frequency, which, you know, you just talked about. And on Caspi, customer purchases 27 times per year on average. And on HASB, it's only seven times. So if you think about just, you know, the marginal improvements like that and consider that the Turkish economy, market is going 10 to 15% per year in dollar terms, you can see what might be attractive to

enter. I think I make 27 e-commerce purchases a month, maybe a week. But obviously, just getting back to it here, how much market share does Trindyall have? Because I think you mentioned HESB has slightly less than 20%. So I expect Trindiole to top that. And do you know how much Trindyall spins annually? and what margins they're operating with. It's sort of a lot of questions,

but I do think it's really important to understand the market dynamics here in Turkey for us to really be able to underwrite Caspi with any conviction. You know, I'm kind of around here, trying to impress you with some of the numbers that Caspi is putting up, and then I'm talking to a guy who orders on Amazon

every single day and maybe twice. So obviously that's sort of difficult to do, but no, I definitely agree. I mean, it's incredibly important to kind of figure out what game Caspi is playing in Turkey. And I talked to one of our, mastermind members about Kaspi recently because he's a fund manager from Singapore who has a small position in the company. And we discussed how we thought about the investment thesis and also the

expansion into Turkey. And he kind of liked the optionality, but we also agreed that it is a very different market and that understanding how it works and especially the competitive environment, is just crucial for the thesis. And getting back to your question about, you know, how much money are spending? Since Alibaba owns about 85% of 20% of all, we only get the number. that Alibaba is giving to us on their Turkish operation. And they kind of lump it into this international commerce arm, which hadn't adjusted EBITAL loss of about $2 billion last year. And the majority of that is supposedly coming from cross-border operations.

So Alibaba is saying that Trinniol itself improved profitability. However, that doesn't really tell us whether they are actually profitable or just came a bit closer in terms of improving profitability. So Hatsby, on the other hand, was already profitable when Kassi, Caspby bought it, operating at an EBITDA to GMV margin of about 2.5%, which doesn't sound that high, but if you compare that to most other marketplaces, it's not that bad. And this certainly has come down over the last few quarters to about only 0.5% of a margin, which certainly is significantly lower.

But that's mostly due to the investments made by Caspi. So the goal seems to be to not operate it at a loss, which proves to me that Mikhail kind of doesn't plan to burn money here and gain market share just for their sake it. Well, I guess my problem would be that I can't see Hesby taking Trindial's number one spot. I know that C-Limited did it in their home market, but the difference, as just kind of said, is that they played on their home turf. They had to fight to win no matter the cost. And with Caspi, we sort of are trying to get the best of both worlds, right? We don't want them to spend ridiculously on the turkey expansion. But then at the same time, they also have to beat out the local competitors to win market share at the

same time. And that is going to require aggressive investment. This debate is going to remind me of a quote. As you know, I just recently visited Stick, our boss and the CEO of TIP and Aalhus. And it's somewhat of an annual tradition at this point. And one thing that he repeatedly said was, you can have anything, but not everything. And there's a cost to everything. That's basically what it means. And oftentimes, it's sort of an opportunity cost. And the Caspi's case, I would like to buy, you know, a high margin monopoly in Cazacan that pays, let's say, a high single-digit dividend and also get the upside of having Turkey work out. And the problem is that for Turkey do play out, Caspi needs to spend the money to make

with the operations in Kazakhstan. So the rest is sort of is that you make good money and then you throw it after bad in Turkey. And when I talk to Caspian investors, I sort of hoped they would tell me that their thesis is about Kazakhstan and that Turkey is just this call option that we keep talking about, but it seems to me that most see Turkey as kind of the key part of the thesis, and I'm just not sure I want to bet on the number two e-commerce player in Turkey. You just mentioned that the dividend is a relatively large part of your thesis, and we don't actually talk about dividends a lot on this show. We've covered a lot of companies. We spend much more time on share buybacks and stock-based comp and a lot less time on dividends. And so perhaps

you can give some background on the dividend history and whether you're not. You know, whether you you expect the dividend to be a priority going forward for this company. And the reason I bring it up now is because in emerging markets and frontier markets, a healthy dividend can actually be a sign that the cash is really there, right? There isn't any fraud occurring, which should be hard to verify at a distance, especially an economy that historically has had a lot of trouble with corruption and money laundering and, you know, let's say nefarious accounting. And, you know, I don't want to imply that I think necessarily anything bad is happening at Caspi at the moment, because I just don't know. But the dividend was suspended last year when Caspi bought Hespi. Right. So that's something to

