Thanks for the article, seems like PAGS is the Venn Diagram of growth bros and EM value investors.

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Apr 2Liked by IJW

I appreciate the thinking - long PAGS - second largest position representing 14.9 pct of my portfolio. The growth re pix from both a macro perspective and company specific one is noteworthy, generally speaking - now absorbing 10% The nations transactions speaks volumes regarding their growth trajectory and potential flexibility looking ahead. From my recollection, they were at 2% a couple years ago - I see Pix as a an underrated intangible positive iin light of Brazil, being so underbaked as you pointed out - it’s a useful metric of trajectory and A sponge that gets you in the door.

When stocks move up and down, perhaps staying down for longer than one might imagine, There are no rules nor reason - however it is pretty unusual to find growth and value heavily discounted. on top of this, if and when these kinds of remarkable equites Display more signs of leading their peers than not, much less moat potential(I don’t see a moat here yet) a run usually comes.

1. CLS

2. PAGS.

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I know u don’t want more china exposure but can you help me out with $NISN. It is a net net that’s trading at pe of around 1 and is also PCAOB approved. It also won a fraud case.

They also have a couple negatives, they once placed new equity under the share price on the open market, they also openend a new trading segment that’s way lower margin, they also get delisted soon if they don’t do reverse split soon and most importantly they are really bad at communication.

I don’t get why they are trading so cheap, so I hope u can take a look at it and make some sense why they are so cheap Or is it simply because they are Chinees.

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If there is no long listing history, the business is kind of hard to understand, no dividends and large share issuances with a sudden spike in earnings, I tend to stay away no matter how cheap it is. These are usually fraudulent in some way.

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A other interesting company that isn’t as small or traded in china is MTN.

$MTN is a African/ Middle Eastern telco, with a digital and fintech arm. they have fast growth in all places and can get higher margins on there telco business after they are done building infrastructure, while also expanding use base by increasing penetration rate and getting into new markets. They telco and fintech arm are the real gems tho, and also growing userbase quickly.

And all of this for a pe of only 12

The reason they trade so cheaply is because they got fined by Nigeria, seemingly without a real reason and they never recovered from that because of fear of a new fine. For me is mostly interesting because I’m way concentrated in Latin America, Hongkong and small caps. 😬

Hope u find some value in this name if u want some Africa exposure.

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If you like this, why not go for Airtel Africa? Much cheaper and more growth. Why would MTN be superior?

The main risk here is currency risk. Which is substantial in Africa. Which is why I haven't pulled the trigger on AAF.

But thanks for the suggestion :) . I will put the stock on my watch list.

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Im long MTN + now Airtel

why chose.

Currency is part of the game in EMs.. I chose to track GDP which is a more reliable measure of value. If GDP grows or is stable, these telcos will be ok.

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The central bank of Brazil released their own payments processor(Pix). It's cheaper than other electronic payment methods and, last time I looked, was quickly gaining market share. This is why both $STNE and $PAGS fell so dramatically in q4 '21. I didn't see it in your write-up and it's something to consider.

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Mar 16, 2023·edited Mar 16, 2023Author

Yeah maybe I should have mentioned it. Kind of forgot about it.

I disagree this is the reason for the stock decline. It is not really a threat to credit cards. It has only rapidly taken share from wire transfers and Boletos.

See this article:


And PAGS has been taking share since end of 2021, not losing it. And their Pagbank segment is actually benefitting from PIX.

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I dont really understand the relation between the interest rate and their earnings?

they have loans outstanding at lets say 10% then inflation is 15% so their loans are loss making?

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Mar 31, 2023·edited Mar 31, 2023Author

I think I left out too many important info in the original write-up for the sake of brevity :).

My understanding is that they pay Selic rates on their payables from Central bank funding and receive credit card interest on their receivables from financial institutions (mainly Mastercard and Visa). When interest rates are low, this spread is large, when they are high the spread is much smaller.

And they pay just under 10% on their deposits, vs 13.75% on their central bank funding:



So more deposits = lower cost of funding.

And lower interest rates is lower cost of funding as well, as the spread is larger. So lower interest rates is better margins. From Q4 2022 conference call:

"If the rates -- interest rates goes down, our financial expenses will go down. And we do not expect to decrease prices automatically. The dynamics or the moving parts here will be the following. In long tail, we had the same rates since 2016. I mean the past years is exactly the same rates, the prepayment, MDR and so on. So if the rates -- the interest rate goes down, we're going to recover margins in long tail in the next business day."

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Thanks. very clear. I like the idea !

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