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 Capital Markets

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<li>
<a href="https://www.smartkarma.com/entities/ant-financial-services-group" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Group (6688 HK)</a> has priced above the initial market capitalisation range of USD200 to USD300bn, at USD317bn including its over-allotment option of shares</li>
<li>Ant’s IPO valuation reflects the assumptions in our ambitious scenario SOTP valuation</li>
<li>Based on earnings and EBITDA multiples, Ant Group looks attractive relative to payments companies and fast growth investment and wealth managers</li>
<li>Ant is at a slight discount to the China MegaTech comparables, and we believe that it warrants a premium valuation to its China peers</li>
<li>Ant’s premium growth potential in digital finance, leveraging off its leading digital payments footprint, indicates further upside potential to the shares post IPO, in our view</li>
<li>Risks to our positive view on Ant Group include increased regulatory restrictions in China, heightened geopolitical tensions impacting demand for the shares at IPO and weaker than expected GDP growth limiting growth potential, especially in China</li>
</ul>



Ant Group (6688 HK) has priced above the initial market capitalisation range of USD200 to USD300bn, at USD317bn including its over-allotment option of shares
Ant’s IPO valuation reflects the assumptions in our ambitious scenario SOTP valuation
Based on earnings and EBITDA multiples, Ant Group looks attractive relative to payments companies and fast growth investment and wealth managers
Ant is at a slight discount to the China MegaTech comparables, and we believe that it warrants a premium valuation to its China peers
Ant’s premium growth potential in digital finance, leveraging off its leading digital payments footprint, indicates further upside potential to the shares post IPO, in our view
Risks to our positive view on Ant Group include increased regulatory restrictions in China, heightened geopolitical tensions impacting demand for the shares at IPO and weaker than expected GDP growth limiting growth potential, especially in China


Ant Group (6688 HK): IPO Pricing Warrants a Re-Rating

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

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<a href="https://www.smartkarma.com/entities/root-inc" target="_blank" data-smartkarma-citation="entities:29692:1" rel="noopener">Root Inc (ROOT US)</a><a href="https://www.businesswire.com/news/home/20201020005703/en/Root-Inc.-Announces-Launch-of-Initial-Public-Offering" target="_blank" rel="noopener">announced</a> its IPO terms and it will offer 24.16 million shares of common shares in the IPO (22 million shares offered by Root and 2.16 million shares sold by a major shareholder). The IPO price is currently expected to be between $22 and $25 per share. However, we expect this IPO to receive a very high demand, and the IPO price range is likely to be raised prior to final pricing. 
We are including Root Inc in our model portfolio.
</div>We forecast the company to generate revenue of $616.1 million in 2020 (up 112.3% YoY) and $1,070.2 million in 2021 (up 73.7% YoY). From 2019 to 2022, we have assumed the company's revenue to increase by 78.9% CAGR. The combination of the company's exploding revenue growth and improvement in the reduction of net losses as a percentage of revenue is very impressive indeed.Our base case valuation for Root is an implied market cap of $13.2 billion, or $52.1 per share, which is 108% higher than the high end of the IPO price range of $25 per share. Given the very high upside, we have a positive view of the Root IPO and we include this stock in our model portfolio.


Root Inc (ROOT US)announced its IPO terms and it will offer 24.16 million shares of common shares in the IPO (22 million shares offered by Root and 2.16 million shares sold by a major shareholder). The IPO price is currently expected to be between $22 and $25 per share. However, we expect this IPO to receive a very high demand, and the IPO price range is likely to be raised prior to final pricing. 
We are including Root Inc in our model portfolio.
We forecast the company to generate revenue of $616.1 million in 2020 (up 112.3% YoY) and $1,070.2 million in 2021 (up 73.7% YoY). From 2019 to 2022, we have assumed the company's revenue to increase by 78.9% CAGR. The combination of the company's exploding revenue growth and improvement in the reduction of net losses as a percentage of revenue is very impressive indeed.Our base case valuation for Root is an implied market cap of $13.2 billion, or $52.1 per share, which is 108% higher than the high end of the IPO price range of $25 per share. Given the very high upside, we have a positive view of the Root IPO and we include this stock in our model portfolio. 