think about. I don't necessarily know, again, whether that, you know, spells a doom or anything nefarious, but suspension of the dividend, there could be a good reason for it, right? The acquisition would justify it. But again, it's something that we want to make sure we understand. And one other quick thought is that with COPA, you mentioned that you expect the dividend to be paid out long-term because that's how the management team makes its money. And based on the insider ownership of Caspi's founders, I would imagine that there's a similar case here, too, right, where they have a strong incentive to pay a dividend out to all shareholders because they want to collect cash dividends from their own ownership stakes in the business. And that's how I think about it. And that's sort of

your margin of safety that you have on the dividend part of the thesis, so that as long as the founders get paid through dividends, I expect them to be a priority just because that's the way they're getting paid. And there's actually an interesting and perhaps somewhat controversial story here. I don't know if it adds to your suspicion about the company and CEOs in that region or not, but Mikhail actually has a hobby that I personally quite like, but it's also quite expensive. and in 2024 he bought the English League One Football Club, Waycombe Wanderers. And I should say that League one kind of sounds like the first league. It's actually the third league.

So, you know, it's not that high up. So it probably wasn't too expensive. And you did buy them from American owners, which I kind of need to figure out. Because fortunately, even Sean is now in somewhat of a football mood watching the World Cup here and there, which kind of makes me a bit proud because I was certainly a hope to be part of the reason for that. But anyway, even that one club was not enough for him. He also bought a club in the Kazakh Premier League a year later.

And in an interview, he basically said that he has this goal of, you know, establishing an integrated youth academy between Kazakhstan and England. And again, as a football fan, I'm kind of biased to like him even more for that. But also as an investor, you know, I'm kind of wondering whether Caspi pays dividends because the controlling shareholder needs cash for his, let's call it, love for football. A football habit. It's not such a bad thing. help out with the dividend part of your thesis, right? Because he would need cash to keep funding

these acquisitions. That's true. At first glance, it's probably a good thing. But he also wouldn't be the first billionaire who suddenly loses interest in owning a club. And, you know, if he loses interest and doesn't need the money anymore, in theory, he also doesn't need the dividend anymore. So again, I kind of feel like I just fabricating Berries reviews here because we talked so much about how great the company is. I do generally have a good feeling about the CEO and how he thinks about both the company, but also about treating shareholders. And since you don't have any stock-based comp, it's not like you're being diluted if they pay a dividend instead of buying back shares, which again, you mentioned we kind of usually like to see. Plus, that's also a suboptimal

way to stop delusion because again, I mentioned it basically just, you know, taking cash out of the business to pay back the dilution part of the business, which in generally just means, hey, you know, that's cash that you and I don't get as shareholders. So it's not really a much better way to pay back Sheld us, but I'm somewhat all going on a tangent here. Look, we're talking about a central Asian, former Soviet republic. So I think at some point we need to talk about the macro here and make sure we understand how geopolitical and currency and all these types of risks that are really beyond our control factor into the thesis today.

And there definitely is macro risk involved, right? I mean, currency debasement is a real concern. You've got a legacy of governmental corruption ties to Russia, which is problematic for us as American and Western European investors. And then you've even had coups in recent history where you've had attempts at overthrowing the government. And so if we could only bet an isolation on a stable dividend, 10% earnings per share growth and have this call option on growth in Turkey, Caspi would absolutely be a no-brainer.

This would be like at the current valuation, dump everything you have. in the Caspi. But the problem is, that's not the entire context. You have these other macro risks. And so, really, the thing that gives me pause here. And the reason that this company trades at, you know, seven or eight times earnings is because of the macro in political risks. I guess I can only invoke stick here again, saying you can have anything, but not everything. And in this case, you have a company trading at seven times earnings because of everything that you mentioned, you know. And I think the first thing that we should talk about macro wise is the current. So Kaspi earns everything in Kazakhstan, Tang, but you and I would own it in dollars, obviously,

since we would buy the stock trading on the NASDAQ, and the dividend would also get paid to us in dollars as well. So it's only one thing how the business does in its local currency, and another what the local currency is worth if you actually look at it in dollar terms. So Kaspi could have a great year in local terms, and you could still be down as an investor if you invested through dollars. So we have that problem with New Bank and Mali too, but this time the risk is pretty much amplified since Kazakhstan and therefore also the local currency, the Tang, are a lot more concentrated,

