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/bradespar-sa" target="_blank" data-smartkarma-citation="entities:24510:1" rel="noopener">Bradespar SA (BRAP4 BZ)</a> is an attractive investment, as a discounted vehicle through which to gain exposure to iron ore miner <a href="https://www.smartkarma.com/entities/vale-sa-7721577f-6c6a-4536-a829-92551c2bcd7f" target="_blank" data-smartkarma-citation="entities:27725:1" rel="noopener">Vale SA (VALE3 BZ)</a> </li>
<li>We believe that the current 25% discount to the NAV at Bradespar is excessive, and that this should narrow in the near term</li>
<li>Vale’s fundamentals are robust, supported by s strong iron ore price and, as an exporter, benefiting from a weak BRL</li>
<li>
<a href="https://www.smartkarma.com/entities/itausa-investimentos-itau-pr" target="_blank" data-smartkarma-citation="entities:24513:1" rel="noopener">Itausa-Investimentos Itau-Pr (ITSA4 BZ)</a> is trading close to its long run and 18 month average discount to the NAV; we are neutral on Itausa</li>
<li>Risks to our positive view on Bradespar include a sustained weakening in iron ore prices, a strengthening of the BRL as well as a worsening of sentiment towards Brazil and Latin American equities generally</li>
</ul>



Bradespar SA (BRAP4 BZ) is an attractive investment, as a discounted vehicle through which to gain exposure to iron ore miner Vale SA (VALE3 BZ) 
We believe that the current 25% discount to the NAV at Bradespar is excessive, and that this should narrow in the near term
Vale’s fundamentals are robust, supported by s strong iron ore price and, as an exporter, benefiting from a weak BRL

Itausa-Investimentos Itau-Pr (ITSA4 BZ) is trading close to its long run and 18 month average discount to the NAV; we are neutral on Itausa
Risks to our positive view on Bradespar include a sustained weakening in iron ore prices, a strengthening of the BRL as well as a worsening of sentiment towards Brazil and Latin American equities generally


A Tale of Two Brazilian HoldCos; We Prefer Bradespar (BRAP4 BZ) Over Itausa (ITSA4 BZ)

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Thematic (Sector/Industry)

<p>This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity indices. </p><p><strong><em>Companies mentioned this week:</em></strong></p><p><a href="https://www.smartkarma.com/entities/mediatek-inc" target="_blank" data-smartkarma-citation="entities:772:1" rel="noopener">Mediatek Inc (2454 TT)</a>, <a href="https://www.smartkarma.com/entities/hyundai-motor-co" target="_blank" data-smartkarma-citation="entities:155:1" rel="noopener">Hyundai Motor Co (005380 KS)</a>, <a href="https://www.smartkarma.com/entities/kia-motors-corp" target="_blank" data-smartkarma-citation="entities:156:1" rel="noopener">Kia Motors Corp (000270 KS)</a>, <a href="https://www.smartkarma.com/entities/bytedance-technology" target="_blank" data-smartkarma-citation="entities:27936:1" rel="noopener">ByteDance (1460967D CH)</a>, <a href="https://www.smartkarma.com/entities/mtn-group-ltd" target="_blank" data-smartkarma-citation="entities:24897:1" rel="noopener">MTN Group Ltd (MTN SJ)</a>, <a href="https://www.smartkarma.com/entities/reliance-industries-ltd" target="_blank" data-smartkarma-citation="entities:198:1" rel="noopener">Reliance Industries (RIL IN)</a>, <a href="https://www.smartkarma.com/entities/vale-sa-7721577f-6c6a-4536-a829-92551c2bcd7f" target="_blank" data-smartkarma-citation="entities:27725:1" rel="noopener">Vale SA (VALE3 BZ)</a>, <a href="https://www.smartkarma.com/entities/petroleo-brasileiro-sa-1cc9bae4-1206-4157-b187-d2f98d7b3b2b" target="_blank" data-smartkarma-citation="entities:27684:1" rel="noopener">Petroleo Brasileiro SA (PETR4 BZ)</a> </p>

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity indices. Companies mentioned this week:Mediatek Inc (2454 TT), Hyundai Motor Co (005380 KS), Kia Motors Corp (000270 KS), ByteDance (1460967D CH), MTN Group Ltd (MTN SJ), Reliance Industries (RIL IN), Vale SA (VALE3 BZ), Petroleo Brasileiro SA (PETR4 BZ) 

