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.

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/yandex-nv-a" target="_blank" data-smartkarma-citation="entities:414:1" rel="noopener">Yandex (YNDX US)</a>  offer for <a href="https://www.smartkarma.com/entities/tcs-group-holding-plc" target="_blank" data-smartkarma-citation="entities:28148:1" rel="noopener">TCS Group Holding PLC (TCS LI),</a> Tinkoff, values the Russian digital bank at 2021E PBV ratio of 2.8x and 2021E PE ratio of 10x</li>
<li>We believe that the Yandex-Tinkoff deal reflects that TechFin M&amp;A activity is more geared towards the quest for expansion of scope than scale</li>
<li>We see other cases of this type of M&amp;A in other recent transactions, in Brazil; for example, there are the cases of StoneCo-Linx and Nubank-EasyInvest</li>
<li>Tinkoff is a comparable digital bank in Emerging Markets to Brazilian <a href="https://www.smartkarma.com/entities/banco-inter-sa" target="_blank" data-smartkarma-citation="entities:28162:1" rel="noopener">Banco Inter SA (BIDI11 BZ)</a>; we estimate that – based on a per digital account valuation – the Yandex offer values Tinkoff at a 25% premium to Banco Inter</li>
<li>We believe that this deal’s “read-across” is constructive for other digital banks in the main and specifically for Banco Inter’s market valuation, especially after the recent correction in share prices</li>
<li>Risks to our positive view on Banco Inter include lower than expected growth in the digital account base due to increased competition, worse than expected credit quality due to the economic downturn forcing cost of risk higher as well as downward pressure on credit spreads and fees</li>
</ul>



Yandex (YNDX US)  offer for TCS Group Holding PLC (TCS LI), Tinkoff, values the Russian digital bank at 2021E PBV ratio of 2.8x and 2021E PE ratio of 10x
We believe that the Yandex-Tinkoff deal reflects that TechFin M&amp;A activity is more geared towards the quest for expansion of scope than scale
We see other cases of this type of M&amp;A in other recent transactions, in Brazil; for example, there are the cases of StoneCo-Linx and Nubank-EasyInvest
Tinkoff is a comparable digital bank in Emerging Markets to Brazilian Banco Inter SA (BIDI11 BZ); we estimate that – based on a per digital account valuation – the Yandex offer values Tinkoff at a 25% premium to Banco Inter
We believe that this deal’s “read-across” is constructive for other digital banks in the main and specifically for Banco Inter’s market valuation, especially after the recent correction in share prices
Risks to our positive view on Banco Inter include lower than expected growth in the digital account base due to increased competition, worse than expected credit quality due to the economic downturn forcing cost of risk higher as well as downward pressure on credit spreads and fees


Yandex Offer for Tinkoff – TechFin M&A Driven by Quest for Greater Scope, and Brazil “read-Across”

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Cross Asset Strategy

<ul>
<li>Russian allocations among EM active funds are at their highest levels in 3-years. </li>
<li>The Russian overweight stands at +1.23% above benchmark, the second-largest among all EM countries and towards the top end of the long-term range. </li>
<li>Key overweights are in Russian Financials and Communication Services, though Energy stocks represent the largest sector holding.</li>
<li>Increases in exposure have been driven by Yield and Value funds, where allocations are towards all-time highs.</li>
<li>
<a href="https://www.smartkarma.com/entities/sberbank-of-russia-pjsc-cde59529-fb78-4659-85d0-127942b44ba7" target="_blank" data-smartkarma-citation="entities:27581:1" rel="noopener">Sberbank of Russia PJSC (SBER RM)</a> is both the most widely held stock in Russia and also the largest overweight, held by 63% of EM funds at an average weight of 1.19%. The key underweights are <a href="https://www.smartkarma.com/entities/gazprom-pjsc-6a7231a9-d5e4-4da4-bf21-aa1b9d50fbf8" target="_blank" data-smartkarma-citation="entities:27578:1" rel="noopener">Gazprom PJSC (GAZP RM)</a> and <a href="https://www.smartkarma.com/entities/tatneft-pjsc-8dc45b1a-e1ac-4c8e-84fc-dcd517b23339" target="_blank" data-smartkarma-citation="entities:27718:1" rel="noopener">Tatneft PJSC (TATN RM)</a>
</li>
<li>Recent activity has seen buyers of Consumer Staples stocks, driven by increased ownership in <a href="https://www.smartkarma.com/entities/x5-retail-group-nv" target="_blank" data-smartkarma-citation="entities:25278:1" rel="noopener">X5 Retail Group Nv (FIVE LI)</a> </li>
</ul><p><em>The analysis is taken from our Emerging Market Research, that features 224 global emerging market long-only active funds, with combined AUM of $360bn.</em></p>


Russian allocations among EM active funds are at their highest levels in 3-years. 
The Russian overweight stands at +1.23% above benchmark, the second-largest among all EM countries and towards the top end of the long-term range. 
Key overweights are in Russian Financials and Communication Services, though Energy stocks represent the largest sector holding.
Increases in exposure have been driven by Yield and Value funds, where allocations are towards all-time highs.

Sberbank of Russia PJSC (SBER RM) is both the most widely held stock in Russia and also the largest overweight, held by 63% of EM funds at an average weight of 1.19%. The key underweights are Gazprom PJSC (GAZP RM) and Tatneft PJSC (TATN RM)

Recent activity has seen buyers of Consumer Staples stocks, driven by increased ownership in X5 Retail Group Nv (FIVE LI) 
The analysis is taken from our Emerging Market Research, that features 224 global emerging market long-only active funds, with combined AUM of $360bn.

Russia

TCS Group Holding PLC, a digital provider of online financial and lifestyle services via its ecosystem. With no branches, the Group serves all its customers remotely via online channels and a cloud-based call centre.

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TCS Group Holding (TCS LI)

Yandex Offer for Tinkoff – TechFin M&A Driven by Quest for Greater Scope, and Brazil “read-Across”

$yandex offer for Tinkoff values the Russian digital bank at 2021E PBV ratio of 2.8x and 2021E PE ratio of 10x We believe that the Yandex-Tinkoff...

Victor Galliano

The Russia Resurgence

Russian allocations among EM active funds are at their highest levels in 3-years. The Russian overweight stands at +1.23% above benchmark, the...

Steven Holden

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