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Response Kaspi.kz replied shortly on the same day after the report with a statement: "In our view, the report is misleading, inaccurate and misrepresents our business. Being the first company from Kazakhstan to successfully list on Nasdaq has obviously raised our profile amongst short sellers. For those investors who have known us over the years, our reputation speaks for itself." They later released a more detailed explanation about the arguments brought by Culpers: The company emphasized that 99.6% of its 2023 revenue was generated in Kazakhstan, with the remainder coming from operations in Azerbaijan and Ukraine. This information is clearly disclosed in their US IPO prospectus and 20F filings. The company operates under strict regulatory supervision, implementing comprehensive policies

Growth Catalysts Expansion into new geographies Kaspi is well-positioned for regional expansion, leveraging its proven ecosystem and market leadership in Kazakhstan to tap into new high-growth markets. In April 2024, Kaspi partnered with Alipay to enable QR code payments across China, signaling the company’s ambition to expand its payment services beyond its home market. This partnership opens up access to the massive Chinese consumer base, potentially driving transaction volumes and cross-border growth. In parallel, Kaspi has also adopted an innovative market entry strategy in Azerbaijan, starting with e-commerce and gradually layering in fintech services. This reversal of its traditional approach demonstrates the company’s adaptability in addressing diverse market dynamics. By acquiring

Moat and Competitive Advantage Network Effects Across segments The largest moat that Kaspi.kz has is the network effects of its super app. Source: Kaspi Kaspi’s payment, marketplace, and finance platforms are highly interrelated. The growth and development of one platform naturally support and accelerate the growth of the others, reinforcing a virtuous cycle. For example, a consumer using Kaspi for managing finances can seamlessly browse the Marketplace for products. Once a purchase decision is made, the user can easily complete the transaction through Kaspi’s integrated payment system, given that their financial information is already stored in the app. The interactions between Kaspi's various platforms create a self-reinforcing flywheel that drives profitable growth and provides signific

Fintech and loan players in Kazakhstan Kazakhstan's banking landscape is characterized by a mix of established institutions and innovative fintech players, with 22 banks operating in a sector dominated by a few key players. At the forefront is Halyk Bank, which holds a commanding position with over 30% market share in both loans and deposits across most segments of the banking system. However, this landscape is far from static, with recent political developments potentially paving the way for improved competition and efficiency gains monetization. In this competitive environment, Kaspi Bank has emerged as a formidable challenger, particularly in the retail banking sector. While Halyk Bank maintains its overall leadership, Kaspi has carved out a significant niche, especially in consumer-foc

Currency The National Bank of Kazakhstan (NBK) heavily manages the Kazakh tenge, but the currency remains vulnerable to frequent devaluations during risky external conditions. The last major devaluation occurred in 2015 when the NBK abandoned its USD peg due to historically low oil prices, which depleted the Bank's foreign exchange reserves. Source: JP Morgan While the risk of such an event is currently low, given the tailwinds oil prices are experiencing from the Middle East geopolitical crisis, the country's rising import needs amid an infrastructure construction boom and robust demand are expected to keep the current account in deficit over the coming years, placing depreciatory pressures on the tenge. Analysts forecast the Kazakh tenge to trade within the range of KZT430-450 per USD ov

Foreign Policy Dynamics and Regional Position Kazakhstan's geopolitical landscape is undergoing significant changes, shaped by its historical ties to Russia, strategic location, and evolving multi-vector foreign policy. The country currently finds itself in a delicate position, balancing its dependence on Russia with the need to diversify its economic and diplomatic relationships. At present, Kazakhstan's energy sector remains heavily reliant on Russia. Approximately 90% of its oil exports flow through the Caspian Pipeline Consortium (CPC), which traverses Russian territory and is partially owned by Moscow. This dependency has been highlighted by past pipeline interruptions, which have demonstrated Kazakhstan's vulnerability. A potential shutdown of this crucial export route could jeopardi

Political Landscape and Government Kazakhstan's political history has been marked by a gradual transition from Soviet rule to independence, followed by a long period of authoritarian leadership under Nursultan Nazarbayev. History Soviet Era and Independence Kazakhstan was part of the Soviet Union from 1936 to 1991. During this period, it was governed as the Kazakh Soviet Socialist Republic. In December 1986, mass demonstrations by young ethnic Kazakhs took place in Almaty to protest Moscow's appointment of a non-Kazakh leader, signaling growing discontent with Soviet rule. As the Soviet Union began to dissolve, Kazakhstan declared its sovereignty within the USSR in October 1990. Following the failed coup attempt in Moscow in August 1991, Kazakhstan declared full independence on December 16

5.Advertising services - advertising campaigns on the platforms, which may display ads on the Kaspi.kz Super App to users through product searches, suggested products and banner ads. Two forms of ads - product ads and brand ads Product ads Brand ads   Source: Kaspi Q2 2024 Report Promotional periods such as Kaspi Juma, a 3 day national shopping festival (Kaspi's version of 9.9 / 10.10 / 11.11 in the context of Shopee or USA's Black Friday or China's Single Day) Kaspi Juma usually takes place twice a year, in the summer and the autumn, and allows consumers to purchase any goods from participating merchants via a buy-now-pay-later consumer finance product with interest-free instalments for up to 24 months. This will be changed to thrice a year from 2024 onwards to cater to the diff

Fintech Platform Kaspi˖s Fintech segment is its consumer lending and deposit businesses. The platform enables consumers to access instantly and seamlessly, primarily through Kaspi.kz Super App, the Company’s digital finance products, including consumer finance and deposit. Fintech is Kaspi˖s largest, but slowest growing and least profitable (from a margin perspective) operating segment, accounting for 54% of revenue and 35% of net income, in 20˖23. It is notable that Kaspi originates 100% of loans from its own balance sheet (vs 2% for Ant/Alipay). Kaspi's fintech platform has shown impressive growth, particularly in its Total Finance Volume (TFV), which serves as a key indicator of the platform's financial services adoption and usage. The TFV has exhibited strong year-over-year growth at 3

Executive SummaryI am issuing a strong "BUY" recommendation for Kaspi.kz, with a bullish outlook projecting a 68% upside over the next three years and an even more impressive 117% upside over a five-year horizon. This recommendation is rooted in Kaspi's demonstrated strengths: a robust business model, an exceptional management team, and attractive valuation metrics that present a compelling investment case.Kaspi stands out in the market with its rare combination of high growth, exceeding 30% year-over-year, coupled with outstanding profitability, boasting net income margins above 40%, resulting in an ROCE of 88.63% in FY23. Despite these strong fundamentals, the company is trading at a reasonable 10.4x price-to-earnings ratio, suggesting it may be undervalued at current levels.Furthermore,