and Kazakhstan's economy is heavily export-oriented. And, you know, the main export product is crude oil. So the strength of the currency basically depends entirely on the oil price. It's sort of similar to the problem we had with Kopa, which is an airline, and their reliance on jet fuel prices. And in this case, the impact is more long-term and also more difficult to figure out. For example, you would think that with oil prices being relatively high at the moment due to ongoing conflicts in the Middle East, you'd think that would be good for Kazakhstan because it means they'll get more money from oil exports, which should then also support

the Teng as a currency. However, the general instability and volatility of oil hurts other parts of the economy, right? Very high oil prices, for example, fuels inflation, up and down the supply chain and consumer prices, which then means that the central bank has to step in and raise interest rates. And, you know, that can, again, ripple across the economy and cause, you know, deceleration and growth. And that just means there's a lot of very nuanced interrelated dynamics for us to consider. Unfortunately, it's not as simple as just to say, you know, oil goes up, Kazakhstan's currency appreciates. The relation is much more complicated. I guess the best thing for Kazakhstan would actually just have relatively stable oil market

at least a reasonable price. So perhaps, you know, oil trading in the $70 range. So, you know, you could have expected, you know, the local currency to rise after war driven by higher oil prices. However, the tank's actually been pretty firm sitting around $490 compared to the dollar. And it's even a touch stronger than it was a year ago. And the reason for that, and you kind of alluded to it, is mostly that the central bank has raised the base rate to 18%, which makes holding in local currency attractive. So the currency's been propped up by higher rates, which is, you know, sort of also part of oil going up lately, just because, you know, they have all of these interconnections going on in the markets. And I think the main risk I see long term still is not necessarily that oil is higher than it should be. It's a perfect world for Caspian. Kassar. stand. But the real risk is just that it's at a sustained low level environment. So, you know, that would put long-term pressure obviously on the local currency. And the Hallex Bank is actually looking for 600 plus to the dollar by the end of next year on lower oil and the government cutting those national fund transfers. So even with oil doing okay right now and the currency

being sort of firm, the medium-term outlook is a weaker tank and that obviously is a sort of headwind for Caspi. Yeah, that's just the thing that gives me about Caspi. I mean, the business is not an oil business at all. It's really a payment in software business and in a data business, but you can't escape the currency headwind and the tie to oil when most of their earnings are being generated in, you know, Kazakhstan's local currency. And, you know, it's certainly above my pay grade to figure out where oil prices are going to be in the coming years. And nobody really knows the answer to that. And yet, that is going to materially impact the returns that we receive in US dollar terms, really irrespective of the underlying businesses' performance.

You certainly have to debate it whenever you look at these emerging market companies, but sometimes I'd just like to simplify and, you know, look at the past and see how it has done. And to be fair, to Gaspi, they grew their revenue at a keg of over 30% in the last decade in dollar terms. So that's important, not local currency. The operating profits were growing even faster at 36%, and net income at over 60%. And again, all of that is in dollar terms. So you are accounting for the local currency, $2 losses. And it's basically the amount of money or the growth that you would have gotten as an investor in the dollar.

So it's a headwind that they faced for the longest time and it has not diminished your returns in any meaningful way. Or related to that, but even bigger picture. What do we think about the geography, right? I mean, Kazakhstan is sitting right at the border of Russia and China. You know, this is, I think, the part of the thesis where I'm getting grilled. I mean, we're going from oil prices to bordering Russia and China. And, well, to be honest, I kind of saw myself doing some research into how capable Kazakhstan's defense would be in a scenario, for example, a Russian attack. And while doing that, I kind of just stopped and asked myself, well, what does it say about the margin of safety of this investment when I suddenly have,

to transition or, you know, kind of pretend to be a military expert, which, you know, I obviously am not to the surprise of not that many people. And obviously could pretend that, you know, I have sort of an idea of how the relationship between Russia and China actually work. But that would obviously is only me, you know, speculating about something that I simply don't understand. And I think the only thing I can say is that it seems like Kazakhstan knows how to balance its geographical and, you know, political position in the region. I mean, they did maintain functional relationships with Russia and China and the US and Europe simultaneously and also still attracted a lot of foreign investment from all of them, which is quite important because, you know, for example, you can build the

infrastructure that you need for the oil transports, which we're kind of getting to because I think the biggest risk is not necessarily whether Kazakhstan will get into any conflict itself, but mostly how other conflicts will impact it. I mean, Kazakhstan's oil mostly has to physically transit out through pipelines that, for example, go through. Russia. And if you would imagine that there's disruption, so there could be sanctions, it could be the war on the Ukraine, having an impact on the logistics, or it could even be the Iran situation, you know, in some way, shape, or form disrupting the regional transport. All of that could sort of bottleneck the export of oil from Kazakhstan. All of these things are just, you know,

things that are pretty much unknown unknowns to me. I just don't know how to account for that. Caspe could do everything right and the stock could sell off dramatically in U.S. dollar terms because of something like you said where there's some sort of bottleneck in oil exports and the currency just collapses and your returns fall off dramatically. That is something that truly can happen here. And so that's why you have that P.E. of 7 and it might look like a bargain, but in reality, it is also just a very large margin of safety accounting for all the unknowns and things that are beyond Caspi's control, right? If this same business was doing just as well in the U.S. or

