Artem Fokin from Caro-Kann on Kaspi $KSPI (Episode #149)
Artem Fokin, founder of Caro-Kann Capital, discusses the bull case for Kaspi (KSPI). Kaspi is the dominant fintech in Kazakhstan, and Artem breaks down how it's trading for a value price despite rapid growth and how its dominance will allow it to grow into new sectors of the Kazakhstan economy. (Note: you can find the HBS case study on KSPI we mention here)
This podcast is brought to you by Daloopa.
Daloopa was founded by a former hedge fund analyst. He didn’t have a tool that he trusted to be 99.9% accurate, allowed him to pull updates directly into his existing models, and had the granularity in KPIs, Guidance, and non-GAAP adjustments that he needed. So, he built Daloopa. Daloopa is the fastest growing source for public company data, with data available for over 3,000 companies. Hundreds of AI algorithms collect and organize customized company historicals with an accuracy level and depth of data that is higher than anything achievable by other modeling tools. Each datapoint is auditable to the source. Daloopa’s Excel plugin is the first to allow you to update your models in your existing format. It’s simple and non-invasive—Daloopa will never #REF out your models. Daloopa clients are able to cover more opportunities and generate more ideas. No more data errors, no more Excel monkeying, just the fundamentals. See why equity investors are switching to Daloopa by checking them out at Daloopa.com/YAVP.
Please follow the podcast on Spotify, iTunes, or most other podcast players, as well as on YouTube if you prefer video! And please be sure to rate / review the podcast if you enjoy it, or share it with someone else who would enjoy it (more listeners is a critical part of the flywheel that keeps this Substack and podcast going!).
Disclaimer: Nothing on this podcast or on this blog is investing or financial advice; please see our full disclaimer here. The transcript below is from a third party transcription service; it’s entirely possible there are some errors in the transcript
Transcript begins below
Andrew: All right. Hello, and welcome to the Another Value podcast. I am your host, Andrew Walker, if you like this podcast, it would mean a lot if you could rate, subscribe, review it wherever you are listening to it. With me today, I am happy to have for the second time my friend, Artem Fokin. Artem is the founder and portfolio manager at Caro-Kann Capital. Artem, how is it going?
Artem: Hi Andrew, It's nice to be back.
Andrew: Great having you back. Let me start this podcast the way I start every podcast just with a quick disclaimer. Nothing on this podcast is investing advice, people should consult their own financial advisor, do their own work. Today we are going to be talking about a company that is listed in London. It is the largest marketplace in Kazakhstan. It is a reasonable market cap, but it is a pretty small cap company. If the combination of foreign listing Kazakhstan company, small market cap size does not just screen buyer beware and do your own work, I honestly do not know what will. So, please remember not investing advice, do your own work. That out the way the company we are going to talk about today is Kaspi. The ticker there is KSPI, they trade in London, and Artem, I will turn it over to you. What is the elevator pitch for Kaspi?
Artem: Okay, so before we get into the elevator pitch for Kaspi, I want to reiterate what Andrew just said. Caro-Kann Capital LLC and its affiliates have an economic long position in Kaspi shares. And I am biased, this is not investment advice, this is not recommendation to buy or sell any security, including Kaspi shares. So, please do your own work. Please consult you on financial advisor, please consult your own lawyer. That is number one.
Number two, I want to thank you for having me over for the second time because I am deriving tremendous [inaudible] financial benefits from being here because of your recordings, I can memorialise the hairstyles that I have had over the last few years because the last recording that we did about a year and a half ago, I think I was like in the middle or towards the end of my Covid hair. So, now I just want to make this appearance, that I actually did get a haircut, so, if anybody cared about the topic, now they know Artem made it to the hair, to the barber shop. With that, I think we can wrap this call and just go home.
Andrew: No, look, I appreciate it. I sometimes I do the same thing. I look and I am like I will look at an old podcast, Oh, looks like I was really letting it go or the first podcast we are like, August of 2020. So, I was very much with you with the poofy hair. But no, appreciate you coming on for the second time, I absolutely hear you on that. You are the only guest I have done the podcast from not in my apartment, I believe, because I was so excited to have you on the first time.
Artem: You are flying to Spain, I think same day.
Andrew: Yeah. I was so, excited to have you on the first time I did it from my brother-in-law's house right before we flew to Spain. Anyway, neither here nor there elevator pitch for Kaspi.
Artem: So,, this is how I think about Kaspi. When I talk to some of my friends, this is how I explain it. I say, imagine there is a country in the world, and imagine that country has about 18 million people population and imagine there is a company in that country and that company has three businesses. Business number one, it's payments. Think about it as PayPal or Venmo in the U.S. or think about it as WeChat Pay or Alipay in China. And that business is dominating the market. It's 65, 70, 75% market share in payments involving consumers depending how you count and slice the pie. There is a second business, which is marketplace. This is three P marketplace, so, it is not one P. The company does not own inventorying, and think about it as Amazon marketplace, not Amazon one P Commerce, but Amazon three P Commerce, or similarly think about it as Alibaba in China.
Similarly, this is the dominant or marketplace in the country, and then there is the third business, which is unsecured consumer lending. A lot of that is buy now, pay later, BNPL. So, think about it as affirm in the U.S. or Klarna or after pay and the company obviously it is more difficult to dominate and tie vertical in consumer lending because there are so, many different products, but within bound buy now, pay later, this is a dominant player. To mention that you got an percentage invest in a company, that is dominating the space growing revenue at, call it 30% rate and it is very, very dominant in the country. Normally, we would be talking about this type of business we would be debating what right revenue multiple is and obviously sometime in 2021, in the middle, it will be one number. Today, it will be another number, a lot lower, just a spoiler alert, and we will be debating what normalized margins are because we do not really know, etcetera.
In this case, we actually do know the numbers, and you can get this company. So,, financial profile growing roughly call it 30% a year local currency might be a little bit higher, and it has consolidated EBIT margins of roughly 55%, like 53, 54, 55, and has net income margin. This is normal IFRS net income margins of around 42, 43, 44%. And its capital, it means that this company can trade on normal earnings, not on revenue multiple and normalized earnings in 2035 or 2045 or 2055. So, but on normal earnings of this year and this company today, based on the company guidance, which only fourth quarter remains outstanding.
Artem: Which be reported in the next few weeks. So, this guidance, I think is very reasonable and achievable. It is trading probably around 12, 12 and a half times [inaudible]. So, that is the pitch in the nutshell, and then typically people will ask me where is the catch? I was like, well, the catch, is that the country? I did not tell you the country typically, and you have to mention this to your listeners and viewers, I say the country is Kazakhstan, and that is why this company is based price today this way.
