Financials & FinTech research, Galliano’s Financials Research

Victor Galliano

Financials & FinTech research

Financials & FinTech, EM & Developed Markets

Galliano’s Financials Research

Galliano's Financials Research provides fundamental research in Emerging Markets financials, including FinTech, as well as financials in select Developed Markets.

The investment style applied is generally value oriented, although Growth At Reasonable Price (GARP) strategies can also be used where appropriate. 

Our investment research approach aim is often contrarian, looking to capitalise on overly sceptical or optimistic consensus views. In terms of valuation techniques, the focus is on PBV ratio to ROE, PE multiples and dividend yield, as well as the application of PEG ratios and, where appropriate, Sum of the Parts (SOTP) valuations.

Equity Bottom-Up

<ul>
<li>Of the six Malaysian banks screened, we highlight RHB Bank and retain CIMB on the buy list; PB Bank and Maybank are quality but seem fairly valued</li>
<li>RHB Bank has, in the September quarter, meaningfully improved its pre-provision profitability versus its peers; RHB’s high CET1 ratio suppresses its ROE, and it is attractive on PE and PEG</li>
<li>CIMB once again improved its positive post-provision returns which is constructive for CIMB’s share price given its modest valuations versus its peers; its high NPL ratio is fully provisioned</li>
</ul>


Of the six Malaysian banks screened, we highlight RHB Bank and retain CIMB on the buy list; PB Bank and Maybank are quality but seem fairly valued
RHB Bank has, in the September quarter, meaningfully improved its pre-provision profitability versus its peers; RHB’s high CET1 ratio suppresses its ROE, and it is attractive on PE and PEG
CIMB once again improved its positive post-provision returns which is constructive for CIMB’s share price given its modest valuations versus its peers; its high NPL ratio is fully provisioned


Malaysian Banks September 2022 Results Screener; RHB Stands Out, and Stick with CIMB

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/ql-resources-bhd" target="_blank" data-smartkarma-citation="entities:11221:1" rel="noopener">Ql Resources (QLG MK)</a> and <a href="https://www.smartkarma.com/entities/ammb-holdings-bhd" target="_blank" data-smartkarma-citation="entities:137:1" rel="noopener">AMMB Holdings (AMM MK)</a> could replace <a href="https://www.smartkarma.com/entities/hartalega-holdings-bhd" target="_blank" data-smartkarma-citation="entities:10230:1" rel="noopener">Hartalega Holdings (HART MK)</a> and <a href="https://www.smartkarma.com/entities/top-glove-corp-bhd" target="_blank" data-smartkarma-citation="entities:20759:1" rel="noopener">Top Glove Corp (TOPG MK)</a> in the <a href="https://www.smartkarma.com/entities/kuala-lumpur-composite-index" target="_blank" data-smartkarma-citation="entities:22913:1" rel="noopener">Kuala Lumpur Composite Index (KLCI) (FBMKLCI INDEX)</a>.</li>
<li>If the changes go through, glove makers will have no representation in the index. At one point in 2020, glove makers made up nearly 20% of the <a href="https://www.smartkarma.com/entities/kuala-lumpur-composite-index" target="_blank" data-smartkarma-citation="entities:22913:1" rel="noopener">FBMKLCI INDEX</a>.</li>
<li>One-Way turnover at the rebalance will be around 3% and the impact of passive trading will be higher on the inclusions as compared to the deletions.</li>
</ul>



Ql Resources (QLG MK) and AMMB Holdings (AMM MK) could replace Hartalega Holdings (HART MK) and Top Glove Corp (TOPG MK) in the Kuala Lumpur Composite Index (KLCI) (FBMKLCI INDEX).
If the changes go through, glove makers will have no representation in the index. At one point in 2020, glove makers made up nearly 20% of the FBMKLCI INDEX.
One-Way turnover at the rebalance will be around 3% and the impact of passive trading will be higher on the inclusions as compared to the deletions.


KLCI Index Rebalance Preview: No More Glovemakers in the Index (Or How the Mighty Have Fallen)

<ul>
<li>The six Malaysian banks screen favourably on balance sheet and returns metrics to June 2022; we add CIMB to the buy list, keep RHB and we remove Maybank</li>
<li>We add CIMB with its positive post-provision return trends and further potential which combine constructively with CIMB’s undemanding valuations versus the peer group; its high NPL ratio is fully provisioned</li>
<li>We stick with RHB, with its attractive post-provision profitability and positive cost of risk trends, whilst also trading on attractive multiples versus peers and on a relatively low PEG</li>
</ul>


