PATRIA INVESTMENTS LTD (PAX)

I recommend a long position in Patria Investments Ltd Class A shares (PAX), currently trading at $13.05. Patria Investments has a $1.9 billion equity market cap and is the largest private markets alternative asset manager in Latin America. It is an owner-operated, asset-light business with a high return on equity and a long runway for growth. The Company IPO’d in January 2021 at $17/share. Management has exceeded the growth plans presented at the time of the IPO. Fee earning AUM has grown from $7.7 billion at year-end 2020 to $23.9 billion at year-end 2023, a 45% cagr, and stood at $34 billion at 1Q24. Nonetheless, the stock has derated. At IPO it traded at 20x forward earnings per share. Today it trades at 11x 2024E eps and 8x 2025E eps. The Company has a net cash position of $222 million and has paid a total of $2.79 per share in dividends in the past three years, equivalent to 21% of its market cap. The company trades at less than half the multiple of the large, global alternative asset managers, which trade at 26x 2024E eps. I expect Patria to double FRE (fee-related revenues) and earnings per share in the next five years. I expect the dividend to grow in line with earnings. The current dividend yield on the stock is 7%. Even if the PE multiple does not expand, I expect the combination of eps growth and dividends to generate a 20% plus IRR over the next five years.