Root Inc IPO Valuation Analysis (Insurtech SaaS)

Root Inc is getting ready to complete its IPO in the NASDAQ exchange in the next few weeks. Root Inc is an insurtech company that operates through a mobile app that uses smartphone technology, telematics, and data science to provide auto and home insurance. Since the founding of the company, Root has raised a total of<a href="https://www.insurancejournal.com/news/national/2020/10/06/585407.htm" target="_blank" rel="noopener"> $523 million</a> in funding. It was last valued at $3.65 billion in September 2019 in a round led by ST Global and Coatue. Root is targeting about <a href="https://www.businessinsider.com/root-insurance-us-based-insurtech-filed-for-ipo-2020-10#:~:text=The%20US%2Dbased%20insurtech%20has,currently%20available%20in%2029%20states." target="_blank" rel="noopener">$6 billion</a> valuation in this IPO. You can read Root Inc's S-1 <a href="https://www.sec.gov/Archives/edgar/data/1788882/000162828020014305/roots-1.htm" target="_blank" rel="noopener">here.</a> 
Surging revenue &amp; rapid improvement in net margins - The company's revenues have exploded higher in the past three years. In 2019, the company generated revenue of $290.2 million (up 570% YoY) while its total operating expenses increased by 393% YoY. A combination of a much higher revenue growth rate than operating expenses has resulted in a rapid improvement in net margins, which improved from -159.6% in 2018, -97.3% in 2019, and -58.9% in 1H 2020.
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Root Inc's exploding revenue growth and improvement in the reduction of net losses is very impressive, in the ranks of <a href="https://www.smartkarma.com/entities/snowflake-inc" target="_blank" data-smartkarma-citation="entities:29254:1" rel="noopener">Snowflake Inc (SNOW US)</a>. 
Although Snowflake and Root compete in different industry segments, both are SaaS companies with exceptional sales growth and significant operating leverage going forward. Similar to Snowflake, the word "WOW" came to my mind in reading through Root's IPO prospectus. Root Inc could be one of those exceptional, highly disruptive SaaS companies that even the great value investors such as Warren Buffett could inject significant amounts of capital (similar to Snowflake).
</div>

Root Inc is getting ready to complete its IPO in the NASDAQ exchange in the next few weeks. Root Inc is an insurtech company that operates through a mobile app that uses smartphone technology, telematics, and data science to provide auto and home insurance. Since the founding of the company, Root has raised a total of $523 million in funding. It was last valued at $3.65 billion in September 2019 in a round led by ST Global and Coatue. Root is targeting about $6 billion valuation in this IPO. You can read Root Inc's S-1 here. 
Surging revenue &amp; rapid improvement in net margins - The company's revenues have exploded higher in the past three years. In 2019, the company generated revenue of $290.2 million (up 570% YoY) while its total operating expenses increased by 393% YoY. A combination of a much higher revenue growth rate than operating expenses has resulted in a rapid improvement in net margins, which improved from -159.6% in 2018, -97.3% in 2019, and -58.9% in 1H 2020.

Root Inc's exploding revenue growth and improvement in the reduction of net losses is very impressive, in the ranks of Snowflake Inc (SNOW US). 
Although Snowflake and Root compete in different industry segments, both are SaaS companies with exceptional sales growth and significant operating leverage going forward. Similar to Snowflake, the word "WOW" came to my mind in reading through Root's IPO prospectus. Root Inc could be one of those exceptional, highly disruptive SaaS companies that even the great value investors such as Warren Buffett could inject significant amounts of capital (similar to Snowflake).


Root Inc IPO Preview - The Next Snowflake?

Covering IPOs, Healthcare and Technology Stocks

Andrei Zakharov

Algosun Global

Equity Bottom-Up

Lemonade shares outperformed previous week and rose ~10% while S&amp;P 500 index fell ~1% and Nasdaq composite underperformed as well. Lemonade’s trading volumes also increased and looks like stock could find the bottom below $50 a share. Lemonade stock is up ~25% from September lows of $44.11 a share, what confirms our bullish view as stock price rose by more than 20%.In September Lemonade officially entered its third market in European Union – France, following the Netherlands and Germany. Total French insurance market exceeds €300 million and there are 285 insurance companies operating in the country. So, key rivals are Allianz, Aviva, AXA and the competition will be fierce. Moreover, we believe Lemonade may launch business operations in UK anytime soon to expand its disruptive online direct model for UK residents too.

