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

Guararapes Confeccoes SA / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/28023" target="_blank" data-smartkarma-citation="entities:28023:1">Guararapes Confeccoes SA (GUAR3 BZ)</a>, is a top three competitor to Brazilian market leader <a href="https://www.smartkarma.com/entities/24472" target="_blank" data-smartkarma-citation="entities:24472:1">Lojas Renner SA (LREN3 BZ)</a> in apparel retail</li>
<li>Its consumer credit book, including credit card loan exposure, of BRL4.1bn (USD1.1bn) is held by Guararapes’ 100% owned corporate vehicle for consumer credit, Midway Financiera. Midway  has delivered premium ROAE over 2015-18, and, although its NPL coverage is lower than Renner's, it has a very solid capital position</li>
<li>We apply a bear (9x) and bull (16x) range of historic (2018A) PE multiples for its consumer finance arm Midway Financiera. We estimate that this values Guararapes’ consumer credit businesses in a range of USD500-889m, equivalent to a range of 22%-38% of Guararapes' market capitalisation</li>
<li>We believe that Guararapes equity is an attractive investment, trading on consensus PE multiples of 15.6x for 2019E and 12.8x for 2020E, and EV/EBITDA multiples of 8.2x for 2019E and 7.1x for 2020E. Although we recognise that Guararapes should trade at a discount to Renner, we believe that Guararapes has potential to re-rate and narrow its discounted valuation</li>
</ul>



Guararapes Confeccoes SA (GUAR3 BZ), is a top three competitor to Brazilian market leader Lojas Renner SA (LREN3 BZ) in apparel retail
Its consumer credit book, including credit card loan exposure, of BRL4.1bn (USD1.1bn) is held by Guararapes’ 100% owned corporate vehicle for consumer credit, Midway Financiera. Midway  has delivered premium ROAE over 2015-18, and, although its NPL coverage is lower than Renner's, it has a very solid capital position
We apply a bear (9x) and bull (16x) range of historic (2018A) PE multiples for its consumer finance arm Midway Financiera. We estimate that this values Guararapes’ consumer credit businesses in a range of USD500-889m, equivalent to a range of 22%-38% of Guararapes' market capitalisation
We believe that Guararapes equity is an attractive investment, trading on consensus PE multiples of 15.6x for 2019E and 12.8x for 2020E, and EV/EBITDA multiples of 8.2x for 2019E and 7.1x for 2020E. Although we recognise that Guararapes should trade at a discount to Renner, we believe that Guararapes has potential to re-rate and narrow its discounted valuation


Guararapes: Good Value in Brazil Retailing, Sound Presence in Consumer Finance