Global Emerging Markets Weekly: 5 February 2021

Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Investics Research

It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

Equity Bottom-up Research

Equity Bottom-Up

<p>We believe that iron ore prices will stay stronger for longer as <a href="https://www.smartkarma.com/entities/vale-sa" target="_blank" data-smartkarma-citation="entities:23731:1" rel="noopener">Vale SA (VALE US)</a>, in its most recent regulatory filing, guided its production volumes down to 305-310 million tons for FY20 and 315-335 million tons for FY21. </p>
<p>Most of the sell-side and the market were assuming sales of 360 million tons for FY21. Market participants will have to bring supply estimates down by 25-45 million tons for FY21. </p>
<h3><strong>Vale Output Summary </strong></h3>
<table class="table table-striped">
<tbody>
<tr>
<td style="text-align: center; width: 128.444px;">2017</td>
<td style="text-align: center; width: 128.444px;">2018</td>
<td style="text-align: center; width: 128.444px;">2019</td>
<td style="text-align: center; width: 128.444px;">2020e</td>
<td style="text-align: center; width: 126.667px;">2021e</td>
</tr>
<tr>
<td style="text-align: center; width: 128.444px;">366</td>
<td style="text-align: center; width: 128.444px;">385</td>
<td style="text-align: center; width: 128.444px;">302</td>
<td style="text-align: center; width: 128.444px;">305-310</td>
<td style="text-align: center; width: 126.667px;">315-335</td>
</tr>
</tbody>
</table>
<p><em>source: company filings and presentations</em></p>
<p>We believe this guide down in sales for 2021 is substantial and will benefit iron ore prices in the short-term as Vale's shipments are almost 16-17% of the seaborne market. </p>
<p>Based on spot prices of 120-140$/ton, <a href="https://www.smartkarma.com/entities/fortescue-metals-group-ltd" target="_blank" data-smartkarma-citation="entities:41:1" rel="noopener">Fortescue Metals (FMG AU)</a> trades at an 11-15% FCF yield.  The company pays out its cash generated as dividends.  </p>
<p>This catalyst and cheap FCF yield indicate a short term upside of at least 20-30%.</p>

We believe that iron ore prices will stay stronger for longer as Vale SA (VALE US), in its most recent regulatory filing, guided its production volumes down to 305-310 million tons for FY20 and 315-335 million tons for FY21. 
Most of the sell-side and the market were assuming sales of 360 million tons for FY21. Market participants will have to bring supply estimates down by 25-45 million tons for FY21. 
Vale Output Summary 



2017
2018
2019
2020e
2021e


366
385
302
305-310
315-335



source: company filings and presentations
We believe this guide down in sales for 2021 is substantial and will benefit iron ore prices in the short-term as Vale's shipments are almost 16-17% of the seaborne market. 
Based on spot prices of 120-140$/ton, Fortescue Metals (FMG AU) trades at an 11-15% FCF yield.  The company pays out its cash generated as dividends.  
This catalyst and cheap FCF yield indicate a short term upside of at least 20-30%.

Fortescue Metals: More Upside In the Near Term

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

MSCI Emerging Markets Index / Technical Analysis

<p>China (<strong>MSCI China</strong>) continues to offer many attractive setups and accounts for the vast majority of today’s recommendations. Taiwan (<strong>TAIEX</strong>) continues to be worthy of an overweight within the EM universe, while Brazil (<strong>Bovespa</strong>) and India (<strong>SENSEX</strong>) display improving price and RS trends -</p>

China (MSCI China) continues to offer many attractive setups and accounts for the vast majority of today’s recommendations. Taiwan (TAIEX) continues to be worthy of an overweight within the EM universe, while Brazil (Bovespa) and India (SENSEX) display improving price and RS trends -

US Dollar Weakness Remains A Tailwind For EM

Managing Director

Elan Gore

TMI Data Science

TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade & traditional media.  Our proprietary software, TMI Machine, is a text-mining platform designed with the buy-side & capital markets professional in mind, text-mining the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income & individual equities.  TMI provides custom leading indicators and systematic trading strategies, operating at the nexus of linguistics & statistics drawing on vast experience in investment banking and hedge fund settings in senior quantitative and fundamental roles.  

