I think throughout our holding period, the business in Kazakhstan proceeded largely as we expected, and obviously, more recently, especially as the company approached some closer to penetration of similar key verticals in Kazakhstan. Obviously, we were eyeing what they were going to do abroad, and maybe elsewhere in Central Asia, and obviously that culminated in the company making the purchase of Hepsiburada in Turkey earlier this year.

This is a business by any measure - again, just focusing purely on the business and its metrics, and maybe setting aside the discussion of the geography or the risk that that brings - it's simply an exceptional business and probably more importantly run by extremely talented, broadly focused CEO who obviously has done a tremendous job building a terrific business in Kazakhstan. I don't think it's necessarily really disputed, just how incredible that business is.

Super apps in general are generally understood to be extremely wide moat businesses. Kaspi's execution has been great as far as expanding to new verticals and kind of leveraging essentially free customer acquisition costs to monetize new verticals from the existing user base.

And of course, I think the hope kind of more at this point is that they can replicate a fraction of that success in Turkey, which has a little over four times the size of Kazakhstan. Of course, the way the competitive landscape there is likely to evolve and already exists now is very different from the way Kazakhstan was when Kaspi began in Kazakhstan. There are a couple of differences, but the most notable of which is that there weren't really any credible competitors when Kaspi started building out its super app in Kazakhstan. Of course, there is at least one, really more because Amazon is also there, but Trendyol, Amazon, and even a couple of other e-commerce players all competing with Hepsiburada in Turkey.

So we've seen in other geographies, like Grab for example, what it looks like when you have a super app kind of evolving in a competitive landscape. You could say that exists to some extent in China as well. And it certainly won't look anywhere near as dominant as what Kaspi has in Kazakhstan, but again, with the company trading at maybe - after today's move - a little over six and a half times 2025 earnings just coming from Kazakhstan, it's not as if you need to believe a lot, right? And that optionality is worth potentially a very significant amount.

Obviously, though, part of that increased focus on international comes as the domestic opportunity in Kazakhstan is more penetrated, but again, this is probably not anything novel for the listener. But that's kind of broadly some background on where we're coming from. But I'm happy to delve into whatever points the other caller is most interested in.

Analyst 2: Yeah, absolutely. I have very similar thoughts about the dominance of its business. Kaspi's CEO is, like, universally respected among peers and competitors I speak to there. I've visited Kazakhstan multiple times, visited Turkey and Hepsiburada once so far. I guess the debate for me is like, what's the right position size? What's the right time to add? I'm thinking about some of the headwinds that are present this year that came out on the call. So happy to talk about that or whatever direction you think we should go in.

The debate is kind of similar on our end, right? There's never been any debate as to the quality of the business and of course, valuation. Again, how you sort of calibrate that for the geography is tricky, but throughout the period that we've owned it, whether it was during the initial breakout of the geopolitical tensions with Russia or anything like that, it's always been a position size debate about the right position size.

I just think the thought is that obviously the headwinds that you have this year - we've actually taken up our position a little bit earlier in the year in hope that you would maybe see some multiple expansion just as things potentially came to some sort of resolution in Russia-Ukraine.

Again, we were, of course, just viewing that war as just kind of upside optionality in our underwriting. We can definitely get down with just the base earnings growth and then the optionality that you have with Hepsiburada, but that sort of path to multiple expansion, just the way I view it - and this is without having had a chance to catch up with IR yet or really sit and digest this quarter too much - but what's happening in Kazakhstan, that's kind of one thing. Some of those are temporary headwinds, like the smartphone registration headwind, and it sounds like you can even potentially see a bounce in the second half.

Others, like maybe a weak macro environment and the higher funding costs weighing on Fintech margins - there's not necessarily any clear path in sight to those being resolved. And then of course, the tax on income from government bonds, that's just the way I underwrite it - just like a permanent clip to earnings power that doesn't go away, assuming that it happens, which I'm sure it almost certainly will be given Kaspi's contacts in the government.

So when I think about the headwinds that are kind of more medium term - the macro in Kazakhstan, especially when you have Russia kind of trying to tighten the screws after Kazakhstan kind of cheated relentlessly on their oil volume quotas - again, it just doesn't seem like something that necessarily resolves anytime soon. Same thing with the rate issue weighing on Fintech margins.