Lemonade shares outperformed previous week and rose ~10% while S&amp;P 500 index fell ~1% and Nasdaq composite underperformed as well. Lemonade’s trading volumes also increased and looks like stock could find the bottom below $50 a share. Lemonade stock is up ~25% from September lows of $44.11 a share, what confirms our bullish view as stock price rose by more than 20%.In September Lemonade officially entered its third market in European Union – France, following the Netherlands and Germany. Total French insurance market exceeds €300 million and there are 285 insurance companies operating in the country. So, key rivals are Allianz, Aviva, AXA and the competition will be fierce. Moreover, we believe Lemonade may launch business operations in UK anytime soon to expand its disruptive online direct model for UK residents too. 

European Expansion Is Underway. Lemonade CFO Remains Bullish On 2020 Outlook

During the last two trading sessions shares of Lemonade fell hard amid a massive tech stock sell-off. We remain bullish on Lemonade and believe, that investors underestimate the value of AI-powered technology platform and future opportunities to enter auto, life &amp; health insurance segments. Furthermore, company has a free of debt balance sheet with more than $500 million of cash and cash equivalents, that contributes ~$10 per share to our 12-month price target of $66/share.

During the last two trading sessions shares of Lemonade fell hard amid a massive tech stock sell-off. We remain bullish on Lemonade and believe, that investors underestimate the value of AI-powered technology platform and future opportunities to enter auto, life &amp; health insurance segments. Furthermore, company has a free of debt balance sheet with more than $500 million of cash and cash equivalents, that contributes ~$10 per share to our 12-month price target of $66/share.

Lemonade Stock May Present Investors with Better Entry Point After Tech Sell-Off

United States

Horace Mann Educators Corporation is an insurance holding company.  The Company markets and underwrites personal lines of property and casualty insurance, retirement annuities, and life insurance.  Horace Mann markets its products primarily to educators and other employees of public schools and their families.

National Western Life Group, Inc. operates as a life insurance company. The Company offers life and term life insurance products. National Western Life Group serves customers throughout the United States.

Goosehead Insurance, Inc. operates as an insurance agency. The Company offers home, auto, motorcycle, umbrella, flood, landlord, life, business, commercial auto, product liability, and recreational insurance services. Goosehead Insurance serves customers in the United States.

Stewart Information Services Corporation provides title insurance and related services through locations in the United States and several international markets. The Company meets the needs of real estate and mortgage industries through the electronic delivery of services required for settlement. Stewart's services include title reports, flood determinations, and credit reports.

Employers Holdings, Inc. provides workers' compensation insurance.  The Company focuses on small businesses involved in low to medium hazard industries.

Safety Insurance Group, Inc. provides personal lines property and casualty insurance focused exclusively on the Massachusetts market.  The Company's principal product line is private passenger automobile insurance.  In addition, Safety Insurance offers commercial automobile, homeowners, dwelling fire, umbrella and business owner policies.

Argo Group International Holdings, Ltd. offers property casualty insurance and reinsurance. The Company offers excess and surplus lines, select markets, and international specialty insurance.

HCI Group, Inc. offers property/casualty insurance.  The Company offers homeowners', condominium owners', and tenants' insurance.

SiriusPoint Ltd. operates as a global insurance and reinsurance company. The Company offers services in insurance lines which includes environmental, property, energy, workers compensation, and aviation and space, and reinsurance lines includes life, accident and health, property, marine and energy, casualty, and credit and bond. SiriusPoint serves customers worldwide.

AMERISAFE, Inc. provides workers' compensation insurance focused on small to mid-sized employers involved in hazardous industries, principally construction, trucking, logging, agriculture, oil and gas, maritime, and sawmills.

Hanwha Life Insurance Co., Ltd. offers life insurance services and reinsurance services.  The Company also does insurance against loss business, beverages business, real estate rental, and securities investment business through its subsidiaries.

Wuestenrot & Wuerttembergische AG is a financial services company.  The Company offers housing finance and building society savings accounts, as well as life insurance, real estate, and investment products. W&W is the result of the merger between Wuestenrot Beteiligungs-AG and Wuerttembergische AG VersicherungsBeteiligungsgesellschaft.

