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>Since our March-end report, our shorts – especially Kakao Pay – worked better than our longs, given the continuing turbulent conditions; Santander’s offer for Getnet minorities signals a specific opportunity</li>
<li>We still favour Mastercard in the megacaps, and we stick with PagSeguro and Nexi despite both having disappointed; Cielo has been a strong performer, but we would not chase it</li>
<li>Among our shorts, we remain negative on DLocal, given its very demanding valuations, and we still see Kakao Pay to be fundamentally over-valued; we reintroduce Paytm to the shorts list</li>
</ul>


Since our March-end report, our shorts – especially Kakao Pay – worked better than our longs, given the continuing turbulent conditions; Santander’s offer for Getnet minorities signals a specific opportunity
We still favour Mastercard in the megacaps, and we stick with PagSeguro and Nexi despite both having disappointed; Cielo has been a strong performer, but we would not chase it
Among our shorts, we remain negative on DLocal, given its very demanding valuations, and we still see Kakao Pay to be fundamentally over-valued; we reintroduce Paytm to the shorts list


Payment Companies Screens – More Constructive Market Signals or a Bear Market Rally?

Banco Bilbao Vizcaya Argentari / Equity Bottom-Up

<ul>
<li>Mexico continues to be the key contributor to BBVA group, with the offer for Garanti minorities set to increase BBVA’s share of higher risk higher reward returns from emerging markets</li>
<li>The revised offer to Garanti minorities is still 10%+ cheaper in Euro terms than at the time of its 4Q21 announcement, with a modest hit of 34bps to CET1 ratio</li>
<li>We see BBVA as an attractive value play in select emerging markets and Spain, with its well-established digital offerings as a driver for sustained premium returns and premium capital distribution</li>
</ul>


Mexico continues to be the key contributor to BBVA group, with the offer for Garanti minorities set to increase BBVA’s share of higher risk higher reward returns from emerging markets
The revised offer to Garanti minorities is still 10%+ cheaper in Euro terms than at the time of its 4Q21 announcement, with a modest hit of 34bps to CET1 ratio
We see BBVA as an attractive value play in select emerging markets and Spain, with its well-established digital offerings as a driver for sustained premium returns and premium capital distribution


BBVA – Mexico Is the Motor for Further Capital Distribution

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<ul>
<li>Indexes and Sectors remain extremely mixed which we believe is likely to remain the case moving forward.</li>
<li>Attractive Sectors include Energy and Financials, (and to a lesser extent Staples and Utilities) and these areas remain our primary focus.</li>
<li>Financials (XLF) and Energy (XLE) are hitting new RS highs amid rising rates and new highs in WTI crude oil -- Remain overweight/add exposure on pullbacks.</li>
</ul>


Indexes and Sectors remain extremely mixed which we believe is likely to remain the case moving forward.
Attractive Sectors include Energy and Financials, (and to a lesser extent Staples and Utilities) and these areas remain our primary focus.
Financials (XLF) and Energy (XLE) are hitting new RS highs amid rising rates and new highs in WTI crude oil -- Remain overweight/add exposure on pullbacks.


<ul>
<li>Our payment company screens focus on the market value to processed volume ratio versus the take rate, market value to sales, and valuations relative to EBITDA and earnings growth</li>
<li>In the megacaps, we like Mastercard on valuation and growth; in emerging markets we favour PagSeguro and SBI Card, and small cap Getnet, also we believe that Stone is oversold</li>
<li>We are negative on Paytm and DLocal, which both did IPOs in 2021; we believe that both companies’ growth prospects are more than discounted by their earnings and EBITDA valuations</li>
</ul>


Our payment company screens focus on the market value to processed volume ratio versus the take rate, market value to sales, and valuations relative to EBITDA and earnings growth
In the megacaps, we like Mastercard on valuation and growth; in emerging markets we favour PagSeguro and SBI Card, and small cap Getnet, also we believe that Stone is oversold
We are negative on Paytm and DLocal, which both did IPOs in 2021; we believe that both companies’ growth prospects are more than discounted by their earnings and EBITDA valuations


Payment Companies – Focus on Value and Growth

Event-Driven

Banco Bilbao Vizcaya Argentari / Event-Driven

<ul>
<li>BBVA’s offer to buy out the Garanti minorities values the Turkish bank at a PTBV ratio of 0.7x and prospective PE of 3.6x and is expected to be earnings accretive</li>
<li>The negative reaction to BBVA’s move reflects investor concerns surrounding macro-economics and politics in Turkey, and the weak Turkish Lira; we believe that Turkish monetary policy easing is largely done</li>
<li>BBVA shares provide exposure to its best-in-class return group emerging market banks at an attractive PBV ratio; in addition, BBVA shares are supported by its big share buy-back plan</li>
</ul>


BBVA’s offer to buy out the Garanti minorities values the Turkish bank at a PTBV ratio of 0.7x and prospective PE of 3.6x and is expected to be earnings accretive
The negative reaction to BBVA’s move reflects investor concerns surrounding macro-economics and politics in Turkey, and the weak Turkish Lira; we believe that Turkish monetary policy easing is largely done
BBVA shares provide exposure to its best-in-class return group emerging market banks at an attractive PBV ratio; in addition, BBVA shares are supported by its big share buy-back plan


BBVA (BBVA SM)-Garanti: Better the Devil You Know, Especially in Emerging Markets

Spain

Banco Santander SA attracts deposits and offers retail, commercial and private banking, and asset management services. The Bank offers consumer credit, mortgage loans, lease financing, factoring, mutual funds, pension funds, insurance, commercial credit, investment banking services, structured finance, and advice on mergers and acquisitions.

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Banco Santander Sa (SAN SM)

Payment Companies Screens – More Constructive Market Signals or a Bear Market Rally?

In payments, we stick with our longs on Mastercard for its quality, PagSeguro and Nexi for value; we reintroduce Paytm to the shorts, adding it to...

Victor Galliano

BBVA – Mexico Is the Motor for Further Capital Distribution

BBVA's premium returns engine is Mexico, supported by improving Spanish returns and the growth potential of Turkey, where it is buying the...

Victor Galliano

Stick With Energy and Financials

Indexes and Sectors remain extremely mixed which we believe is likely to remain the case moving forward. Attractive Sectors include Energy and...

Vermilion Research

Payment Companies – Focus on Value and Growth

A number of payment fintechs, after the recent market slide, are trading at attractive valuations again; we like Mastercard, SBI Card, Pagseguro,...

Victor Galliano

BBVA (BBVA SM)-Garanti: Better the Devil You Know, Especially in Emerging Markets

BBVA shares provide exposure to its high return group emerging market banks in Mexico, Turkey and other LatAm at an attractive PBV ratio; plus BBVA...

Victor Galliano

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