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 transforming into a super app covering banking, payments, e-commerce, logistics, and government services. The turning point was a management transition that brought in CEO Mikhail Lomtadze, a Georgian with a Harvard MBA and a background at Baring Vostok, whom Daniel Mahncke considers the primary visionary behind the company. The legacy banking system created the conditions for Kaspi's rise: 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. More than 70 percent of Kazakhstan's 20 million people now actively use Kaspi, and active users interact with the app more than 77 times per month.

Kaspi's three major business units are payments, marketplace, and fintech, each of which Mahncke says would qualify as a monopoly on a standalone basis. The payments unit accounts for only 16 percent of revenue but roughly 40 percent of net income, with a net income margin above 65 percent, exceeding Visa's. Because all transactions move between Kaspi accounts on its own rails with no interchange middleman, the marginal cost of an additional transaction is nearly zero. The company runs approximately 18 million transactions per day and processed about 100 billion dollars in total payment volume last year. Shawn O'Malley raised the question of whether a payments margin above 65 percent is sustainable given potential competition or government intervention.

The marketplace segment accounts for approximately 47 percent of revenue and 26 percent of net income, with a take rate of 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 expects the gap to close as Kaspi scales advertising and logistics rather than by simply raising seller fees. The advertising business is growing at over 70 percent per year, though only about 7 percent of merchants currently participate. Eighty-four percent of orders ship free and about half arrive in under 48 hours, but Mahncke acknowledges the asset-light logistics model relying on third-party carriers and more than 10,000 self-service parcel lockers is relatively easy to copy. Fintech represents approximately 38 percent of revenue and 33 percent of net income, with around 24 billion dollars in lending last year and over 6 million depositors holding roughly 14 billion dollars in deposits. Despite growing the loan book over 20 percent per year, non-performing loans stand at only 6 percent, which Mahncke attributes to superior data and the fact that customers cannot afford to lose platform access.

Insider ownership is high and compensation is unusually low. Lomtadze owns approximately 22 percent of Kaspi and co-founder Vyacheslav Kim owns approximately 20 percent, with all officers and directors combined holding more than 46 percent. The entire management team earned a combined total of approximately 1.4 million dollars in salaries last year, and stock-based compensation is less than 0.5 percent of revenue. Kim is currently selling shares to finance a stake in a regional bank he recently acquired, creating selling pressure, while Lomtadze has been buying and Tencent has been absorbing some of the supply.

In late 2024 Kaspi acquired a 65 percent stake in Turkish e-commerce company Hepsiburada for 1.1 billion dollars in cash. Turkey has roughly five times Kazakhstan's population, but the central competitive concern is Trendyol, approximately 85 percent owned by Alibaba, which posted an adjusted EBITDA loss of roughly 2 billion dollars last year and has a well-capitalized backer willing to absorb losses. Mahncke is direct that Kaspi will not enjoy the same monopoly-like conditions in Turkey, and O'Malley says he cannot see Hepsiburada taking Trendyol's top position. Mahncke adds that most Kaspi investors he speaks with view Turkey as a central part of the thesis rather than a call option, which he finds somewhat concerning given the uncertainty. The dividend was suspended following the acquisition, which O'Malley flags as worth understanding since in emerging markets a healthy dividend can serve as evidence that cash earnings are real.

Kaspi trades at roughly seven to eight times earnings, and both speakers attribute that low multiple entirely to macro and political risk. Kazakhstan's oil must physically transit pipelines running through Russia, meaning sanctions or the Ukraine war could bottleneck exports and collapse the tenge. One analyst forecast projects the tenge weakening to above 600 to the dollar by end of next year if oil prices fall. O'Malley identifies currency risk as his single greatest concern beyond political risk, noting emerging market currencies not uncommonly get cut in half against the dollar over a decade and Kazakhstan's tenge has experienced exactly that. He lost money on Russian oil stocks bought at three to five times earnings in 2021 that went to zero after the Ukraine invasion, and that experience informs his caution. Mahncke's DCF uses a revenue CAGR of roughly 11 percent, well below the historical 30 percent, flat margins, and no multiple expansion, and still produces an expected return of over 20 percent per year for five years including the dividend. Both speakers plan to speak with management before committing to a position, with O'Malley open to a starter position and Mahncke placing Kaspi high on his watch list.