But what's going to be a little more - it's not concerning, it's more of just something that's at the top of my consideration as far as relative position size. Obviously, Turkey is clearly what's driving a lot of the upside here, because even if we take away a lot of the short-term macro factors in Kazakhstan, there's a penetration wall, certainly in the company's payment segment.

Marketplace and Fintech still have quite a bit of room to grow there. But beyond some of the government actions that are becoming a little more clear on Kaspi's service call today, they've in the past made overtures about consumer credit broadly in Kazakhstan, not necessarily from Kaspi, but of course, they're one of the three or four largest lenders in the country, so of course, they're part of the equation - expanding too quickly.

So you have one segment, the payment segment that - other than B2B, which is not a huge portion of the segment and even that, its ceiling cannot be super meaningfully additive to their growth rate - is pretty quickly reaching a penetration wall.

Fintech, if you look at loans per capita compared to debt per capita compared to many other emerging geographies or certainly developing countries, there is a large runway, but do they maybe have to be careful about how fast they expand that? And of course, how fast they expand is also going to be tied to their marketplace segment anyway, which of course, has these macro headwinds.

So you've got a penetration wall and macro headwinds kind of impacting the business in Kazakhstan, and that makes it all the more important that investors are probably turning to Hepsiburada for potential upside. But there, you have shopping boycotts in the wake of the jailing of the mayor of Istanbul. Again, that one probably can go into the short-term bucket. So that one could resolve within a reasonable time frame.

I don't know, I guess we'll hopefully - Kaspi management kind of hinted at it when asked about it in detail on the call, but presumably Hepsiburada is still public and traded, so they'll have their call, and we'll hear from them. And I'm sure you've done all the ground research and have a better idea than I do of what might be going on there.

And then, of course, what would really kick things off in Hepsiburada would be if they can start really ramping up any kind of equivalent Fintech or payment business there. Obviously, that's pending the acquisition closing, sometime later this year, of QNB Bank's Turkish subsidiary, so they can't quite do that yet.

So maybe you don't have the same kind of longer-term headwinds, other than just the general macro in Turkey, but it goes with the territory. But maybe there's a question in my mind of, like, is it one quarter or two quarters before we maybe start to see signal progress there?

Because one thing I'm sure the person on the other line knows is that Kaspi CEO better, probably, does not really tip their hand or provide financial targets in advance of actually delivering on the product initiatives that they talk about. So you're probably not really going to see investors start to give credit to whatever is going on in Hepsiburada or the optionality that they build a super app and diversify on top of the marketplace offering there until it's actually happened.

So that's moving pieces in big terms. I don't know why - I guess the reflection and answer to that question determines what we would do with position size, but again, I haven't done a lot of on-the-ground work in Turkey, especially since some of these protests are breaking out. So I have to spend a little more time thinking about that, but as far as what's top of mind, that's something we would want to do some more work on and understand more, because that's probably the most tradeable part in any sort of rerating here, certainly in the near term.

But that's probably a bit long-winded, but that's kind of where we're at in terms of position size and the factors that are top of mind when we ask ourselves how big should we be in this.

Yeah, I mean, it's tricky because I'm sure you follow - I'm just reminding myself, I got a rough idea - but obviously Halyk is a comp for the lowest ceiling, lowest multiple segment of Kaspi, which is its Fintech segment, right? Which is only about a third of its net income, but Halyk trades at kind of three and a half times trailing four quarters.

So, it's just tricky, right? Because we've always kind of struggled with the multiple here. I mean, the good thing is that when the multiple is this low, you can kind of just look at the underlying free cash flow and think about just what your kind of free multiple expansion compounding is.

Take the reciprocal of six and a half times or whatever - obviously, they can't pay out 100% of that, but that's basically all upside, right? So your absolute free cash flow yield at that point is - and obviously how much comes back to us as dollars. It sounds like you're American, but whatever currency your funds are denominated in - that's like a 15% kind of yield.

I mean, they could probably go even more with their low-return Fintech business, just because the marketplace and payment businesses are basically infinite returns on capital. They could probably pay out close to 100% of that free cash flow, or that net income. But maybe clip it a little bit, and then obviously it's uncertain what happens to the tenge versus the dollar, but I think earnings should probably grow irrespective of what happens to the currency.