The six Malaysian banks screen favourably on balance sheet and returns metrics to June 2022; we add CIMB to the buy list, keep RHB and we remove Maybank
We add CIMB with its positive post-provision return trends and further potential which combine constructively with CIMB’s undemanding valuations versus the peer group; its high NPL ratio is fully provisioned
We stick with RHB, with its attractive post-provision profitability and positive cost of risk trends, whilst also trading on attractive multiples versus peers and on a relatively low PEG


Malaysian Banks June 2022 Screener; CIMB Is Our New Value Pick

<ul>
<li>
<a href="https://www.smartkarma.com/entities/ammb-holdings-bhd" target="_blank" data-smartkarma-citation="entities:137:1" rel="noopener">AMMB Holdings (AMM MK)</a> and <a href="https://www.smartkarma.com/entities/ql-resources-bhd" target="_blank" data-smartkarma-citation="entities:11221:1" rel="noopener">Ql Resources (QLG MK)</a> could replace <a href="https://www.smartkarma.com/entities/hartalega-holdings-bhd" target="_blank" data-smartkarma-citation="entities:10230:1" rel="noopener">Hartalega Holdings (HART MK)</a> and <a href="https://www.smartkarma.com/entities/top-glove-corp-bhd" target="_blank" data-smartkarma-citation="entities:20759:1" rel="noopener">Top Glove Corp (TOPG MK)</a> at the December rebalance.</li>
<li>One way turnover is estimated at 2.87% and the impact of passive flows is larger on the potential adds as compared to the potential deletes.</li>
<li>
<a href="https://www.smartkarma.com/entities/westports-holdings-bhd" target="_blank" data-smartkarma-citation="entities:3954:1" rel="noopener">Westports Holdings (WPRTS MK)</a> is a close add and there could be changes over the next few months as we approach the end of the review period.</li>
</ul>



AMMB Holdings (AMM MK) and Ql Resources (QLG MK) could replace Hartalega Holdings (HART MK) and Top Glove Corp (TOPG MK) at the December rebalance.
One way turnover is estimated at 2.87% and the impact of passive flows is larger on the potential adds as compared to the potential deletes.

Westports Holdings (WPRTS MK) is a close add and there could be changes over the next few months as we approach the end of the review period.


KLCI Index Rebalance Preview: The Gloves Could Come Off

<ul>
<li>The six Malaysian banks have healthy capital adequacy ratios, healthy credit quality and adequate NPL coverage; increased tourism should support GDP, positive cost of risk trends and loan growth demand</li>
<li>We like RHB, with its attractive post-provision profitability and sound cost of risk trends, whilst also trading on attractive multiples versus peers and on a relatively low PEG</li>
<li>We also like big-cap Maybank with its reasonable valuations; combined with a prospective earnings recovery due to contained risk costs, this could drive a re-rating, after lacklustre share returns</li>
</ul>


The six Malaysian banks have healthy capital adequacy ratios, healthy credit quality and adequate NPL coverage; increased tourism should support GDP, positive cost of risk trends and loan growth demand
We like RHB, with its attractive post-provision profitability and sound cost of risk trends, whilst also trading on attractive multiples versus peers and on a relatively low PEG
We also like big-cap Maybank with its reasonable valuations; combined with a prospective earnings recovery due to contained risk costs, this could drive a re-rating, after lacklustre share returns


Malaysian Banks Screener; RHB Bank Is Our Top Pick

Malaysia

RHB Bank BHD provides banking services. The Company offers commercial and consumer banking, corporate and investment banking, and international banking services. RHB also provides savings accounts, foreign currency accounts, home and travel insurance, and investment planning.

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RHB Bank Bhd (RHBBANK MK)

Malaysian Banks September 2022 Results Screener; RHB Stands Out, and Stick with CIMB

We highlight RHB Bank and keep CIMB on the buy list; RHB has improved its pre-provision profitability and it is attractive on PE and PEG; CIMB...

Victor Galliano

KLCI Index Rebalance Preview: No More Glovemakers in the Index (Or How the Mighty Have Fallen)

QL Resources and AMMB could replace Top Glove and Hartalega in the KLCI. That would mean no glove makers in the index, down from a near 20% index...

Brian Freitas

Malaysian Banks June 2022 Screener; CIMB Is Our New Value Pick

We add CIMB to the buy list, keep RHB and we remove Maybank; CIMB has positive post-provision return trends and undemanding valuations; RHB has...

Victor Galliano

KLCI Index Rebalance Preview: The Gloves Could Come Off

AMMB and QL Resources could replace Hartalega and Top Glove in the KLCI at the December rebalance. Westports is a close add, while Top Glove needs...

Brian Freitas

Malaysian Banks Screener; RHB Bank Is Our Top Pick

From our Malaysian banks screener report, we like RHB for its attractive post-provision returns and undemanding multiples, and Maybank for its...

Victor Galliano

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