Andrew: No, look, that is great and I am glad you said Alibaba because the first thing when we started talking about this, they are very clear they want to be a super app and the first thing you talk about, especially in 2021, like the super app Alibaba, like that is kind of the way it is thinking your head Alibaba's obviously a little bit of a different model, but that is kind of the way to think about it like these guys are and more than Alibaba, more than- these guys are like the dominant player in Kazakhstan. When Covid hits, the government is distributing payments, the COVID payments, the Covid- they are distributing it through Kaspi. These guys are the way that you do anything if you are in Kazakhstan.
Artem: Correct. So, in my opinion, Alibaba is not the best comparison. I think WeChat is a lot better comparison, because WeChat not only they have gaming business and then they have their app, which entire China uses. Also, they have Wepay, which is a very dominant way to send money to each other. I remember several years ago, my wife was in China and she went to local place, kind of Medicare type place, and she left her wallet at home and she asks the person who works there says like, "Excuse me, unfortunately I forgot my wallet, would not be too much trouble for you to walk with me to my apartment. I live not far away and I will keep you very nicely for your trouble, I apologize." And the person looks at her and says like, "Do not you have your phone?" "Of course I do." "Just send me money here." Right. It was like probably five, six years ago.
Artem: So, she was just sent money via WePay. So, done. So, that's number one in terms of comparisons. Number two, I like your example of how prevalent and important Kaspi is for the life of local people of Kazakhstan, for the citizens of Kazakhstan. Another example, now and it is a relatively new product feature, you can renew your driving license through Kaspi app, that is one example. Another example, you can register yourself as sole entrepreneur in the Kaspi app, and I believe that you also can establish a company via Kaspi app, so, that shows you what you can do and to show involvement on the payments business only on average a consumer of Kaspi. It is doing 58 transactions a month using the Kaspi payment app.
Artem: You think about your, it is like almost twice a day and people use it to send money. I can, like Andrew and I go in New York. I am in New York, let us say we go for dinner and generally picks up the check. I like "Andrew, no, I will send you my half." So, I send you, I send him my half. It will be via Kaspi if we were in Kazakhstan.
Artem: And similarly, people use Kaspi app to buy groceries, which they buy to buy something else. So, it is tremendous, the app and the company play a tremendously positive role in the life of everyday consumer.
Andrew: There was an old article- when I was researching this, there was an old article that described it and they said it is along the lines. You can renew your driver's license on there app. They described it as Kaspi, as the unofficial national bank and national app for Kazakhstan. Like that is how prevalent this thing is. So, we are talking about literally the dominant app in Kazakhstan. I just want to dive a little bit further than that. So, let us start here, we have talked about, "Hey, this is trading 12,12 and a half- you started this trading 12, 12 and a half times 2022 earnings. Again, like 2022 they have already reported three quarters of earnings. They raised guidance twice throughout the year. So, it would be- it is not unheard of for someone to miss a Q4 guidance. It would be kind of surprising, but, you know, 12 or 12 and a half is probably the right thing. I just wanna start by framing this, this is a 15 billion dollars USD market cap company with about 2 billion dollars in revenue. Can you frame that because all the revenues from Kazakhstan, can you just frame that versus kind of the overall Kazakhstan economy?
Artem: So, the way I think about it, is a little bit differently, so, I am doing it more bottoms up. So, first, let's start with payments. And in payments there are two different types of payments. One is something that will not be generating commission revenue for Kaspi. For example, you and I go for dinner and pick up the check. I am going to sell you my half it is similar to PayPal if I send you money via PayPal, because it is not commercial transaction, you just picked up the tab, it will be zero condition. So, then there is a second block where it is called RTPD. So, like ready to generates in total processing volume, that one generates a take rate for Kaspi and Kaspi makes money on every transactions of that page. Right now, this is rough numbers and remember, I am rounding the foreign currency, which fluctuates daily, etcetera. But the way you think about it, on average, every consumer of Kaspi today and we are talking about roughly wealth million consumers.
Artem: And just to make sure, the country as a whole has about 18 million citizens.
Artem: So, 12 million, and obviously some of those citizens are-
Artem: Right. Children or may be very elderly who may not be very friendly with stack, like it is all those things. So, keep this in mind, right. So, but, sorry, I misspoke. It is roughly around 10.7 million of active consumers right now in payments, so, I misspoke about that. So, it is 18 million, so, this is the penetration you can judge, you can form your own view about how many kids are there, which will not be consumers for a while, etcetera. So, now, if you look at the revenue generates in process and volume per person proactive customer is about 2,500 US dollars per year. If you look at the salaries of average Kazakhstan citizen we are talking about, and which results roughly in their annual spend, we are talking about frankly 9,500.
So, in theory, all of that spent can move over time to Kaspi in theory. I am not projecting that it will happen eventually because there will be almost some either other payment system or some level of cash usage, which by the way, something to appreciate. In the U.S. you can live in New York or San Francisco many other places, and you will not in can carry a wallet with 20 bucks in cash just in case, and you can have the same $20 bill for a year. In many countries in emerging markets has not that way. Credit card usage or debit card usage may be not as prevalent. As a result you need to have cash, otherwise you will not get far away. A driver will need you to pay him in a taxi, a cash, or local grocery store, or local cafeteria. So, Kaspi- Kazakhstan used to be a country with very high usage of cash for a long time, which is very reasonable and when Kaspi Payments app took all that amount of cash used went down [inaudible].
Artem: If you go to MBK, MBK is National Bank of Kazakhstan website for data for the entire country, for the entire industry. For all payments. you will see how fast local payments were growing. We are talking about like 200, 300% gross for the last several years and why is that? Is because all of a sudden people started getting more money? No, because cash was getting substituted and Kaspi pay was taken off. So, going back to sum up, roughly not right now, 2,500 per year, it can go to as high as 9,600 thousand. But probably will never get there, but over time, this is how I think about the trend, getting into that direction. Now, if you say, "Oh, I am bullish on the economy of Kazakhstan", and that 9,500, 9,600 dollars per year would be rising, then the upper ceiling will be moving up. If your bearish from Kazakhstan economy, then you may say, "I think it will be dropping so, you make your own goal here".
So, that is one element how I think about payments. So, then there is another angle, you can look at payments. There are right now on the platform of Kaspi, there are about 450,000 merchants. Kaspi said publicly that I believe in the one call ago, or two calls ago that they think that the number over time and not too distant future. I am thinking about two, three years, but that is my timeline, so, do not impose it to the company. They could get to 600,00 to 700,000 merchants. That obviously extends the opportunity for Kaspi to generate more transaction volume where they charge their gateway. So, now, there is another interesting element how you can think about it. This is a new initiative, so, the date on that initiative is very scarce because there is not that much to report so far. But Kaspi is also, moving into business-to-business payments because historically been the consumer-to-consumer and each other hundred bucks if it was a very nice dinner, so, or it would be business-to-consumer. I pay at the cafe shop or at the grocery store or somewhere else with my Kaspi app. Now they are moving to business-to-business. Now there are some business-to-business transactions in the country which Kaspi will probably not serve. It is like, you know, Kaspi gas is a big local oil and gas company that may never use Kaspi for its own business-to-business payments. However, I think Kaspi is very naturally designing its products for wholesale.