Just Group PLC provides financial services. The Company specializes in de-risking solutions, retirement income products, mortgages, financial advice, and guidance services to individual customers, financial intermediaries, corporate clients, and pension scheme trustees. Just Group serves customers worldwide.

Protector Forsikring ASA underwrites casualty insurance throughout Norway.  The Company focuses on delivering standard insurance products to the SME market, the public sector and the affinity market (grouped arrangements).

Vaudoise Assurances Holding SA, also known as Vaudoise Versicherungen Holding, is an insurance holding company, offering, through its affiliates, life, health, accident, property, commercial, motor vehicle, liability and legal protection insurance services, among others. The Company operates through a network of Swiss offices and affiliates in Spain and Italy.

Bao Viet Holdings, through its subsidiaries, engages in insurance, reinsurance, financial investment, fund management, securities, banking, and real estate services businesses in Vietnam. The Life Insurance segment offers a range of whole life, pure endowment, term life, endowment, bancassurance, annuity, universal life, healthcare and personal accident riders, and other life insurance products, as well as reinsurance assumed and ceded in life, healthcare insurance, and personal accident. The Non-life Insurance segment provides health and personal accident, property, cargo, hull-P&I, general indemnity, aviation, automobile, fire and special risk, agriculture, and other insurance products; and assumes and cedes reinsurance for various non-life insurance products. The Financial Services segment offers fund management, investment portfolio management, security brokerage and trading, investment consulting services, etc.; investment management services to policyholders; and security brokerage, securities underwriting and issuance agency, securities trading, custody, investment, and financial consulting services. The Banking Services segment provides various banking services, such as handling individual customer deposits, and deposit and current accounts for corporate and institutional customers; and provision of consumer loans, overdrafts, credit card facilities, and fund transfer services. The Real Estate Operations and Other Activities segment is involved in the rental and development of various real estate projects. The company also engages in the real estate investment and consulting activities; provision of machinery and equipment; and vocational driving training operations. It offers its services through approximately 150 branches in 63 cities and provinces. Bao Viet Holdings was founded in 1964 and is headquartered in Hanoi, Vietnam.

PSC Insurance Group Limited provides insurance brokerage services. The Company offers services such as risk management, workers compensation, business protection, worth insurance, claims settlements. PSC Insurance Group conducts its business globally.

Anadolu Hayat Emeklilik AS is a life insurance company offering its services in Turkey. The Company is active in both private pension and life insurance markets and operates through regional sales offices in Turkey.

Momentum Metropolitan Holdings operates as a holding company. The Company, through its subsidiaries, provides financial services such as individual life assurance, group life assurance, employee benefits, health insurance, and credit life products. Momentum Metropolitan Holdings serves customers in South Africa.

Mercuries Life Insurance Co., Ltd. offers diversify life insurance products and services.

Lemonade, Inc. operates as an insurance company. The Company offers artificial intelligence (AI) based technology for fire, property, liability, and other related insurance policy issuing and claim settlements. Lemonade serves customers in the United States.

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Lemonade Inc (LMND US)

Ant Group (6688 HK): IPO Pricing Warrants a Re-Rating

Ant Group's share price at IPO is above the original expected range; still, we expect solid share re-rating potential given its growth prospects...

Victor Galliano

Root Inc IPO Valuation Analysis (Insurtech SaaS)

Our base case valuation for Root is an implied market cap of $13.2 billion, or $52.1 per share, which is 108% higher than the high end of the IPO...

Douglas Kim

Root Inc IPO Preview - The Next Snowflake?

Root Inc could be one of those exceptional, disruptive SaaS companies that even the great value investors such as Warren Buffett could inject...

Douglas Kim

European Expansion Is Underway. Lemonade CFO Remains Bullish On 2020 Outlook

Lemonade shares outperformed previous week and rose ~10% while S&P 500 index fell ~1% and Nasdaq composite underperformed as well. Lemonade’s...

Andrei Zakharov

Lemonade Stock May Present Investors with Better Entry Point After Tech Sell-Off

During the last two trading sessions shares of Lemonade fell hard amid a massive tech stock sell-off. We remain bullish on Lemonade and believe,...

Andrei Zakharov

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