So if your IRR threshold is, like, 20%, right, and you have a business that has a mid-teens earnings yield, and is growing in nominal terms 15%, and then who knows, maybe in 2026, maybe it's 10% - a little harder to say. But then call it - I don't really have a precise macro forecast of what the dollar is going to do versus the tenge, if the tenge depreciates a little bit versus the dollar - you still have something growing maybe high single digits with a 15% kind of yield, that gets you north of 20% compounding without multiple expansion.

That's why we still own a position, right? Because you don't really need multiple expansion to get a satisfactory return here. Of course, you could maybe also say that your return threshold maybe needs to be higher than the rest of your long book. This is the way we think about it - just given the geography, even accounting for the currency headwind, which is kind of baked into the earnings growth rough numbers that I was mentioning just now.

Is that sort of constant multiple math at a higher threshold for this investment versus just like a US domiciled name? That's just the way it is.

So if it were to be rerated a little bit, where you get closer to that, maybe I think about it a little bit differently, but as is, for me to be more interested, I probably need to have a little more confidence in one of these earnings levers we discussed. And kind of the bigger near to medium-term factor will be the Turkish business - Hepsiburada.

When I think about what potentially drives an acceleration here - you can't really mine out of the product suite at all. I mean, obviously, Hepsiburada has kind of built their own delivery and certain other value-added services.

But what I think about - if we're operating under the premise that the most likely near-term wing factor or thing that could potentially pick up, that will get people excited about the story again, and maybe give you some multiple expansion juice on top of just seeing the underlying IRR from earnings accretion and the growth that still exists - that's a couple of months away, I guess, building up that suite.

But have you done - because obviously, one of the interesting things going on in Turkey, you're probably more familiar with what's going on the ground than I am just because you've been there recently - is what's happened with this legislation in Turkey turning on heavy discounting. As I understand it, there was lobbying being done related to that bill, but if there were just any sort of inflection as it relates to the competitive environment - and you've already seen it, right? Hepsiburada's margins have improved, and that's clearly due in large part to them not having to be quite as promotional or invest quite as heavily in advertising.

But I'm just curious if you've done any recent checks on the marketplace business in Turkey, and how relative share and promotional intensity is looking over the last - to some extent, we can glean this from earnings, but if you've talked to IR there, I'm just curious if you've done any work there recently?

You're right.

Yeah, it's tricky, and I kind of think about it the same way. I mean, okay, it's hard to bet against Kaspi's CEO. Of course, they built Kaspi in a much more benign competitive environment.

And the competitive environment for building a comprehensive super app is not nearly as benign in Turkey, but will be easier now because as you mentioned, Trendyol for the time being, because of the banking box, can't really do the financial services side.

And one other thing that's clear to me - again, this is just in general - much more of a jockey bet versus a horse bet, but obviously a lot of the bet is just on Kaspi's CEO. It is fairly clear that there's just a quite a chasm, not that Hepsiburada has executed poorly by any stretch, but there's definitely a chasm between just the operational sophistication of Kaspi's CEO and management team and Hepsiburada, right?

Hard to translate to how much upside that is, but Kaspi's track record is what it is. And I think a lot of that is the evidence of what a less robust management team looks like - what happened when Trendyol started becoming aggressive in the market, and then of course, they're bailed out by this legislation. But there probably is a big gap between how Kaspi will be operating - their CEO is basically as I understand it running the show now even though it's a technically separate entity, versus how it was before.

But again, it's just one of the tricky things here. It's hard to quantify that.

Yes, I would agree with that.

Right, like what did they say - 18% of GMV is smartphones? So what does that imply year-over-year? Like, how much did smartphones kind of decelerate or decline to get such a big headwind? I do want to follow up with IR on that one.

Maybe there's some seasonality we don't know about the business - maybe for whatever reason, people make a lot of purchases when they get their paychecks on March 15th, I don't know. But I was puzzled by the same math and unfortunately, I don't have a great answer for you, and I haven't talked to IR again, but it's at the top of my list of questions.