So, think about the typical flow of goods in almost in any country. This manufacturer then there is a distributor, then there is a retailer. Sometimes if manufacturer is relatively small or a retailer is very very big, then they will be manufacturer the direct relationship with the retailer and Kaspi can logically capture both of those steps. In fact, they have already designed solution that is targeting distributors and manufacturers to deal with a lot of local merchants who are buying their products. So, think about it, Coca-Cola or Pepsi cola or someone like that selling goods to distributors and then those distributors are selling them to local merchants across entire Kazakhstan. So, Kaspi can capture both of those steps and if you think about it, you take retail volume then you say manufacturers and distributors make of their certain mark up. You take those market mark up out your potential volume jobs, but that what they can in theory serve. And if you capture both steps, first you go from manufacturer to distributor, then from distributor to the retailer, then you capture twice. So, that is how I think about payments. Does it help?
Andrew: Yeah, no, that is great and you know, I think the other thing is you have probably, because you have got all the retailers linked up, like it does sound silly, but if you have multiple payment systems, it is tougher to manage your business like you do think there would have to be some poll in demand, I mean, I do not think we have seen it crazy amounts yet in the U.S. but you do think there would have to be some demand from the retails, like, "Hey if I can use Kaspi to both take money from consumers and to pay my suppliers," like that removes the headache of managing two payment systems and you know, it is free for me to take the payments from the consumers. Kaspi probably as one of the largest companies at Kazakhstan, they can probably match your payment terms on the other places. Make it pretty easy, like it is just the benefits of scale, the benefits of that network effect and the benefit of already having your foot in the door with the consumer. We have talked three I know Kaspi has another few other--
Artem: Let me add another one. Let me add another benefit here because I agree with you very much about what you said, there is another benefit. Kaspi is also, experimenting with working capital financing products.
Artem: So, you are a retailer, you are selling product and gamble goods, Thai detergents, you are selling Mevir cosmetics products and Coca-Cola, etcetera. Kaspi, and you accept the payments via business-to-consumer Kaspi. So, Kaspi knows how much money you're making on revenue line. Now you are starting to work with Kaspi to pay for your goods that you are getting either from manufacturer or distributor. You might have working capital needs. Kaspi may extend you a loan because they see everything and then they will just subtract it from your revenue coming in when you make those sales. Kaspi is learning right now about that product line, so, in the next couple year, maybe two years, we will learn a lot more, maybe even faster. But that is another way to increase your stickiness of a customer from business-to-business perspective.
Andrew: And that is when, I do not know how PayPal is done yet, but I mean, I know PayPal, Amazon, those guys, I know they have moved in there and I would have to imagine that they are gonna have a lot of success where, "Hey, you are not a bank, just underwriting Andrew Nordon's business of fun." Amazon, you see their daily revenue, their daily working capital movements like you can do a credit analysis of these guys better than anyone else in the world. and because you handle the payments and everything they do, you gonna be able to get your money out faster or know if the loans at risk and know if it needs restructuring like way before anybody who is just like kind of checking the every quarter end covenants on that loan.
Artem: Correct, 100%. The power of data and what data enables you to do is massive. And it has been massive in the FinTech business and there is a potential for different data fact to play a massive difference in their business-to-business all the time.
Andrew: So, we have talked payments in marketplace, you just mentioned FinTech. I do not know if you wanna talk the FinTech business or as well, or if you want to jump into some other areas here.
Artem: Well, I will talk about marketplace as well because we have not actually covered marketplace. So, marketplace has about 5.7 million active customers. Remember, on payments, it is approaching 11, 10.7, 10.9, etcetera. So, what means is that not every consumer that is using Kaspi app and presumably local to the product, to the experience is on marketplaces. So, we are right now talking about roughly low 50's penetration for marketplaces and over time what it can be. Well, probably it will never be a 100% because it will be almost someone who will not use Kaspi marketplace but cannot approach 60-70 over the next few years. I think so, but obviously it will be interesting to watch how it evolves over time. So, that is the only thing that I wanted to mention on the marketplace that is worth attention and worth highlighting upfront.
Andrew: Perfect. Did you want to talk FinTech as well?
Artem: So, yeah, so, FinTech about 5 million lending customers and you can think about the average size of a BNP alone, call it 60-70 dollars. Obviously it fluctuates it is roughly, you can feel free to run your own math. This is how I have estimated that. You need to keep in mind that on average it is about 14, 15 loans per customer per year. So, it means that you have option If I were in Kazakhstan, I was a customer, I may have several loans and my aggregate balance will be low, will be higher. Kaspi historically has had a very low default rates, and the reason for that is the amount of what the end actually touched upon and stole my glorious moment to explain that is because Kaspi has lot of data on the consumer when they underwrite, and this is one of the things that explained. The worst scenario is when someone says, "I want to buy a flat-screen TV." I am using flat screen TV as an example, which is something expensive and they actually a froster, that consumer does not that bad actor has zero plans to actually ever pay that long. They want to get that TV, then take the TV, resell it on the black market, get the money and run away.
Artem: That is the worse because another alternative when someone says, "I am buying this flat screen TV, I am making my salary in six months", they will pay down and then three months later, they will lose a job. It happens. Do not get me wrong, but that is not as bad because number one, they already got some of your money back. Number two, that is a genuine good person. They will probably can work with them on restructuring or give them holiday, wait until they get back to when they will get another job, etcetera. That is solvable. The first bad person, bad actor, not solvable, and because Kaspi has a lot of data, they brought the bad actors never paying, never making it when the first purchase down tremendously. How do they do that? Number one, they can look at my or Andrews activity via payments. If I am an active user they know a lot more about me. How much money I spend.
Andrew: The most likely broad is the person who- it is their first transaction and they are buying the TV, right?
Andrew: You and I have two years worth of data. We have done a bunch of stuff like you probably know this is a real person. As you said, maybe they could lose their job, things get worse, but they are probably not just buying this to go sell it on the black market and never pay back the what they bought it for.