Western Europe, it might be at 20 or 30 times earnings. And so, you know, the fact that it trades at less than 10 times earnings, again, is just that margin of safety reflecting the higher degree of uncertainty and the fact that a number of risks are out of their control, but also very directly hurt the business or could hurt the business to a significant degree. So I was the last question on all this. What are your thoughts on the Russia connection specifically? Because I know that's been the center of some criticism and short reports and some speculation that Caspi has been helping launder money for people in Russia. It has ties to the Russian government. Obviously, that, again, would be problematic for us as, you know, U.S. and European investors where there are

very strict sanctions on Russian assets and businesses with connections to Russia. So how do you think about that here with Caspi and the risks that we would be introducing to our portfolio if we were to actually put real capital into it? I think I talked to you before we started, you know, this episode and I said that basically the short report is the first thing I looked for with this company because I thought, you know, if I find anything that I find so, you know, critical to the thesis, I might not even do all the work on the name. So since we're sitting here, and, you know, I'm pitching the stock. I didn't think anything will actually come from it from the short report. And just for context, it mainly leaned on Caspi's links to again Russia.

That means, you know, Caspi having Russian users, Russian business and so on, which obviously, as you just said, it kind of matters because of the sanctions after the Ukraine war. And again, Kazakhstan and Russia have a deep historical and, you know, they also have a economic ties, obviously still. And they were the last two Soviet republics. There's a long border. I think it's the second longest border of any country on earth between Kazakhstan and Russia. So obviously, there is a lot of cross-border commerce. And some connection wasn't really a shocking surprise to me. I think many of the claims made in the short report have also been debunked by now. I've also linked to an article in the show notes, if you want to get some more details on that. However, I would also say

there were some points, you know, that were brought up that do give me a little pause. I mean, one of them, for example, is the claim that, as you kind of talked about, Kasbu was involved in the money laundering activities of Dahan Sajibali, one of the most powerful politician in Kazakhstan. And to be clear, Kasper was certainly not part of the actual laundering process, but there might have been one of the many bank accounts where some of the laundered money went. And that is something that obviously still should be flagged by them. And I guess it kind of shows that ultimately you are still operating in a country like Kazakhstan where potentially you have to look away when certain people do things.

And obviously, that's not great for you as an investor. And it's sort of difficult. I wouldn't be surprised if there's any bad news coming out at any point in the future. I would also say this has been quite some time ago. And personally, I couldn't find anything on, you know, for example, the class action lawsuit that was started. I think it never actually gained traction. I also think, again, that most of the things in the short report were debunked. And I generally always look at it and sort of two sides.

When a short report is coming out, obviously, the person who's publishing it has a short position on it. So they put it as much as possibly into that report. And it's also quite good if you cannot actually just, you know, debunk it just at the first thought because the stock is already dropping at that point. So I felt like this report has been somewhat like that, although I wouldn't be surprised if there are ties to Russia that. maybe potentially will also have the stock to some more. And you know, you will even get a P. that's lower than seven. I mean, the Halleck Bank, for example, is trading at a P.E. of three to four, so it can certainly still go lower if you're invested in in Kazakhstan. When I bought Russian oil stocks at three and four and five times earnings in 2021, I thought

I was genius. And then they went to zero when the invasion of Ukraine occurred in 2022. too, and it became illegal to own Russian assets. And so I'd like to think I was a lot younger and more naive at that time. And yet, here I am quite intrigued by Caspi, not to say that that's a perfect one-to-one comparison, but there is definitely some similarities that I'm sort of feeling, you know, tingling down my spine. But let's just go ahead and move forward here. And let me ask if there's maybe anything else we should cover before we talk about the valuation and your final thoughts on the intrinsic value of Caspi and if it's a good fit for our intrinsic value portfolio

of about 15 companies. I think there's only one thing that I still want to bring up and it might explain some of the more recent price sections. So for years, Barring Vostock, which is a P.E. fund And actually the P.E. fund that not only backed Caspi from the start, but also the one where Mikhail, the current CEO, worked before he joined Caspi. that fund had a huge 35% stake in Caspi and over the last couple of quarters, especially since Casby went or listed on the NASDAQ has basically sold part of its stake and taking the gains.

