MELI numbers

Investment Analysis Clubs Saul’s Investing Discussions
#1

Here are the MELI revenue numbers since Q1 2011:


	Q1	Q2	Q3	Q4	Total
2011	61.5	69.4	81.6	86.5	299
2012	83.7	88.8	97.3	103.8	373.6
2013	102.7	112.2	123.1	134.6	472.6
2014	115.4

Here are the q/q revenue growth numbers (in USD and in local currencies):


	USD	local
Q3 2012		37.0%
Q4 2012	20.0%	37.7%
Q1 2013	23.0%	36.0%
Q2 2013	26.3%	38.0%
Q3 2013	27.0%	45.0%
Q4 2013	29.8%	49.7%
Q1 2014	12.3%	49.9%

You can see how fast the company is growing revenue only when you look in local currencies. Massive growth. The growth is even good in USD.

Now here’s adjusted EPS:


	Q1	Q2	Q3	Q4	Total
2011	0.32	0.34	0.6	0.47	1.73
2012	0.45	0.57	0.59	0.69	2.3
2013	0.4	0.67	0.66	0.93	2.66
2014	0.69				0.69

This is in USD. Again, the local currency devaluation masks how fast the company is growing earnings.

The outstanding share count has remained constant for the past 4 years.

The company announced that it will revalue it’s Venezuelan currency so earnings and the balance sheet are going to take a hit from that this quarter.

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#2

Chris;

Those numbers look very good. Just couple questions on top of my head.

  1. what is the reason for local currency devaluation?

  2. what are the economic growth rates in those countries where Meli operates?

  3. are those countries politically stable?

Sorry these questions could sound stupid to someone who follows the company closely. But I do not own the stock and do not follow the company. I will do some research this weekend.

Regards.
-M

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#3

Mark,

It’s been a while since I looked at MELI so I’m not as familiar which the details as I was a few months ago. Danny (dvena) is very knowledgeable about MELI and he has posted a lot of useful info on the MELI board at RB.

MELI’s main markets are (revenue % in 2013, 2012, 2011, left to right):


Brazil

  	 	43.7	% 	 	 	48.1	% 	 	 	55.5	% 
Argentina

  	 	25.8	  	 	 	23.7	  	 	 	19.0	  
Venezuela

  	 	17.9	  	 	 	14.6	  	 	 	11.6	  
Mexico

  	 	6.9	  	 	 	7.2	  	 	 	7.5	  
Other Countries

  	 	5.6	  	 	 	6.4	  	 	 	6.4

1) what is the reason for local currency devaluation?
This is when I wish I would have paid more attention in my macroeconomics class! Here are 5 year graphs of the USD to

Brazil: http://www.xe.com/currencycharts/?from=BRL&to=USD&vi…

Argentina: http://www.xe.com/currencycharts/?from=ARS&to=USD&vi…

Venezuela: http://www.xe.com/currencycharts/?from=VEF&to=USD&vi…

Mexico: http://www.xe.com/currencycharts/?from=MXN&to=USD&vi…

With Venezuela you need to be careful because there is a government exchange rate and a black market exchange rate, and the black market exchange rate reflects the reality. MELI recently announced that they will be revaluing their Venezuelan assets to more reflect their true value. This will hit the value of assets on the balance sheet (such as VEF cash). To the company’s credit, they have purchased real estate in Venezuela with their local currency cash to prevent cash value deterioration. The details of these transactions are in the latest 10K, but I’ll say they amounts of the purchases are staggering. In Argentina, MELI has exchanged excess local currency to US denominated assets.

2) what are the economic growth rates in those countries where Meli operates?
I think a more appropriate questions are what are internet usage penetration and internet usage growth in their markets. I don’t remember the numbers in detail but recall that penetration is nowhere near penetration and that adoption growth is very high. This means they can continue to grow the number of customers for a long time and the high growth can continue for a long time.

3) are those countries politically stable?
Well, Venezuela is the least stable. Ever heard of Hugo Chavez? It’s 18% of their business. Argentina has been a basket case for decades. Brazil is more stable. Mexico is the most stable politically. I think the currency issues and the politics keeps some people from buying MELI shares. However, people in these countries still buy and sell stuff to each other and MELI is the big gorilla (the eBay, PayPal, and Amazon rolled into one) in Latin America. Since the company, routinely converts local currency cash into USD assets, the currency is minimize to the point where it’s not a big issue, I think.

Check out the RB MELI board and read the high rec posts there.

Chris