Artem: Yes, and it gets even better than that, what a normal person does before buying a TV for let us say a $1,000 or $800 or $2,000. You go and you do read lot of product reviews. Where do you do that? You do it on Kaspi marketplace and if you never, and you do it- because it is important purchase, it is expensive for most people. So, you probably spend quite some time browsing and figuring out whether LG is better than Samsung and this merchant has a discount, etcetera. And if you have never better that chances up, you are probably not a good, you may be a bad actor. So, that is why the LBL's their first payment default rate is ridiculously low, like as of most recent reports and reported date, it is less than 1%. Like this is like terrific numbers, so, that is what makes it very profitable. While they charge good rates, but it is not obnoxiously high rates, but because they keep their default rates so low, that is why they can mitigate as well.
Andrew: Perfect. Great, so, I think that is a great overview of the different business lines here and everything. I wanted to dive in some risk, but is there anything else on, like, I know there is a lot here, again, this is the super app, there is a lot we can talk about here, a lot other opportunity. Anything else big you think we should talk about in these three segments or anything else?
Artem: So, I would think about the super app strategy. You got consumers, you got an app, you got a product that delights your customers, and they love it and they want to be coming back. Once they keep coming back you want to layer more services and more products and because there is a habitual usage over an app, people will be using your app for the new products and services and your customer acquisition cost will be very low because all those, in this case, millions of people already on your app. And then the question is how quickly you can layer up more services? And I will give you a couple of examples where Kaspi is innovating recently.
So, example number one is Kaspi travel. Kaspi travel did not exist, called it two, two and a half years ago. The little started from zero and then they said, "We will be offering tickets and train tickets, both domestically and if you want to fly to most popular destinations", and they have started with that and within call it 18 months, they have become number one seller of air tickets and train tickets. So, they build business virtually from zero to a pretty decent size within an incredible shorten of time.
Recently, Kaspi management announced that they are offering travel packages. So, think about this holiday package where you get flight and hotel, and then you go to Dubai or Thailand or whatever other wonderful country you want to visit, you buy that. So, this is a new initiative and they are using similar playbook as they did for Kaspi Travel, so, that is one.
Number two, another example. Example number two is, Kaspi Grocery where they partnered up with local retailer so, think about it as, you know, Safeway or Whole Foods or something like this, and it is called Marlum, and the company is doing groceries delivery, and they are partnering, like offline piece is mostly taken care by Marlum, who is retailer and the online customer position, etcetera, is done by Kaspi in the online world. So, that is another example. It is still relatively early there, only in a few cities right now, but over time I think it will grow. So, that is speed of innovation and how fast you can scale from zero to something very sizable.
And there is another important trend here if you think about, if you and guy or our counterpart from Kazakhstan decide to do a startup and say, let us do travel app where people can buy tickets. We know very little about the market and we know very little about consumer behavior. Kaspi has tons of data about almost every single vertical of Kazakh economy, especially when it involves consumers. They may know less about business-to-business, but everything that involves business-to-consumer, they know tons. As a result, if Kaspi goes into a new vertical and new product and new niche, most likely they have done very extensive analysis and they have all the data in the world to make a very educated decision why and how they are gonna succeed and how they are gonna capture that market. So, that is another thing that I would like to add.
Andrew: Yeah, no, look, I mean, I think you could just sum it up as this is Kaspi is a super app, right?
Artem: It is.
Andrew: If you are a super app, the end game for a super app is probably you are. I do not want to say tax, but you can kind of think of it. You are a tax on the entire economy of every country that you dominate in. Eventually, most of the economy, if you are a super successful super app, you can dominate the majority of everything that happens in that economy. Like there is really no reason you can not be involved with every kind of transaction. Like VISA and MasterCard get a cut of every transaction in the United States, basically, but they do not have anything else really going for Kaspi and the long run can be VISA and MasterCard plus Google, plus Expedia plus booking, plus like everything else you can imagine.
Artem: Yes, I agree with that and that is exactly I think what is they are playing and the most important piece there is keep customers [inaudible]. That is number one, on that point couple of things anecdotally, want to speak with consumers in Kazakhstan or out of Kazakhstan. I remember one conversation, like I asked a person like, "Oh, you know, do this Kaspi?", the reaction was, "I love Kaspi, we all love Kaspi, it is amazing." Like, what do you mean when I am using it? right? that is one example and that person was even living probably half a year in Kazakhstan, half a year outside of Kazakhstan. So, that is kind of like just a story and I had more conversations like this that is number one.
Number two, on YouTube, you can actually find videos and that is to me that is an example that your marketplace is really doing well?
Artem: Where it will be, how to become a merchant and start selling on something on Kaspi. So, that is two and number three, you can download Kaspi app while you are in the U.S. or any other country, I assume, most likely and you can browse the app and it is very nicely, very clean designed app, like, feels nice and it is indeed has everything there. Like, "Oh, [inaudible] driving license, tap here. Get your company registered tap here. You want to buy groceries? You go here, you want to buy something else?" You go there, so, like all that stuff like very nicely designed in one place. So, number one, speed of innovation. Number two, and this is the growth drivers and I think some based on some of my conversations, I have a feeling that some people do not appreciate the magnitude of gross drivers for Kaspi. Because this is what I have heard, "Artem Kazakhstan has 18 million people, so, it is relatively modest from the population size perspective."
This is not Indonesia, for example, or Mexico, or United States, and Kaspi already has, call it 10 million, 11 million, whatever the number is, how big you can get. You already almost exhausted the market and that is partially true if you look only at potential active customers number. What way it is not true is number one, customer engagement, as we spoke about, there are still 5.7 out of 10.9 roughly is marketplace customers on payments. So, there are still a lot of people who are using Kaspi for only one use case, but not for others. So, there is still tremendous opportunity today, that is number one.
Number two, increasing number of merchants which will lead and remember I mentioned on marketplace merchants would be- I already mentioned those numbers. So, from kind of 450, to 600, 700, I believe, if correct. The public records I am quoting for a moment right now. That is another gross driver.
Number three, you can go business-to-business, which we discussed, and it is not like in theory they already announced that initiative. That is a massive expansion of your time. Innovations new products such as grocery travel packages, that is a new thing. There is a possibility, even though I am not modeling that and I am not betting on that, there is a potential to expand in other economists in Central Asia, it may or may not happen, I do not know. If it does, then we just, increase our time depending on the country. Kyrgyzstan is smaller, Kazakhstan is bigger, but if that happens, it can be a very sizable increase in town. So, I think there are a lot of gross drivers and once you build this virtual cycle it is on the company to mess it up for the cycle to stop churning and as long as they do good job, which they have been doing, you have potential to keep churning that flywheel.
