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

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<li>
<a href="https://www.smartkarma.com/entities/27676" target="_blank" data-smartkarma-citation="entities:27676:1">Magazine Luiza SA (MGLU3 BZ)</a> is a general consumer goods retailer through physical and virtual stores, as well as e-commerce. It also grants credit and provides extended warranties for its products, and has its own e-commerce marketplace with 36% of sales executed via the e-commerce channel in 2018</li>
<li>Its consumer credit operation, Luizacred, is a 50-50 joint venture with Banco Itaú Unibanco. It also has a small insurance operation Luizaseg, a 50-50 joint venture with Cardif, part of the BNP Paribas group. Luizacred’s loan portfolio came to BRL8.4bn (USD2.2bn) at YE 2018, with BRL8.15bn in credit card exposure on its base of 4.25m cards</li>
<li>We apply a bear (13x) and bull (19x) range of historic (2018A) PE multiples for Luizacred, based on Brazil GAAP net earnings. We estimate that this values Magalu’s share of the consumer credit and insurance businesses in a range of USD345-504m, equivalent to a range of 4%-6% of Magalu’s market cap</li>
<li>Although we see better value equities as alternatives, and other retailers with more meaningful consumer finance arms, we believe that Magalu, as a digital disrupter in Brazilian retail and consumer finance in the slipstream of <a href="https://www.smartkarma.com/entities/24470" target="_blank" data-smartkarma-citation="entities:24470:1">B2W Cia Digital (BTOW3 BZ)</a> , is another name worth watching</li>
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Magazine Luiza SA (MGLU3 BZ) is a general consumer goods retailer through physical and virtual stores, as well as e-commerce. It also grants credit and provides extended warranties for its products, and has its own e-commerce marketplace with 36% of sales executed via the e-commerce channel in 2018
Its consumer credit operation, Luizacred, is a 50-50 joint venture with Banco Itaú Unibanco. It also has a small insurance operation Luizaseg, a 50-50 joint venture with Cardif, part of the BNP Paribas group. Luizacred’s loan portfolio came to BRL8.4bn (USD2.2bn) at YE 2018, with BRL8.15bn in credit card exposure on its base of 4.25m cards
We apply a bear (13x) and bull (19x) range of historic (2018A) PE multiples for Luizacred, based on Brazil GAAP net earnings. We estimate that this values Magalu’s share of the consumer credit and insurance businesses in a range of USD345-504m, equivalent to a range of 4%-6% of Magalu’s market cap
Although we see better value equities as alternatives, and other retailers with more meaningful consumer finance arms, we believe that Magalu, as a digital disrupter in Brazilian retail and consumer finance in the slipstream of B2W Cia Digital (BTOW3 BZ) , is another name worth watching


Magazine Luiza (Magalu); Another Contender in Brazilian E-Commerce, Sound JV in Consumer Finance