Hypergrowth with a Dividend

In this edition I’ll do a brief introduction of a new position and a short presentation of my current portfolio holdings. If this new position piques your interest you’re most welcome to share your findings and DD with me @ Twitter (link).

Enjoy the read,

Alexander Eliasson


Imagine a company having the e-Commerce market share of Amazon, processing more Payments than Visa & Mastercard combined and close to 50% of the country as monthly active users. Imagine that company being valued at p/e ~15 NTM, paying dividends and guiding for +100% GMV growth. That company is Kaspi.

Kaspi at a Glance

Kaspi is the largest Marketplace, Payments and Fintech Ecosystem in Kazakhstan. Kaspi’s Super App share the characteristics of WeChat/MercadoLibre/Ant Group. Close to half of the population are monthly active users hence a network effect that’s somewhat unbeatable.

#1 Marketplace (MercadoLibre, Amazon, Shopee, Alibaba)

#1 Payments (Alipay, Square, Mastercard, Visa)

#1 Fintech (Ant Group, Paypal, Afterpay)

“In our Ecosystem business model, the growth and development of one service contributes to the growth and development of other services creating a powerful virtuous cycle, with each participant deriving greater value than if they were to use a standalone service. A growing number of services being used by our consumers results in lower costs, synergies across all our Platforms and creates a powerful self-reinforcing network effect; thereby giving us a strong competitive advantage.

- Prospectus, P. 105

Kaspi: Payments

Kaspi proprietary payments network is reminiscent that of Alipay/WeChat Pay: Online/Offline(QR) end-to-end payment functionality without the need for a card and third-party payment network. In 2020, Kaspis proprietary network accounted for 66% of the total payment network transactions in Kazakhstan, while other payment networks, such as Visa and Mastercard, had an aggregate share of 34%. To give you a sense of proportion, Kaspis market share in payments in Kazakhstan is above that of Alipay in China.

Merchants are migrating to Kaspi’s POS at a breakneck speed and close to half of the population are active customers:

Total Payments Volume TPV grew +177% YoY in 2020:

What makes this evermore impressive is the 40-50% net margin:

“Cohort analysis illustrates that RTPV per consumer has increased 13.8x over 4 years and that both new and older consumers continue to see strong RTPV growth. With 86% of Payments Platform consumers coming from our 2018, 2019 and 2020 cohorts we expect strong RTPV growth into the mid-term.
Annual Report 2020

I’ve been following the payment-scene a couple of years and I’ve never seen a company taking this much market share in this short of a time. Jaw-dropping.

In 2020 Kaspi grew Revenue Generating Total Payment Volume RTPV +81% YoY. Kaspi is guiding +85%-90% YoY growth in RTPV for 2021. No signs of slowing down.

Kaspi: Marketplace

Kaspi is the largest e-Commerce Marketplace in Kazakhstan, with Alibaba as the second player. In 2017, 2018 and 2019 Kaspis market share grew to 23%, 38% and 46% - surpassing that of Amazon in the US.

The marketplace platform connects consumers with merchants enabling sales of a broad selection of products and services, without the need of Kaspi to carry inventory (Tmall, Shopee, MercadoLibre). Kaspi helps merchants increase their sales by advertising and marketing options (Tmall, Amazon), buy-now-pay-later consumer finance products (Afterpay) and payment solutions (Alipay, WeChat Pay).

  • e-Commerce +106%

  • m-Commerce +47%

  • Active Merchants +47%

The combined take rate and net income margin are already world-class for the Marketplace segment. No need for a overly optimistic “10 year out”-scenario.

Kaspi is already killing it. Now, look at their guidance.

This cohort analysis is probably the most important data point to understand where we’re going from here.

One and a half months ago, Kaspi issued this statement in regards to onboarding new merchants:

“In this regard, we see a substantial opportunity to accelerate merchant onboarding and are prioritising the development of innovative digital tools for merchants. With an enhanced merchant offering we expect to see a significant acceleration in Marketplace GMV growth in 2021.