Andrew: Perfect. So, I wanna come back to that international point in the session in a second, especially when we are discuss risk, but I do think we need to talk real quickly about management here, and I think for anyone is listening, again, this is probably going to end up being more on the bull case, but there is a fantastic HBS article from 2019.When they were talking, I think they were just getting, they had just gone public, but the HBS is like addressing their thoughts around going public. It is got a lot of background on management, so, we can talk management, we can talk insider ownership. I think recently, capital allocation really points to management. Like all these are gonna be bull cases. We will discuss risk in a second, but I do think we just need to address it and talk about it real quick because it is a super app. It is capital light you are relying on them to continue taking that tax on the economy we talked about. So, it is pretty important to keep innovating.
Artem: Okay, happy to talk about management and capital location and inside ownership. One thing, when I say capital light, I just want to clarify, marketplace is capital light, payments capital light. In that, you are using your own balance sheet to extend those. So, now if you ask me about the mix, very recently earnings from marketplace and payments combined became bigger, more than 50% and became large than earnings from the companies fintech business. So Capital light earnings are growing faster than call it capital [inaudible] for the lack of better reward earnings. And by the way, company also provides very good segment disclosure, which is not always the case for many countries, which have several business segments where you can actually go and do lot of analysis on your own.
Andrew: I'm looking at their 3Q presentation and at the back, it's really nice. They just break out cleanly. Hey, here's the payments income statement, here's the marketplace income statement, here's the fintech income statement. Here's the... it's really nice.
Artem: And to make things even better, if a particular initiative gets attraction, that management starts believing that it's important for investors to understand what we're doing. They will break it down for you over time. For example, when Kaspi travels started, it was tiny. So, they just mentioned we're doing Kaspi travel it's just initial fee, we experiments and we're learning. We have a big vision. And then once it became sizeable, like, wait a second, we'll put it separately as revenue and we'll show you so, that you will know what we're doing there. So, disclosures, honestly- most US companies will not have as detailed disclosures as Kaspi does.
Okay, now let's go back to shareholder base since you ask that and that's very important. So, biggest shareholders as of September 30th are private equity firm that owned this company for a very, very, very long time called [inaudible]. They own about 28.5% of the shares outstanding. Chairman of the board, which is Vyacheslav Kim, owns 24.26%. CEO Mikhail Lomtadze owns about 23.42%. If you look at them combined, we're talking about low, sorry, one other thing. Other members of the management team own about 3%.
Artem: Which means that your free flow is roughly 20.5%, which is not that big. And it's listed in London. You can look up [inaudible]. Now management said on two calls ago, management said that they are thinking about Nasdaq capital listing. To me, the way I interpret this is the following, it's difficult for me to imagine a scenario where Kaspi needs money for itself. And we'll talk about capital location in a second why I don't think they need money for themselves on the balance sheet, which means that probably some of the insiders will offer, even the company will indeed to do Nasdaq listing as they say publicly. In that case, it's probably will be coming through a secondary sale, one of the shareholders. So, maybe a combination of them will offer some of the shares to the public, but in [inaudible] probably is the most logical [inaudible] to do so. Because they've been in this investment probably for 15 years by now. That's a long time for private equity firms.
It's clearly has been a very successful investment for them. And at some point, it's logical for private equity firms to exit, that makes just tons of senses help you from the structure. So, I think they're probably the most logical seller, whether are insiders such as chairman of the board, which is Vyacheslav Kim or Mikhail Lomtadze, the CEO, whether they will participate or not, I don't know. Maybe they don't know. Who knows? But that's potentially can be not a catalyst because my observation is this, someone like [inaudible]. They're very much on top of mind for many US investors. While my observation Kaspi is not as much, and I would argue that [inaudible] were even more attractive than those companies. [inaudible] Kazakhstan is a small country we think [inaudible] but profitability [inaudible].
Andrew: Hey, Artem, I think we were losing you for one second there. I believe what you were saying, it looks, I think it was the internet on your side. We'll try and edit this out or maybe I'll just get lazy and leave it in. But I believe what you were saying was, look, you compare this to C Stone, a couple of these other guys, they've got similar business models. They're probably more dominant in Kazakhstan, but because they're London listed, because they're smaller, they don't really get the same attention from a lot of people who might be interested in them. They re-list to the US, the shares get a little more liquid if one of the PE firms or some insiders offer some shares, and all of a sudden they might have a whole new investor base who's doing the work you've done and saying, "Hey, 12 times PE dominant position, super app growing 30% year over year." It's a pretty nice combo.
Artem: Correct. It's pretty much what I said [inaudible] my connection slowed a little bit. With my opinion, any investor, any American-based investor who likes Mercado Libre, or likes [inaudible] or any of those platform type companies around the world outside of the US, especially if it's an emerging market and they either looked at them or maybe they looked at them and actually bought them and they owned them, I think any of those investors would be interested in research and analyzing Kaspi. Whether they will decide that it's a great buy and they should buy it or whether they will decide it's not a great buy and they will do nothing. I don't know. It's up to them. Everybody does their own analysis, but at least I think they would look. And my experience so far is that most people never look at Kaspi and many people never even heard of it.
Andrew: I want to talk upside in a couple of things in a second, but I want to start talking about the risks because starting to run a little long and I want to make sure we address at least some of the risks in this investment. And the risk I want to start with is, again, it turns into a bull case at this point, but the first thing I thought when I looked at this company, and not to hit everyone over the head too hard with numbers, is I looked and said, "Oh, this has a fintech component. They do a lot of B2B lending. Sorry, B2C lending, I thought lending to consumers in emerging markets, small dollar loans like that is balance sheet intensive that does have lower risk." I looked at the consolidated balance sheet and I said, "Okay, they've got four and a half billion." I can't remember the... it's KZT is the domination.
Four and a half billion of assets supported by 3.3 billion of customer accounts, 2.8 billion of loans out to customers. There is run on the bank risk. There was my initial thought. So, I want to ask you. Can you talk a little bit about the risk of funding to customers? Actually, we probably addressed it with data, but I think the run on the bank risk and how they've responded to historical run on the bank's risk, I think that's really interesting both for thinking about the downside and for thinking about the NPS score and everything that the customer has.
Artem: Yes. Okay. That's a good question. To be clear, I am not on the commission by Harvard Business School, so, they are not paying to advertise their cases. But if you go on HBS and buy Kaspi HBS case and you read and you read it, by the way, it's a great read to learn about the company and evolution and management and characters involved. And as well as Kazakh economy, you will also, learn that run of the bank or risk of run of the bank actually happened in the past where rumors would appear that some Kaspi has problems and Ceo ran away from the country or story like this. And then they would record a video where Ceo Mikhail Lomtadze will be posing I think with a very fresh [inaudible] newspaper.
Andrew: It was like a hostage photo where it was him with that day's newspaper and they posted it and they put it in newspapers and said, Hey look he has a- because the rumor was he took all the money and run off. They were like, "Hey, look, here's proof." It's a proof-of-life photo, right? He's here. He's right here.