And obviously that means that there was a lot of selling pressure on the stock for the last couple of months. And that's now largely clear it. And I think I kind of refer to it in the beginning of the episode. What I like to see is that both the CEO as well as Tencent stepped in and bought a big block off the borrowing Vostock steak. So that obviously took the pressure off. And I think it's also a vote of confidence that the CEO is putting his money into the company. And I also kind of like that, you know, the other buyer was not, you know, some, some firm

that I'd never heard of, but actually 10thand, which obviously is quite a well-known company that also I've heard tends to have a pretty good idea of what upcoming companies out there. All right. Well, it's time. What stock valuation? I guess I would have expected you to be a bit more bullish on Caspi here, to be honest, but perhaps it's cheap enough to still work with your dividend plus monopoly in Kazakhstan thesis.

I guess I'm only coming across as a bit bearish because I actually like the company a lot, which, you know, I think it wasn't that perished. I think there were also certainly some bullish points brought up. But I think whenever that's the case and I'm, you know, bullish on a company, I just like to try to poke holes into the thesis. And to be fair, I'm also a bit spoiled by, again, looking at companies like Amazon, like Melly, like C-Limited, when it comes to, you know, e-commerce and payments companies. So I could have easily filled an entire episode, you know, talk about how good Caspi's core business is and when no one can compete with it. But I think most can quickly agree on that.

So figuring out what might be wrong with the business and thesis kind of delivers more value, in my opinion. And again, you know, there's not that much value I can offer when it's about Russia, but especially the Turkish market dynamics are the ones that I think, you know, deserve to have a second look. And anyway, long story short, I thought today, I would go with somewhat of a different valuation approach today, at least as one option today. I still also have a DCF, but I thought, you know, I just kind of want to mix it up.

Oh, mixing it up. Okay. I assume that has something to do with the dividend or what's the approach you're going to take? It has. I mean, it's, you know, a very simplified model, but I thought if we do talk about a company where part of my thesis is actually a dividend, which you said is not happening that often, I also wanted to go with an approach that is sort of, you know, having the dividend as a major a part of the thesis. And my idea has kind of been to test per price thesis of, you know, heads I win, tails, I don't lose much. And I should say that I'm generally, and we kind of discuss the reasons, not betting that this stock gets a higher multiple in any of my valuation approaches. So not in the DCF and also not in this approach. And what it's basically doing is that I say,

okay, well, Caspby pays a dividend of about 8% at today's stock price, which is about $80. And the question is simply, does a dividend like this on a near monopoly throwing off, you know, 50% return an equity, deserve to sit at 8 or 9% of a dividend yield, or should maybe the market accept something lower, like 7 or perhaps 6%. So what I did is I basically looked at the history of Caspian and then figured out where the yield on average has been sitting. And if so, you can figure out, okay, well, what would that mean for the stock price? So it's basically just some simple back of the envelope math. And if the yield would, for example, compress to about 7%, that would mean that the stock price has to obviously go up and the total return after I haircuted for, you know,

the currency and at the dividend, I would collect along the way at about 25%. So that's basically the upside of the market believes the stock should trade at, you know, a yield of 7%. If you would get a yield of 6%, the return would be over 40%. And I should say that 6 to 7% dividend yield is mostly, you know, the historical average for Caspi in the last couple of years. So it's not unrealistic that we get there. And basically the logic here is kind of just like, you know, changing the multiple.

It's kind of how does the market view the company? where should I trade at, just, you know, instead of a multiple sort of look at the dividend yield. And by the way, again, I'm, you know, not making this up. These are the years based on historical evidence. And even if the market says, you know what, there's so much stuff going on that I just don't know and don't understand. And they don't reread it and say, 8% is a dividend yield where you should be. Well, you know, then that's the return that you would get, the 8% from the dividend. So that's sort of the tales, I don't lose much part of the thesis.

And for the DCF, do you come up with a similar value? or do you see the upside as being high or lower? How do you think of it? Yeah, that's kind of the interesting part. I would obviously not only do this, you know, sort of back off the envelope math because, you know, it's sort of arbitrary to some extent, but it's kind of interesting if you compare it with another valuation model.