- 2020 FY Results, P. 6

Kaspi: Fintech Ecosystem

Kaspi’s Fintech Ecosystem consists of digital bank Instant Deposit and P2P payments (Cash App, Square), consumer finance, buy-now-pay-later (AfterPay), Online Car Finance, etc. They also finance sellers, merchants, via Online Merchant Finance. This vertical produced a combined 70% ROE (!) and 40% net income margin last 12 months.

Kaspis automated, data-driven proprietary credit decision process enabled Kaspi to make 99.9% of consumer loan approvals in 2019, under 6 seconds.

“Our scoring models and decision-making processes are assessed and analysed on a continuous basis for effectiveness and validity by our team of 155 data scientists. Our nimble infrastructure allows us to amend our credit decision-making strategy within 15 minutes.

- Prospectus, P. 95

Kaspi: Growth Exhausted?

While deciding to write this brief company introduction two days ago I was asked if I could put some color on the idea that “TAM is reached already”. I’ll share some thoughts on why I believe that’s not the case.

Marketplace & e-Commerce
Two years ago, Kazakhstan’s total retail market amounted to $29.6 billion US Dollars and was growing at +14% YoY (+7% over inflation). That same year Kaspi’s marketplace platform total GMV had a value-share of total Kazakhstan retail trade of 5.5%. One should expect further offline to online conversion to be not only possible, but likely. Furthermore, e-Commerce penetration in Kazakhstan still lags other EM countries such as Brazil and Russia (which are all lagging the west).

Payments & Fintech
Digital Payments grew +81% YoY for Kaspi perhaps creating the illusion that we’re at the end of the runway. Firstly, one should keep in mind the recurring nature of payments (and e-Commerce).

Secondly, management is guiding for +85-90% further growth in 2021.

Payments, but also adjacent verticals such as consumer finance, wealth products and insurance are all areas where Kazakhstan lags other countries.

The Kazakhstan payments market is at an early stage of development with significant potential for growth. Digital payments in Kazakhstan accounted for 31.0% of all consumer payment transactions in 2019, as compared to 81.6% in China, 76.8% in Turkey, 70.4% in Brazil and 51.4% in Russia.
Prospectus, P. 77

Country Expansion
As part of its strategy, Kaspi is already expanding operations into adjacent countries in Central Asia and the Caucasus in a ambition to enlarge TAM. Kaspi entered Azerbaijan by acquiring leading marketplace platforms Turbo (Cars) Tap (B2C) and Bina (Real Estate), which according to the prospectus, is the market leader in respective vertical. Other countries of future interests are Georgia, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan.

“We believe that our highly scalable asset light business model will enable us in the mid-term to efficiently expand into selected adjacent countries in Central Asia and the Caucasus, extending our geographical reach to a total population of 87.3 million people and a combined U.S.$215.9 billion of private consumption in 2019, according to the

EIU, with limited presence of global and local players in the payments, marketplace and fintech space. Our Marketplace and Payments Platforms can be offered via our Super App to the population of any country of presence relatively easily, without significant capital expenditure requirements.”

- Prospectus, P. 79

I am of the opinion that an established Super App such as Kaspi should have tons of verticals to monetize, as proven by WeChat, Alipay or Meituan. To give a sense of the opportunities we can take a look at Alipay, the Super App of China with 830 million monthly active users. I wouldn’t find it farfetched to see Kaspi adding Food Delivery (Doordash), Cinema (Fandango) or Investing (RobinHood).

Demonstrating my point we can take note that Kaspi just recently launched an OTA attached to their Super App. The amount of marketing expense that would be needed to establish a new travel business from scratch would be monumental - Kaspi, on the other hand, is able to front this new business vertical to ~50% of the population overnight. Speaks volume of the inherent power of Super Apps.

- Would you like that trip financed in installments?

The very fact that average monthly transactions per active consumer doubled YoY to 28 transactions per month (!) is testimony to an engagement rate that is close to unprecedented, on a global scale.