Artem: [inaudible] So, it happened. And it happened several years ago. And I think at this point in time, the customer affinity is a lot stronger than it used to be because there is more data points of your interactions. So, I think the reputation is a lot stronger and the risk of a run on the bank is a lot smaller. Is it zero? Probably not. But it's a lot lower than it used to be. That's number one. Number two, Kaspi is a very important part of the Kazakh economy. So, I believe if necessary, MBK and Kazakh government can always help Kaspi out, not help in the sense, "Oh, you roll a bunch of bad loans, we will help you out." No, but in the sense that they will act, make necessary steps to stable [crosstalk]
Andrew: Open the fed window if they had a liquidity crisis basically.
Artem: Exactly. So, that's the second point that I think. Third, and this is less about turn on the bank, it's more about the earnings, whatever. There are plenty of bad loans, even though we have data that shows that it's not the case. The way you think about it, you can say, okay, if bunch of earnings from the fintech businesses low quality, okay, wipe out half of them or pick the number that you want to reduce it by, and then you will be left with more than half of their round rate earnings from two capitalized businesses and whatever earnings you want to assign to give Kaspi credit for in their fintech business. You can do that. So, if it was purely by now pay later product, I think it'll be a lot less interesting. So, in this case, I think the diversity of revenue and income streams is a natural hedge against low or poor quality of loans. And again, I want to highlight that we haven't seen it so, far whatsoever.
Andrew: We're 50 minutes in here. We've talked about this is basically all the revenue, all their earnings, all their income is from Kazakhstan. I think we do have to talk just Kazakhstan as an overall country risk. I just pulled up Kazakhstan GDP, and I'm just looking at what Google gives me. And Kazakhstan's GDP goes from 115 US billion in 2009 to it peaks at like 240 billion in 2013, drops to 137 billion in 2016. Today, it's up to 200 billion. That is doubling your economy and then cutting into a third in a five-year period. This is wild, wild GDP-type stuff but I just want to ask, how do you think about the Kazakhstan country, GDP risk outlook, all of that?
Artem: Okay, so, few things. So, number one, Kaspi makes money in Kazakh local currency called tenge. Andrew and I are US dollar-denominated investors. And as a US dollar-denominated investor, anybody does not want this outcome. You buy something that is worth 500 tenge, which is $1, and then tenge you make a lot of money. It goes up, it doubles. It's 1000 tenge right now. You are very excited, but because foreign currency also, depreciated by 50%, now all of a sudden you are like, "Ops, you actually didn't make any money in USD." So, you have that risk and you need to think about what you're either brought view on Kazakhstan currency, and you can look at historical effects rates. I will share how I think about that. And remember, I'm not a macro guy. I do not have a very strong view on Kazakh market.
But the way I think about this is the following, if the company's growing earnings, I will use numbers a little bit strong just to illustrate the point 30% and you do it for two or three years, and then in year four, foreign currency experiences 30% appreciation against US dollar. But in local currency still growing 30%, you will just stay invested for one extra year in order for you to get to the same point where you are. That's point number one. Point number two. That's only on Kazakhstan for local currency. Number two, oil and gas play an important role in Kazakh economy. It's similar to Saudi Arabia probably or similar to United Arab Emirates. Again, the share may be smaller, but it's still a very important source of revenue coming into the country and it's a big export.
But if you are own anything, in my opinion, and this is my opinion, if you own something in Kazakhstan, you are to a certain extent long oil. How much you try to run also, the regressions and correlations and form your own view but there is this element that you need to keep in mind. So, if you are a very oil-heavy investor and all of a sudden you decide to invest in Kazakh marketplace, remember some of your exposure you already have in your portfolio in a way, very indirectly. If you are an energy investor, you may feel, "Okay. I'm okay with having that risk." And remember this is not your cobalt. Because I would suspect that if oil goes down, Kaspi will have a lot of idiosyncratic factors working in its favor and it should still power through and do well.
But if oil goes up, let's say to a hundred again, it's probably good for Kazakhstan economy and probably good for Kaspi because people will have more money to spend and send each other and buy goods and buy services and travel internationally. So, keep this in mind. That's the second point. Third point, Kazakhstan is a country which will be classified as an emerging market or frontier market, and all risks of investing overseas in the emerging markets. So, frontier markets are present in this case. So, you need to think about those for yourself when you are doing your research.
Andrew: As we said, other people than us have described it as the unofficial national bank, national app of Kazakhstan. That's great. If Kazakhstan's growing, that's great. If there's probably political stability, but emerging market and frontier risk. If that frontier risk plays out and you're the unofficial national app of the Kazakhstan, you're probably going to get pretty hit pretty hard with that frontier risk. Not a guarantee. Nothing on this podcast is guarantee. Not a guarantee, but you can imagine frontier risk in terms of that. You can imagine frontier risk is, even if that went fine, you can imagine frontier risk in terms of the currency just evolving, the economy, just all sorts of risks there.
One more thing. So, international expansion. I listen to the Q3 call, they say, "Hey, we've got a great team." Obviously, we've talked about people can- I'll include a link to the HBS notes in the show notes. They've got a great management team. They say they've got a great team overall. They're saying international expansion, we're going to do it when the time is right. If I went back four years ago, I could see them talking about international expansion. It's taken some time and they haven't really had interaction there. Is this just, "Hey, it always takes a little time for bread to bake," or is it, "Hey, they dominate their national. They dominate in Kazakhstan, but it's really hard to get this stuff going." It's too late. They're not going to be able to chicken or egg in any other market.
Artem: Only time will tell. If another country and pick any country in the region already had a player that is similar in scale, and service, and customer value proposition, and MPS score, and customer happiness to Kaspi, I would say yes, that's country. It's too late to go and try to get into. I'll [inaudible] if another country does not have such a predominant player, which has a superb strategy and combines so many wonderful things, then Kaspi probably can go there and succeed. But only time will tell whether they will go into other markets or not. I am not including an international expansion into my thesis. If it happens, I will need to substantially update my model and my calculations.
Andrew: I've two last questions I want to go through. Just the first [inaudible] and especially dividend policy because look, I emailed you over the weekend. But I think when an investor first looks at this, they're going to see a dividend that's going up and down over time and they're going to say, "Hey, what's going on with capital allocation? They do some share buybacks here." Obviously, I'll let you discuss it, but share buybacks are somewhat limited by liquidity. But you see the buybacks, you see dividends going up and down and we're not used to companies doing dividends up and down, even if I think that's actually the right way to do dividends, neither here nor there, but just want to talk it, turn it over to you on the capital allocation, explain what's going on there.
