TIP829: Kaspi Stock ($KSPI): The Cheapest E-Commerce Monopoly in the World w/ Daniel Mahncke and Shawn O'Malley

Kaspi began as a second-tier retail bank in Kazakhstan in the early 2000s before a management transition brought in Mikhail Lomtatsy, a Harvard MBA and former Baring Vostok partner, alongside businessman Biser Kim. Daniel Mahncke credits this leadership change as the pivotal moment that set Kaspi on its current trajectory. The legacy banking system was dominated by Halik Bank, the old Soviet savings bank, and most of the population was unbanked. Card terminals were expensive and unreliable, sending money required a 20-digit account number and a four-day clearing period, and paying utility bills meant standing in line during working hours. Kaspi solved all of these problems within a single super app that now covers banking, payments, e-commerce, logistics, delivery, and government services including tax filing, driver's license applications, and marriage registration. More than 70 percent of Kazakhstan's 20 million people actively use Kaspi, and active users interact with the app more than 77 times per month.

Mahncke argues each of Kaspi's three business units would qualify as a monopoly on its own. The payments segment accounts for 16 percent of revenue but roughly 40 percent of net income, with a net income margin above 65 percent that Mahncke says exceeds Visa's. Because Kaspi owns its own payment rails with no middleman taking interchange fees, each additional transaction costs nearly nothing. Kaspi runs approximately 18 million transactions per day and processed about 100 billion dollars in total payment volume last year. The marketplace segment accounts for approximately 47 percent of revenue and 26 percent of net income, with a gross merchandise value of roughly 14 billion dollars in Kazakhstan alone. Its take rate is 12 percent on marketplace alone, rising to about 16 percent when delivery and advertising are included, compared to Amazon's all-in rate of 30 to 40 percent. Mahncke believes that gap could close primarily through scaling advertising and logistics revenue. The advertising business is growing over 70 percent per year though only about 7 percent of merchants currently participate. Fintech represents approximately 38 percent of revenue and 33 percent of net income, with roughly 24 billion dollars in lending last year. Kaspi approves 99.9 percent of loan applications automatically in under six seconds, and non-performing loans stand at only 6 percent despite the loan portfolio growing over 20 percent per year.

In late 2024 Kaspi acquired a 65 percent stake in Hepsiburada, a Turkish e-commerce platform with roughly 16 to 20 percent market share, for 1.1 billion dollars in cash. Turkey has 85 million people versus Kazakhstan's 20 million, making it a roughly fivefold expansion of addressable market. However, both hosts express skepticism. Mahncke says Kaspi will not enjoy the same monopoly-like advantages it had in Kazakhstan, and O'Malley says he cannot see Hepsiburada displacing Trendyol, which is approximately 85 percent owned by Alibaba. Kaspi customers average 27 purchases per year on the platform while Hepsiburada customers average only 7, illustrating the engagement gap Kaspi would need to close. Kaspi suspended its dividend following the acquisition, which O'Malley flags as a concern since in frontier markets a healthy dividend can serve as evidence that cash is genuinely present.

Kaspi trades at roughly seven to eight times earnings, and Mahncke argues this low multiple reflects macro and geopolitical risks rather than any deterioration in the underlying business, noting an equivalent business in the US or Western Europe would likely trade at 20 to 30 times earnings. His dividend yield compression model suggests that if the current roughly 8 percent yield reverts to 6 percent, total return would exceed 40 percent. His DCF assumes a revenue CAGR of about 11 percent, well below the historical figure near 30 percent, with flat margins and no multiple expansion, yet still projects returns over 20 percent per year for five years.

Currency risk is the central concern for both speakers. Kaspi earns everything in Kazakhstani tenge while Nasdaq investors receive returns in dollars. The tenge is heavily tied to oil prices since Kazakhstan's main export is crude oil, and one analyst forecast projects the tenge weakening above 600 to the dollar by end of next year if oil prices fall. A structural vulnerability is that Kazakhstan's oil must transit pipelines running through Russia, meaning sanctions or war-related disruptions could bottleneck exports and collapse the currency. Short reports have alleged ties to Russian users and money laundering, and Mahncke says most claims have been debunked though one allegation involving a politically connected bank account gave him pause. O'Malley draws on his own experience buying Russian oil stocks at three to five times earnings in 2021 before they went to zero following the Ukraine invasion as a reminder that cheap multiples in geopolitically exposed markets carry real tail risk.

Insider ownership is above 46 percent across all officers and directors, stock-based compensation is less than 0.5 percent of revenue, and share count has remained flat over time. Tencent has been purchasing shares that Kim is selling to finance a stake in a regional bank, and both the CEO and Tencent stepped in to buy a large block of the Baring Vostok stake, which Mahncke views as a meaningful vote of confidence. Both hosts plan to speak with management before initiating positions and acknowledge they lack consumer-level insight into Kazakhstan and Turkey, which they identify as a meaningful source of unknown unknowns.