1/ Brazilian Fintech co PagSeguro $PAGS put out operating results for Q3, with TPV growth of 85% and acquiring TPV growth of 49%, or up 58% ex the Corona voucher impact. They announced sequential growth of 1m PagBank active users, to 12.2m.
2/ If we put the PagBank business on the same valuation as Nubank's recent financing round (in which $BRK participated) at $30bn for 40m users that implies $9.15bn for PagBank's 12.2m users.
Haircut that by 20% for conservatism to get a $7.23bn valuation.
Haircut that by 20% for conservatism to get a $7.23bn valuation.
3/ Take that off PAGS market cap of $14.8bn to get a valuation of $7.5bn for the core merchant acquiring business.
2022 consensus is for $465m net income, and PagBank & the SMB Hubs investments should breakeven in that year so gives a pretty clean read on core biz consensus.
2022 consensus is for $465m net income, and PagBank & the SMB Hubs investments should breakeven in that year so gives a pretty clean read on core biz consensus.
4/ This puts the core business on a 2022 PE of 16.1x for a company growing its total TPV at over 80% and growing TPV in the core merchant acquiring business at over 50%. Recent sharp rises in Brazilian interest rates have pressured the sector.
5/ The shares stand out into this share price weakness as attractively valued with a very strong growth profile still ahead of them. PagBank continues its rapid growth, guided to be breakeven by 2022 and on track to be 30% of total company revenues by 2024.
6/ The investment in Hubs to move upmarket into the SMB area is tracking well ahead of expectations and should also breakeven in 2022. $PAGS Risk-reward looks very attractive in here. END.
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