Artem: Sure. On capital allocation front, the company has said that our goal is to return to shareholders roughly 50% of our net income. It can be done via dividends, which is then done or it can be done by share buybacks, which they've also, done. Share buybacks have been fairly limited. And remember, this is a company that has been public for a couple of years, so, we are not talking about company that has been public for 20 years. It's relatively you phenomenon. So, far they've done one share buyback that they finished and completed and they've announced the second one. They're presumably going through right now. If I'm not mistaken, and this is from my memory. I cannot be off a little bit. I think the first buyback was for 100 million and I think second one was also, for the same number, but--
Andrew: I think it was 40 and 60 combined a hundred and the most recent was a hundred but I defer to you. It doesn't really matter either way, but yeah.
Artem: It doesn't change. Remember, this is roughly what, like 12, 13 billion market cap company. So, point is that it's a small portion of buyback price.
Andrew: It is, but 12 billion market cap. So, 25% float. So, we're talking two and a half, 3 billion float, right? You take out 200 million, like it's actually a pretty meaningful and pretty quick amount of the float. But you're not going to charter style buyback 12% of your shares [crosstalk]
Artem: Exactly. This is not John Malone a buyback style to be clear. And part of that is a limitation as Andrew alluded to because of the float is fairly limited. Again, remember the float of the company is about 20.5%. I will suspect that a good chunk of that is owned by investors with very long-term horizons who may not be selling their shares. Because when you think about it, and there are plenty of these type of loan-only funds that will be, we're doing emerging markets or we are doing X, Y, Z. And they have billions and billions in under assets, under management. And in my opinion for them, Kaspi is a fantastic investment to have and it's a pretty stable money. They're not going be trading a quarterly results with this is not appalled hedge fund. That doesn't, which means that those shares are not really tradable. They're not easily tradable. They're not easily accessible. So, Kaspi doing buyback even at a relatively small scale, I think it's already in my opinion, is a big testament to management thinking and the right frameworks about capital allocation.
Andrew: I agree. Look, if your shares are undervalued and you've got excess capital, why not buyback shares the fact that they say, "We're going to return 50% of net income to shareholders." And then they said, "Hey, shares are undervalued. Yes, we've got a float problem, but why not switch some of it from the dividend to buybacks?" Shows an insider mentality, shows a smart, let's talk about that though. Valuation. Last thing I want to end on [crosstalk] go ahead.
Artem: So, some money will be going to... depending on which foreign currency you're going to use, whether you're going to be using an average for the year or average for each quarter depending on your preferences, then there is the way how IFRS and GAAP prescriber to do it and obvious then there's common sense and those two may or may not contradict each other or not. Think about this way. The company, it's probably about to generate 1.1, 1.2 billion in net income in 2022 depending on which effects rate you're going to use and depending on whether you think they will hit guidance, or do slightly better, or slightly worse. So, if you think about it, okay, half of that can be more by the way, can be more. Because on the one of the last earnings calls, someone asked about dividends and the team said like, "Look, this is what we said publicly, but if you look at our round rate, we're actually going a little bit to above 50%."
But we said at least 50%. Let's take to 50% then we're talking, call it 550, 600 million of returnable capital can be buyback, can be dividends. If let's say the new 100 million buyback. And again, share those disclosures because both Andrew and I right now are blinking on the exact magnitude of that buyback. Let's call it a 100 to keep things simple. Then we're talking about 450 or 500 million of potential dividends. And this is roughly on 12 and a half, 13 billion market company depending on the day. That's your potential dividend yield. And if management sticks to the same policy and if annex will be rising, then the distributable income will rise as well.
Andrew: Perfect. That was great. Let's just talk real quickly. They're buying back shares. Obviously, they're buying back shares because they see value in shares. You have a position as we disclose at the start. Obviously, you have a position because you see value and shares. How should people think about rough valuation for this company? You've got a company trading net 12 times priced earnings growing 30% per year. If I ignored emerging market, you put those together and people would be going crazy for it. But then you add emerging market, a lot of the balance sheet is in customer loans. And I think that people might be saying, "I have no freaking clue how to think about multiple valuation all of this for this company." How are you thinking about that?
Artem: Look, first of all, this is obviously very personal to every investor how they approach this. The way I would share framework. I would don't want to share exact numbers, but I won't tell frameworks how I think about it. And then new listeners can say, "That's an interesting framework. Let me apply it or say this is a very bad framework and they will not apply." Think about how revenue and how earnings will be growing in the next several years. And we went to gross drivers already, so, you know what those gross drivers can be. Then you think about their margins despite the already extraordinary high, they have been slowly expanding them even more. Think about your margin outlook for the next several years.
Tax it at a rate that's public information. And then we'll get you that earnings, not income. Think about how fast or how slow it'll be growing in your example. And then you need to think about that period and that gross durability. How much time will lapse when Kaspi will become GDP grower or GDP plus 2% grower? So, I have a lot more and it's easier for me to talk about what multiple should be once you reach certain level of maturity. And remember, you are investing in Kazakhstan. And you can look up where local bonds of Kazakh government trade.
Andrew: I just put up the local bonds. I was going to make a comment on that. I'm a little jealous. You beat me to it to be honest with you.
Artem: Okay. Next time, next time. When I have another haircut, I'll come again talk about another company. If you look, this is approach that is similar what corporate financial prescribe you, you take sovereign borrowing rate and ideally you try to make it around 10 years. And Kazakhstan government based on my data, the bonds that are local currency, remember this is not used the currency, this is local currency bonds that expire in 2033, which is conveniently about 11 years out from now. With a caveat, there is a call in 2028 that may or may not be exercised, we don't know. They yield is about 10.7%. So, that's what your sovereign borrowing rate is. And then you think about the cap structure of Kaspi and this is where it gets actually very, very interesting.
Because you can say, "Okay. They got sovereign rate then if they were borrowing money, you add couple of percentage points or whatever you need to add because most likely sovereign nation in its local currency is a lot more credit worth it than any company regardless of how great it is." By the way, there are exceptions in the history. But let's not go there. And then you say, "Okay, but there is also, equity risk premium." So, you need to incorporate that and then you will end up with waited average cost of capital according to corporate finance textbooks. This is why it gets interesting. Kaspi has also, flowed because there are various customer deposits and some of them are interest-bearing, which are attractive source of funding. And there is also, flowed coming from payments, which is a effectively zero interest funds in source.
And then it's up to you to decide. That's why people say valuation is more harder than science. Then it's up to you to decide how you want to dice it and slice it and what you think is the right discount trade for cost-paid earning strain should be even that maturity. But I think the trickier part is actually to get to that level and how long that growth runway will last. If it's three years, it's less attractive because you need to apply that normalized multiple to much of earnings in let's say 2026. If you think that the growth runway is five years or 10 years, that's a very different story. So, that's my frameworks.