And I can say that the DCF is kind of painting a similar picture. It looks more attractive because it not only shows the immediate re-rating potential, but also the annual return potential, which combining growth and the dividend seems quite attractive. I mean, if you would just assume a revenue K go over, about 11% significantly below the historical averages, which again are close to 30%, and a more or less flat net income margin and no multiple expansion. Again, the expected return would still be over 20% per year for the next five years.

So keep in mind, that includes the dividend yield of about 8%. But I don't know, Sean, you got to tell me, am I too biased, as always, when it comes to these ecosystem-like companies? Because I think I could see us establishing a startup position. I think I would first want to look at, especially the Turkish market a bit more. I kind of looked into it and there are a lot of dynamics. It's in some sense similar to Kazakhstan. In some sense, it's different.

And I think I didn't have enough time to really dig deep into that part of the market. But, yeah, otherwise, I think it's just looking at the spreadsheet. And I think that's not, you know, outlandish assumptions looking like quite a good opportunity. I think you're going to be surprised to hear this because I told that story about having my investments in Russian and oil gas companies. just completely wiped out in 2022. But I actually, I could be open. I could be open to this. I've looked into Caspi a bit before. And we both know some very smart investors who are excited about the business. So I don't want to be too close-minded here. And I definitely don't want to immediately roll it out because it's outside of my comfort zone. You know, it feels like a

company where there is a huge degree of not knowing what you don't know from what the customer experience in the ground is like to the political realities of Kazakhstan. But the fact that I'm open to the idea, I think speaks to how compelling of a picture you've paid in here. The data flywheel, the favorable relationship with the government, the deep entrenchment across daily life and Kazakhstan, domination across a handful of verticals. Again, that is all really, really compelling to me as I think about, you know, comparing Caspi with the other ecosystem businesses that we've looked at before Mercado Libre and Amazon and even Uber to an extent. To get this company with the kind of quality and growth prospects that they have at this

valuation does almost feel too good to be true. And I think besides the political risks, the currency risk is what scares me most. It's not uncommon for emerging market currencies to get cut in half in value in USC exchange rate terms over the course of a decade or so. And we've actually seen that happen with Kazakhstan's currency already with the point being the company's dependence on one volatile currency creates some very serious risk for us as USC and Euro-based investors, which you and I are respectively. And, you know, expanding into Turkey, where you've nearly had hyperinflation for a few years

now with the Turkish lira. That's not exactly the most inspiring currency diversification effort I've ever heard of. So I could maybe talk myself into owning it. I could also just as easily talk myself into putting it in the two hard pile just on currency risk alone. I think maybe the best thing to do would be to, you know, truly keep it on our radar. And I would be open to a starter position, but also I would love to, you know, try and speak to the executives of the company, learn more about the business, maybe do a follow-up

episode down the road where we explore, you know, what's changed and whether we think the company is worth a spot in our portfolio. But how do you think about it? I mean, some of the truth of actually managing a portfolio and doing it seriously is that you only want to build positions in stocks that you feel very comfortable in owning. And some of it is also just following a stock for quite some time. So you can do as much research as you want and kind of understand the business. There's something to say about simply following the stock for some weeks and especially

some month and then kind of see how it actually reacts. to market moves and also to market news and all that sort of stuff. And I think that's what's still kind of missing for me. And it's even more important when you just don't have this sort of consumer insight that we both obviously don't have. You kind of have these patterns and how you think about marketplace companies, how you think about payment companies. And I think that gave me a very good insight in how Caspid generally functions.

But there's still a lot of these, again, unknown unknowns that would sort of need to feel a bit more comfortable with. So I'm totally fine with putting it on, you know, higher. up on our watch list and then potentially talking to management and getting some new insights and then we will revisit it and potentially at that point do start a position in this pretty cheap and phenomenal business. And I would say with that, let me close it for today with the quote by Jeff Bezos, who I still consider the father of e-commerce players and he said, if we can keep our competitors focused on us while we stay focused on the customer, ultimately

we will turn out all right. And I feel like this quote kind of fits Caspi's culture quite well. So I thought that's how I would end today's episode. And with that, see you all next time. Thanks for listening to TIP. Follow the Investors podcast on your favorite podcast app and visit the investorspodcast.com for show notes and educational resources. This podcast is for informational and entertainment purposes only and does not provide financial, investment, tax or legal advice. The content is impersonal and does not consider your objectives, financial situation or needs. Investing involves risk, including possible loss of principle, and past performance is not a guarantee of future results. Listeners should do their own research

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