I don't know. Unlike the smartphone question, I don't know if that one immediately - I do remember that they were talking about the two new term deposit products, but I didn't really think about the rates. I don't know if it's just something kind of quirky going on with the rate curve, but that's the only ad hoc explanation that springs to mind.

That makes sense why it would have sticky deposits. When you frame it that way, it makes sense.

I mean, I talked to IR about it. He's forthcoming about facing competition from Temu. I've tried to - this is probably one of the other reasons this is kind of a higher threshold for us. I'm not aware of metrics that allow us to track that robustly.

I mean, I would think, even if you were to talk to Temu IR, they probably would not be aware off the top of their head how their business is trending in Kazakhstan. So it's just - I'm not sure how you go about doing diligence on that other than maybe a survey of consumers. If you managed to do that, great.

But my best guess is that they've probably made some inroads, but it's nothing that's really manifesting in GMV yet in any meaningful fashion. But again, I wish I had a better answer for you, but I've had the same question, and the only real way that I have at my disposal to kind of track them that's worth my return on time, imperfect as it is, is just talking with IR about it, and then Kaspi's CEO whenever I can get a conversation with him, usually when he's at a sell-side conference.

I think Kaspi certainly does acknowledge it.

It makes a lot of sense, right? It just makes a lot of sense. It does take a long time, though, even though they border each other. I heard it takes a long time. Like there are multiple broken logistics areas in the path from Eastern China to Kazakhstan. So it still takes like two weeks or something like that. It's not like because it's on the border, you can get it in a couple of days.

Does it usually ship on demand?

I mean, price is the number one consumer consideration, and like delivery speed/convenience is probably going to be number two after that, of course, for some customers or some types of purchases, those will be flipped.

So if that's the state of affairs, I would think it's hard for them to build a meaningful share, even if they discount heavily. That being said, we saw what Trendyol did, right? Like how far you can get with really aggressive discounting versus local merchants. So it's not something to be dismissed.

Maybe one thing I'm honestly still surprised by is that Kaspi's payments segment still grows at what it does. I know a lot of that is just inflation in there. So if you look at it in real terms, it wouldn't be the 16% revenue growth from this quarter or 18% maybe the quarter before.

But when you look at RTPV divided by the number of active payments consumers that they disclose - if you look at it on an LTM basis, because that's what the basis of the active payments customer disclosure is - when you do that math, it's close to 2.7 million tenge per capita on an annualized basis. Whereas average GDP per capita is like 4 million tenge, and average disposable income per capita is like 6 million tenge.

And it's not like there's a big wedge between the population denominators, right? Because payments customers are 13.8 million versus a population of 20 million in Kazakhstan, right?

So I'm a little surprised that this still grows as much as it does, even with a lot of the growth probably on the B2B side at this point. One thing whenever I talk to IR that he brings up - and I kind of expressed this to him - is that he says there's still a lot of stuff that's in the black or gray economy that's coming into the formal market. And so that is one of the things that helps them.

And I guess the implication is that the government statistics like GDP and wages and average income per household don't capture some of that gray market activity. But I would just be curious how you think about the runway of the payments business, and when it actually could kind of smack into a brick wall from a growth perspective.

There's no - I mean, for me, I try to be conservative when looking at that line. I agree - it's just hard for me. Obviously, it's decelerated quite significantly. But I tend to just not assume that that business grows very much. Again, probably in real terms, maybe a little bit in 2026, and then really not that much thereafter. It's just hard for me to see how they don't hit a growth plateau.

The sole amount of growth - the lot of growth above GDP - I'm willing to give them is really the B2B business. And I think there are a couple ways you can size that. Where I kind of shook out is that maybe B2B can be like 15% of total payment volume, but of course, it's at a slightly lower take rate, so it's a little bit less than that. I think it's 6% of RTPV today. So that doesn't give you much extra juice, right?

Like, that's really the only clear path I could see to growth above nominal economic growth, but again, I would have told you the same thing 12 months ago and probably 24 months ago, so.

Okay, cool. Same for me.

But if you could find one, that would be an interesting conversation. But I think this is an interesting one where the very nature of this company and opportunity attracts certain types of investors, and they probably look at it quite the same way. But yeah, if you somehow find a bear, I think there would be quite an interesting discussion, and I'd be happy to participate.