Financials & FinTech research, Galliano’s Financials Research

Victor Galliano

Victor Galliano is an experienced equity banks analyst, having covered Latin America banks and non-bank financials for over 12 years, as well as more recently covering the Italian banks. He has worked in sell side equity research for 30 years in a career spanning Barclays, HSBC, BBVA LatInvest, Barings and NatWest.
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.

Financials & FinTech research

Banking on Retail: A Primer on The Credit Operations of Leading LatAm Retailers

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>Cencosud is a multi-format retailer operating in Chile, Peru, Colombia, Brazil and Argentina. Its main focus is in supermarket retail, where it is ranked top 2 in Chile, Peru and Argentina, top 3 in Colombia and ranked fourth in Brazil. According to the 2018 accounts, Cencosud’s own share of consumer finance operations account for 3% of revenues and 15% of EBITDA</li>
<li>Cencosud’s credit operations are operated in joint ventures with banks in Chile, Peru, Colombia and Brazil, with only the Argentinian credit operations 100% owned. In Chile, Cencosud holds 49% of the credit business, with Scotiabank controlling 51%; management struck a similar deal for Peru in March, with the terms of the deal outlined in the slide below. In Colombia, Cencosud has a 50/50 joint venture with Scotia-Colpatria and in Brazil it has a 50/50 joint venture with Bradesco</li>
<li>We estimate that Cencosud’s share of the consumer credit businesses is valued in a range of USD606-873m, equivalent to a range of 11%-16% of the market cap. The credit operations in Chile are high return, and there is potential to improve returns in Peru, but we believe that there is a dilution of the returns on Cencosud’s share of credit businesses geographically in Colombia and Brazil, where disclosure is limited</li>
<li>Although Cencosud is inexpensively valued, in terms of TEV to Revenues, PE and EV/EBITDA multiples, relative to its peers, we believe that its potential for re-rating is limited as management continues to focus on its balance sheet de-leveraging; this has led Cencosud to sell down assets, including stakes in its consumer finance operations</li>
</ul>


Cencosud is a multi-format retailer operating in Chile, Peru, Colombia, Brazil and Argentina. Its main focus is in supermarket retail, where it is ranked top 2 in Chile, Peru and Argentina, top 3 in Colombia and ranked fourth in Brazil. According to the 2018 accounts, Cencosud’s own share of consumer finance operations account for 3% of revenues and 15% of EBITDA
Cencosud’s credit operations are operated in joint ventures with banks in Chile, Peru, Colombia and Brazil, with only the Argentinian credit operations 100% owned. In Chile, Cencosud holds 49% of the credit business, with Scotiabank controlling 51%; management struck a similar deal for Peru in March, with the terms of the deal outlined in the slide below. In Colombia, Cencosud has a 50/50 joint venture with Scotia-Colpatria and in Brazil it has a 50/50 joint venture with Bradesco
We estimate that Cencosud’s share of the consumer credit businesses is valued in a range of USD606-873m, equivalent to a range of 11%-16% of the market cap. The credit operations in Chile are high return, and there is potential to improve returns in Peru, but we believe that there is a dilution of the returns on Cencosud’s share of credit businesses geographically in Colombia and Brazil, where disclosure is limited
Although Cencosud is inexpensively valued, in terms of TEV to Revenues, PE and EV/EBITDA multiples, relative to its peers, we believe that its potential for re-rating is limited as management continues to focus on its balance sheet de-leveraging; this has led Cencosud to sell down assets, including stakes in its consumer finance operations


Cencosud: The Priority Is Debt De-Leveraging Through Asset Disposals and Stake Sales

Cencosud SA

Cencosud: The Priority Is Debt De-Leveraging Through Asset Disposals and Stake Sales