The dominant headline for DLO is the announcement that the very recently former CFO of MercadoLibre Pedro Arnt (who’s last day we understand was last Friday) is becoming co-CEO of dLocal to work alongside current CEO Sebastian Kanovich.
dLocal reported Q1s after close, with revenue and TPV in-line and gross profit a touch ahead of Q1 guide (which was given after the quarter closed). The better sequential revenue was driven partly by an Argentine recovery whilst new disclosure for Nigeria– remarkably given DLO’s LatAm roots – show this is now the largest market for the company (>20% of revenue) having driven over 50% of the revenue growth in the last 12 months.
The macro backdrop in Brazil is tough, with well-flagged headwinds into Q4 and early 2023 for TPV. At the same time, the rates cycle is holding higher for longer. The market remains hyper nervous on the Brazil Payment companies, we sense, but as we look ahead to 2023 we think the ~8x 2023e PE multiple on PagSeguro (with 2023-25e CAGR of ~40%) is too hard to ignore.
dLocal reported Q3s after close. Numbers missed our revenue expectations by 2% - though were in-line with consensus - and came in ahead of the street at EBITDA by 1%. Within the mix we saw a very strong performance from Asia/Africa, whilst LatAm was impacted by Argentina, in turn relating to FX regulations imposed from the Central Bank.
We publish today our take on the LatAm Telcos Q1 earnings season. As well as our broader note which picks out key themes and market by market insights, we also publish for the first time a summary of our database which looks at key financials and operational KPIs on a country level basis - see LatAm Telcos Quarterly Databank.
Latest data from the Brazilian Central Bank (January) shows prepayment spreads rising. There remains some uncertainty over whether all the payment companies contribute to this data (evidently not) but indicatively it’s moving in a direction which is consistent with the latest commentary from the companies on pricing (we spoke to STNE/PAGS/MELI this week).
We have pulled together latest BCB data through end-December showing Prepayment rates vs annualized SELIC. Spreads dipped again in the final month of the year, having ticked up in November, though in general terms price increases appear to have momentum (yields up 360bps in Q4) and have served to support spreads in Q4 after strong declines during the first nine months of the year.
Whilst market conditions are tough we understand the Nubank IPO roadshow is still set to start tomorrow (30th) ahead of listing in the US on December 9th. If all proceeds, this will be the fourth largest US IPO this year. Nubank is the largest digital bank in the world, a very high quality asset in a world overburdened with questionable digital wallet business models. The main issue is one of valuation and the targeted $50 billion; the mid-point of the $10-11 price range implies 15x 2022e EV/rev...
After Wednesday’s developments which saw the lower House in Brazil approve the preliminary text of a Tax Reform plan (someone what out of the blue), Congress on Thursday made a number of smaller changes, and following discussions, approved the different components one by one. The reforms are potentially a bigger issue for the Telcos, given the support coming from IOC payments, less so across the Payment space. We run some initial estimates, though caution that much can change and there is a heal...
Following our recent initiation and Q2 results (18 August) we held an Investor Call with dLocal CEO's and COO at the end of last week. No change to the view that numbers were very strong and running ahead of expectations, though events came together in Q2 (macro, new merchants) which provided particular support. We have updated estimates and move our target from USD50 to USD60, staying Neutral given very elevated valuations (130x net revenue) and with a significant lock-up expiry from 1 Sept. We...
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