Andrew: No. Look, that's what I said. The only thing I would- Look, I'm doing this on the fly so, I could be wrong. The only thing I would add there is I actually think you undersold the Kazakhstan yield. So, I'm looking as you said, those 2033 bonds have a near term call. I'm looking at Bloomberg, those are 3.5% yield to call. The only bonds I can find that aren't callable actually go out to 2045 and those are trading at a 6% yield to worst and that's out to 2045. US government 20-year bonds trade for about 3.75%. If you had told me before this pod that Kazakhstan 20-year government bonds traded 2 to 2.5% inside of US bonds, I would've said, "No way." My mental model would've just been Kazakhstan's bonds are 10% or something. But it seems like it's even better and obviously, a lower risk premium on the government bonds when you've got something that you know is 100% Kazakhstan should call for a higher equity multiple. I could be out of turn there. Obviously, I'm just glancing at Bloomberg, but that's what I'm looking at. Everything else you said I think makes tons of sense. It would actually be a little bit better.
Artem: Andrew, which bond? 2045?
Andrew: 2045, yeah.
Artem: What yield?
Andrew: Six percent.
Artem: Okay. You are looking at international bonds. You are looking at a US denominator bonds. In my opinion and the way corporate finance typically teaches that we need to be looking at the local currency government bonds. Not sovereign.
Andrew: Got it. But then as you said--
Artem: You want to make the underlying currency of the sovereign bond and currency of your interest payments with the currency that Kaspi makes money in.
Andrew: Look, this is why I'm not a lawyer. They say a lawyer should never ask a question that they don't know the answer to. I'm a podcaster, and I'm just out here throwing Bloomberg numbers just off the cuff of the thing. But again, and as you mentioned, look they do have that interesting trade that so, many people have talked about in US small banks recently, where they have customer deposits from- If you've got, think about your Venmo account, you probably have a couple of 100 dollars sitting around there. Venmo's not paying you interest on that. If the Fed is paying Venmo or bank 3%, 4%, that's all net interest margin. Same with Kaspi, right? If they've got a lot of your B2B and stuff, they're probably not paying. They've got this great source of deposits that they don't have to pay interest on. They can go to the federal rising interest rates, rising inflation should be a beneficiary of that type of stuff there. Anyway, we have covered a lot. We're focus on--
Artem: One last thing that is important when to talk about risks. Based on my observations over the years, the most common way for an emerging market company to get into trouble is to have mismatch between its earning stream and its liability stream. In other words, your local company in Argentina, in Brazil, Mexico, Kazakhstan does[crosstalk]
Andrew: US dollar-denominated bonds.
Artem: And you make money in local currency because you deal with local consumers. You're not an export of oil or metals or copper. You're a local company. You're a grocery store chain and you make money in local currency, Mexico peso, for example. And then you decide that borrow Mexican peso, will cost you 12%. But if you borrow on USD, it's only six. And say that's a great idea. You borrow it six, then something happens in your local economy and your local currency goes down substantial versus US dollar. So, your local earnings may be same or even higher. But in USD instead of making a hundred dollars, you are now making 60. And all of a sudden, for example, debt to EBITDA used to be two times, which is manageable, and now all of a sudden it's five times or six times.
Andrew: Because the debt that you took that was a 100 Mexican pesos, if the pesos go down 40, now it's worth 140 Mexican pesos. So, earnings down and a liability's up. It's just an awful mismatch.
Artem: Exactly. It's a horrible mismatch. That's the most common way about my observations how we can get into trouble as a company from an emerging market. Kaspi does not borrow in USD almost never. So, as a result, if foreign currency tenge depreciates substantially, you may take a hit as a US dollar-denominated investor will already covered that, but in my opinion, there is no existential risk here. We are like, "Oh my god, the worst happened." So, that's not the case. They're very thoughtful about it and they clearly think very clearly, pun intended. So, they have thought about it very carefully how to design the capital structure to avoid that type of situation.
Andrew: Perfect. We've covered a lot, but I just want to give you the chance. Anything else that we didn't get to cover here that you think we should have touched on? Whether it's on the risk side, the upside side, anything else investors should be thinking about?
Artem: One thing that I would say at the end is this, regardless whether you have interest in researching a company in Kazakhstan as a potential investment or potential idea or not, regardless of that, I think Kaspi story is so uniquely fascinating and what a very ambitious, talented, driven management team can do. Honestly, I think even if you say like, "I will never invest in anything outside of the US." And that's a legitimate approach because it's your investing portfolio. I would say still read about Kasbi because it's such an interesting story and not only on strategy and super app and what we can learn from that and apply to other markets and other countries but also, how management team drove innovation, how they drove culture. And on culture, I want to mention two things. My sense is that Kaspi culture is not a bank culture based on my research. It's more of a tech company culture.
Andrew: There are quotes from the CEO. I can't remember where it was, but somebody says, "Oh, bank Kaspi the bank." And he'd be like, "We are not a bank." We are a technology-driven innovator." And obviously, that's a classic thing for JP Morgan, all those people to say, "We're not a bank anymore." But Kaspi, it's hard to argue it when they're launching travel verticals and all this type of stuff.
Artem: Exactly. That's number one. So, culture is unique. Number two, based on my research, company is attracting tons of young, talented, smart, well-educated people in Kazakhstan. This is like not your traditional banker type people. This is like young full of energy people who are coming to do cool things in a cool company in their country. When I say I think it's based on my research and it doesn't mean that I'm right at my conclusion. That's why I say I think. The company is one of the most desirable employers for young people in Kazakhstan because it has a cool vibe, it has a great culture. So, that's something to keep in mind. So, just encourage everybody to read the HBS case. There are some other materials from the internet that you can find and enjoy reading.
It's just presumably confirm in my opinion. Also, there are several videos of CEO Mikhail Lomtadze on YouTube. They done in Russian, but you probably can get YouTube to translate them for you. I don't know how good translation will be but you can listen. It's interesting perspective or coming from a CEO and just see his behavior, what he does, et cetera. And similar, download an app like play with it. You don't need to buy anything. To be clear, I have not tried to renew my California driving license using Kaspi app. I'm not sure that it will work, but you can definitely get a nap and just play with it and see, touch, and feel and see whether you like it or not.
Andrew: Perfect. Perfect. Cool. Artem, this has been great. Why don't we wrap it up there? Thanks for coming on for the second time. I'll include a link to the HBS case study in the notes, and it'll link to Artem's very, very thinly used Twitter account and the notes as well. But Artem, thanks so, much for coming on here for the second time.
Artem: I think I've made one tweet or maybe two tweets in my entire life.
Andrew: Thinly used Twitter account. Thanks so much for coming on for the second time. Looking forward to the third time and we will chat soon.
Artem: Sounds good. Thank you Andrew.