This article details my high conviction investment thesis in dLocal. I believe that dLocal is a highly misunderstood business with great potential not reflected in today's share price.
I am concerned that since share buy back is limited, therefore most of the returns would be paid in dividends where i have to pay taxes. Is there a way to avoid it? company might have a runway but it will generate so much cash that it would be difficult to invest it back, but to pay in dividends. i just want to avoid paying taxes as it will dilute my results,
Thanks for the question, I just posted my thoughts on Q4. Market does not like take rate declines but right now dLocal's merchants are paying 2.9% I think there is a floor at some point. 30% down in one day is not very fun!
I have no idea where the floor is but even if the rate of take rate declines continue dLocal can still hit my base case in the article.
Great analysis of a company I also love and invest in! I noticed you didn't mention Wise as a competitor for cross-border payments. Their take-rate is very low and they are dedicated to lowering it further as the payment volume grows. They are also active in LATAM. What's your opinion?
Interesting post. Thank you! As a risk management strategy for LATAM stocks, it might be wise to combine DLO, NU and MELI into a single position, say 5% of a portfolio. They are a single entity from the POV of the investor, anyway.
2 months to 2 year on boarding - That is so huge, shouldnt it be plug and play? even if not, then 1 week should be enough?
How would it partner with remittance firms? you think WISE and Remitely can be thier partners and how beneficial it can be to DLO and vice versa? Does DLO convert convery and send money across the border through traditional banking routes?
too much profitable cant have share buyback, hence dividend only solution. I have to pay 15% taxes on it whcih i hate, any reason that company can do something else with so much future cash?
i found no notes in company 10K for specific FX Risk managment except saying derivates and other fluffy words. Any thing you noticed as i believe its very important risk to measure and analyze.
Historically the EBITDA figure is approximately 80% FCF conversion. The Adjusted EBITDA number is a reasonable proxy for real owner earnings as there are no adjustments outside of SBC which is reasonable.
Usually I am skeptical of Adjusted EBITDA figures but in this case I think it is a decent enough proxy.
Much appreciation for the write-up !! DLocal is indeed an asymmetric opportunity, alongside with HIMS and NBIS
I am concerned that since share buy back is limited, therefore most of the returns would be paid in dividends where i have to pay taxes. Is there a way to avoid it? company might have a runway but it will generate so much cash that it would be difficult to invest it back, but to pay in dividends. i just want to avoid paying taxes as it will dilute my results,
Hi, just curious about your reaction to Q4 earnings and subsequent market reaction
Thanks for the question, I just posted my thoughts on Q4. Market does not like take rate declines but right now dLocal's merchants are paying 2.9% I think there is a floor at some point. 30% down in one day is not very fun!
I have no idea where the floor is but even if the rate of take rate declines continue dLocal can still hit my base case in the article.
Great analysis of a company I also love and invest in! I noticed you didn't mention Wise as a competitor for cross-border payments. Their take-rate is very low and they are dedicated to lowering it further as the payment volume grows. They are also active in LATAM. What's your opinion?
Wise and DLO don’t offer the same functionality DLO is a payment gateway and Wise is payment infrastructure.
There is some overlap because DLO also does remittances but I think the XB payments market is large enough to support both players.
Interesting post. Thank you! As a risk management strategy for LATAM stocks, it might be wise to combine DLO, NU and MELI into a single position, say 5% of a portfolio. They are a single entity from the POV of the investor, anyway.
2 months to 2 year on boarding - That is so huge, shouldnt it be plug and play? even if not, then 1 week should be enough?
How would it partner with remittance firms? you think WISE and Remitely can be thier partners and how beneficial it can be to DLO and vice versa? Does DLO convert convery and send money across the border through traditional banking routes?
too much profitable cant have share buyback, hence dividend only solution. I have to pay 15% taxes on it whcih i hate, any reason that company can do something else with so much future cash?
i found no notes in company 10K for specific FX Risk managment except saying derivates and other fluffy words. Any thing you noticed as i believe its very important risk to measure and analyze.
How do their allegations of fraud in 2022 play into this?
I addressed this in the article and encourage you to read the write up listed in the appendix (5).
Sounds very interesting, especially that an ex MELI exec is in charge.
How much of EBITDA flows to FCF? Similarly high to Adyen at~80-90%?
Historically the EBITDA figure is approximately 80% FCF conversion. The Adjusted EBITDA number is a reasonable proxy for real owner earnings as there are no adjustments outside of SBC which is reasonable.
Usually I am skeptical of Adjusted EBITDA figures but in this case I think it is a decent enough proxy.