TMI Data Science was founded by Elan Gore, an award-winning Senior Global Basic Materials Equity Analyst & China Economist with 15 years of experience in North American hedge funds & institutional managers; and Alessandro Porrino, Ph.D., an Algorithmic Trading Analyst and Programmer with 10 years of front-office experience ranging from complex FX option pricing to auto-hedging strategies at Bank of America Merrill Lynch and Standard Chartered.  Mr. Gore holds an MBA in Finance from New York University Stern School of Business, and Mr. Porrino holds a Ph.D. in Systems Engineering from Brunel University London.

Cross Asset Strategy

<ul>
<li>We run sentiment analysis around Rio Tinto's Juukan Gorge heritage site crisis, text-mining for ESG-related sentiment since news of ethically-challenged practices at RIO broke out</li>
<li>In early June, Rio Tinto revealed it had blasted a 46,000-year-old sacred aboriginal site, sparking widespread controversy and resulting in a management shakeout and parliamentary enquiry</li>
<li>Perceived as an ESG disaster, Rio Tinto continues to underperform FMG and the MSCI Global Metals &amp; Mining Index, though its performance gap with BHP closed in September following executive resignations</li>
<li>Fortescue's performance appears to have been unaffected by the Juukan Gorge crisis, but our sentiment analysis and news attributions see gathering clouds as FMG is recently linked to significant negative stewardship headlines</li>
<li>Our daily RIO ESG sentiment time series has been 74% correlated with RIO performance since May 31 with a 7-day lead</li>
<li>Though entirely dependent on the quality and volume of news flow, NLP-based sentiment analysis can help identify and attribute decoupling between equity performance and newsflow tone, as well as challenge confirmation biases, taking into account the rapid pace of news decay</li>
</ul><div class="content-highlight"><p>TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary software text-mines the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. </p></div>


We run sentiment analysis around Rio Tinto's Juukan Gorge heritage site crisis, text-mining for ESG-related sentiment since news of ethically-challenged practices at RIO broke out
In early June, Rio Tinto revealed it had blasted a 46,000-year-old sacred aboriginal site, sparking widespread controversy and resulting in a management shakeout and parliamentary enquiry
Perceived as an ESG disaster, Rio Tinto continues to underperform FMG and the MSCI Global Metals &amp; Mining Index, though its performance gap with BHP closed in September following executive resignations
Fortescue's performance appears to have been unaffected by the Juukan Gorge crisis, but our sentiment analysis and news attributions see gathering clouds as FMG is recently linked to significant negative stewardship headlines
Our daily RIO ESG sentiment time series has been 74% correlated with RIO performance since May 31 with a 7-day lead
Though entirely dependent on the quality and volume of news flow, NLP-based sentiment analysis can help identify and attribute decoupling between equity performance and newsflow tone, as well as challenge confirmation biases, taking into account the rapid pace of news decay
TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary software text-mines the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. 

TMI Snapshot:  After Juukan Gorge, Rio Tinto Sentiment Stabilizes.  Reckoning Time For FMG?

Brazil

Vale S.A. produces and sells iron ore, pellets, manganese, alloys, gold, nickel, copper, kaolin, bauxite, alumina, aluminum, and potash. The Company is based in Brazil, where it owns and operates railroads and maritime terminals.

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Vale (VALE US)

A Tale of Two Brazilian HoldCos; We Prefer Bradespar (BRAP4 BZ) Over Itausa (ITSA4 BZ)

Bradespar holdco is a vehicle that provides discounted exposure to iron ore miner Vale; we see the current 25% discount to the Bradespar NAV as...

Victor Galliano

Global Emerging Markets Weekly: 5 February 2021

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity...

Wium Malan, CFA

Fortescue Metals: More Upside In the Near Term

Fortescue is a pure-play with a high correlation to the iron ore price. With iron ore in a 120-140$/ton range, the stock has an FCF yield of 11-15%...

Sameer Taneja

US Dollar Weakness Remains A Tailwind For EM

China accounts for the vast majority of today’s recommendations. Taiwan (TAIEX) continues to be worthy of an overweight within EM, while Brazil...

Vermilion Research

TMI Snapshot: After Juukan Gorge, Rio Tinto Sentiment Stabilizes. Reckoning Time For FMG?

We text mined for ESG-related coverage of Rio Tinto to find that sentiment (74% correlated with the equity) has stabilized since the Juukan Gorge...

Elan Gore

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