DLocal Limited (DLO), mcap=$5bn, price $16.95 vs $13.00

DLO pitch:
– DLO is a payment service provider (PSP) which specializes in cross-border payments in emerging markets.
– Stock has been negatively affected after Muddy Waters issued a short report.
– The concerns include (but are not limited to) DLO’s subsidiary account conflicts, take rates, client fund segregation, the exercise of options, and the PrimeiroPay acquisition.
– Management issued a statement saying the short report has numerous inaccuracies.
– VIC author agrees with management by going through the short report in great detail and debunking Muddy Waters’ concerns.

DLO valuation:
– If author is right, DLO is a high ROIC business with low invested capital and EBITDA margins of over 35%.
– DLO has a high growth rate, forecasted to be >35% in the next few years, is expected to have >$2/share in net cash by the end of 2023 and trades at 20x E2023 earnings.

Exp. gain: Not specified.

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