Kaspi: Valuation

Kaspi recently reported its first full year results as a listed company and net profits grew +43% YoY.

As mentioned earlier, we don’t need make optimistic “10 year out” -scenarios to see some profits. As a matter of fact, they’re guiding for another +100% growth in GMV next year all while being able to pay close to a 4% dividend to its shareholders. Signalling not only shareholder alignment but also credibility to the accounting (and the cash flow).

Guidance for 2021 indicate that the tremendous growth of 2017, 2018, 2019 and 2020 shows no signs of stopping but rather accelerating. Guidance was given 1.5 months ago.

”We expect year-over-year growth of our Payments Platform RTPV in the range 85-90%.

Marketplace Platform to deliver year-on-year GMV growth of around 100%, which is a material acceleration from 2020.”

We expect our TFV to demonstrate year-on-year growth of around 100% in 2021. We will target a TFV to Average Net Loan Portfolio Conversion Rate of above 2.0x in 2021, up from 1.4x in 2020.

Net Income

We expect our 2021 adj. net income to be around KTZ410 billion, up from KZT274bn in 2020.”

- 2020 FY Results, P. 8

How should we value this Tech Beast?

This quote will infuriate and upset most DCF-purists out there, but he’s essentially correct.

You can look at the huge valuation dislocation and choose one of the following two explanations:

The academic posture would be to assume that Mr. Market have found out that something is fraudulent with the numbers and/or the 1.5 month old management guidance is an outright lie and/or “TAM is reached” and/or “political risk”.

My view would rather be that this is about awareness and credibility. This company was listed only 6 months ago and most investors doesn’t know about it yet (did you know about it?). I see no major Twitter Influencers or Investing-Blogs holding shares and most Emerging Market Funds that I follow just recently started to scoop up shares. Listed on the London Stock Exchange adds another ~6-12 month of awareness delay to growth investors in the US and the Nordics. Secondly, a tech company from Kazakhstan will need at least 1 year of trading until Mr. Market fairly credits actual results and guidance.

According to management, we’re paying below 15x next twelve months earnings for a tech company growing GMV at $SE and $MELI levels with net margins that of $V and $MA - and (!) - collecting a juicy dividend while waiting. I believe we’re looking at a coming Tech Darling not yet reached critical awareness by investors. Too fun to pass in my book.

You don’t need to know a man’s weight to know that he’s fat.”

- Benjamin Graham

Although not obliged by law to disclose my position, I’m long Kaspi @ 5% of my portfolio and I’ll not sell any shares within 30 days of this publication. Disclaimer 1


I’m satisfied with the year this far in my Global Portfolio (above screenshot) and seeing room for improvement in my Nordic Portfolio (below screenshot).

I have 18 positions currently and I mix styles (Growth, Value, GARP) in something similar to a barbell strategy. Put in context, I hold a couple of GARPs providing “stable” annual returns over market mixed with multi-bagger potential growth companies. I try to allocate a maximum of 15% to Large Cap and keeping 85% to Micro-Small-Mid Cap. (Style changes as life changes: when I was building my wealth in my earlier years I held fewer and larger positions, almost all growth names.).

Around year end 2020 I started to tilt towards re-opening plays while letting go of some of the work-from-home plays, and that is an allocation I continue to hold. A few of my current holdings:

AK Medical
Snack Empire
Springfield Properties
Union Medical
Vertu Motors
Water Intelligence

My edge is my curiosity.

“Buy Good Companies, Don’t Overpay, Do Nothing.

Some people love to make successful investing seem more complicated than it really is.”

- Terry Smith

Thank you for reading,

Alexander Eliasson




- This is not investment advice and this article may contain factual errors

- I recommend you to read all the pages regarding ‘Risks'in the prospectus (link)

- I own shares (I’m obviously biased and this article is most certainly biased)

- Please advise your licensed financial advisor before contemplating any investment of any kind