There is not another business in the world like Kaspi.kz. A 59% net income margin, 50% YOY growth, and one of the strongest moats in the world - all for 11x earnings. So what's the catch?
My understanding after talking to people from Kazakhstan is that without Kaspi life there would suck a lot.
High quality business led by a competent team, trading cheap.
Kazakhstan business environment is more developed than people realize regardless of the “stan” in the end, bordering Russia, being in the neighborhood of Iran and Afghanistan. It sounds more exotic than it is.
Great write up and incredibly interesting story. Your insight on underdeveloped economies trending toward superapps at the end makes a ton of sense to me and I had never thought about it from that perspective.
I don’t think I have the stomach for the geopolitical risks personally but this is an incredible write up.
It's been a few months since I looked at the Hepsi deal, so forgive me if I don't remember the details perfectly. I think the acquisition price was within the range I would have estimated Hepsi's fair value at, so not an absolute steal like some of Kaspi's previous smaller acquisitions. But I also think the value of Hepsi under Kaspi's ownership is probably quite a lot greater than otherwise. Kaspi can massively speed up the development of a similar ecosystem to its own, but under Hepsiburada. If executed well, this has the potential to create a business of a similar strength as Kaspi, but in Turkey. Turkey was the country I was most excited about the possibility of Kaspi moving into when I originally wrote this piece, due to its GDP being about 4x Kazakhstan's, but being in a fairly similar place technologically.
So altogether, massive potential but it'll all come down to execution.
Thank you for the detailed and logical deep dive of Kaspi. I share your opinion that the misleading short report creates a buy opportunity.
The business is rocksolid and perhaps exceeds Alibaba or Wechat in terms of marketshare and the range of services offered on one App compared to Chinese peers, via subsidiaries. All the innovaitons (QR payments, storage boxes, e-grocery, and fintech loans leveraging big data) are spearheaded in China so they have a good model to follow, to see what worked and what didn't and adding similar features and customer interfaces. All without the government regulations and country risk premium of course.
I would assume Russia would not shut off the Caspian Pipeline again because they are building a gas pipeline through Kazakhstan to export gas to China. It's a mutually beneficial relationship and Russia could not risk antagonizing few of its neighbors.
I have a couple questions and would love to hear your insights:
1. The m-commerce model, why customers have to examine the product physically before buying them? And how does Kaspi collect the fees, if transaction is done offline?
2. What are your thoughts on the recent Turkish e-commerce acquisition? What are Kaspi bringing to the market that is different? Without the BNPL loans and cross-selling through an superapp, is it algo or ad-tech?
3. Do you think the high margins on fintech is sustainable? Given the history it's a yes but I found it difficult to understand the 30% yield on loans. (I know the inflation is higher, say 9%, but the spread is still 20%).
My understanding after talking to people from Kazakhstan is that without Kaspi life there would suck a lot.
High quality business led by a competent team, trading cheap.
Kazakhstan business environment is more developed than people realize regardless of the “stan” in the end, bordering Russia, being in the neighborhood of Iran and Afghanistan. It sounds more exotic than it is.
Great write up and incredibly interesting story. Your insight on underdeveloped economies trending toward superapps at the end makes a ton of sense to me and I had never thought about it from that perspective.
I don’t think I have the stomach for the geopolitical risks personally but this is an incredible write up.
Thank you Andrew, really appreciate it
Loved your write up, if I had a hedge fund, you would definitely be hired.
On another note, could you share your thoughts on the Hepsiburada acquisition? Thanks!
Thank you Ángel, that's high praise.
It's been a few months since I looked at the Hepsi deal, so forgive me if I don't remember the details perfectly. I think the acquisition price was within the range I would have estimated Hepsi's fair value at, so not an absolute steal like some of Kaspi's previous smaller acquisitions. But I also think the value of Hepsi under Kaspi's ownership is probably quite a lot greater than otherwise. Kaspi can massively speed up the development of a similar ecosystem to its own, but under Hepsiburada. If executed well, this has the potential to create a business of a similar strength as Kaspi, but in Turkey. Turkey was the country I was most excited about the possibility of Kaspi moving into when I originally wrote this piece, due to its GDP being about 4x Kazakhstan's, but being in a fairly similar place technologically.
So altogether, massive potential but it'll all come down to execution.
That makes a lot of sense, thanks Matt!
Thank you for the detailed and logical deep dive of Kaspi. I share your opinion that the misleading short report creates a buy opportunity.
The business is rocksolid and perhaps exceeds Alibaba or Wechat in terms of marketshare and the range of services offered on one App compared to Chinese peers, via subsidiaries. All the innovaitons (QR payments, storage boxes, e-grocery, and fintech loans leveraging big data) are spearheaded in China so they have a good model to follow, to see what worked and what didn't and adding similar features and customer interfaces. All without the government regulations and country risk premium of course.
I would assume Russia would not shut off the Caspian Pipeline again because they are building a gas pipeline through Kazakhstan to export gas to China. It's a mutually beneficial relationship and Russia could not risk antagonizing few of its neighbors.
I have a couple questions and would love to hear your insights:
1. The m-commerce model, why customers have to examine the product physically before buying them? And how does Kaspi collect the fees, if transaction is done offline?
2. What are your thoughts on the recent Turkish e-commerce acquisition? What are Kaspi bringing to the market that is different? Without the BNPL loans and cross-selling through an superapp, is it algo or ad-tech?
3. Do you think the high margins on fintech is sustainable? Given the history it's a yes but I found it difficult to understand the 30% yield on loans. (I know the inflation is higher, say 9%, but the spread is still 20%).
Thank you