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.

Equity Bottom-Up

Bank Negara Indonesia Persero / Equity Bottom-Up

<ul>
<li>Bank Negara stands out versus its peers for its value attributes, its attractive PEG ratio, and its improving pre- and post-provision returns with top NPL coverage relative to its peers</li>
<li>Bank Mandiri remains a buy for its quality attributes, its premium returns, and its well-controlled CoR; Mandiri has a far better valuations-to-returns mix than mega-cap BCA </li>
<li>Bank Rakyat comes off the sell list; it registered improved pre-provision returns in 1Q24, and although cost of risk worsened, post-provision returns were maintained along with its NPL coverage ratio</li>
</ul>


Bank Negara stands out versus its peers for its value attributes, its attractive PEG ratio, and its improving pre- and post-provision returns with top NPL coverage relative to its peers
Bank Mandiri remains a buy for its quality attributes, its premium returns, and its well-controlled CoR; Mandiri has a far better valuations-to-returns mix than mega-cap BCA 
Bank Rakyat comes off the sell list; it registered improved pre-provision returns in 1Q24, and although cost of risk worsened, post-provision returns were maintained along with its NPL coverage ratio


Indonesian Banks Screener; Negara Stands Out on Value, Growth Potential and Improving Return Trends

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

Amman Mineral Internasional / Index Rebalance

<ul>
<li>There are 2 constituent changes for the LQ45 Index and 6 constituent changes for the IDX80 Index at the rebalance to be implemented at the close on 30 April.</li>
<li>The largest passive inflows are expected in <a href="https://www.smartkarma.com/entities/amman-mineral-internasional-pt" target="_blank" data-smartkarma-citation="entities:39838:1" rel="noopener">Amman Mineral Internasional (AMMN IJ)</a>, <a href="https://www.smartkarma.com/entities/indosat-tbk-pt" target="_blank" data-smartkarma-citation="entities:5737:1" rel="noopener">Indosat Tbk PT (ISAT IJ)</a>, <a href="https://www.smartkarma.com/entities/bank-rakyat-indonesia-persero" target="_blank" data-smartkarma-citation="entities:484:1" rel="noopener">Bank Rakyat Indonesia (BBRI IJ)</a> and <a href="https://www.smartkarma.com/entities/merdeka-copper-gold-tbk-pt" target="_blank" data-smartkarma-citation="entities:28447:1" rel="noopener">Merdeka Copper Gold Tbk PT (MDKA IJ)</a>. </li>
<li>With only 4 days to implementation, there could be relatively big moves on stocks that have large flow/impact from passive fund trading.</li>
</ul>


There are 2 constituent changes for the LQ45 Index and 6 constituent changes for the IDX80 Index at the rebalance to be implemented at the close on 30 April.
The largest passive inflows are expected in Amman Mineral Internasional (AMMN IJ), Indosat Tbk PT (ISAT IJ), Bank Rakyat Indonesia (BBRI IJ) and Merdeka Copper Gold Tbk PT (MDKA IJ). 
With only 4 days to implementation, there could be relatively big moves on stocks that have large flow/impact from passive fund trading.


IDX30/​​LQ45/IDX80 Index Rebalance: BIG Flows for Some Stocks

External broker reports(aggregated public sources), BRI Danareksa Research

BRI Danareksa Research

External broker reports(aggregated public sources)

As a one-stop financial solution with the vision to be the most valuable securities house, BRI Danareksa Sekuritas (BRIDS) has maintained an excellent track record and extensive experience in the capital market as an underwriter, broker, and financial advisor for individual, institutional, foreign and domestic, private and government clients. Established in 1992, PT Danareksa Sekuritas is a securities company that performs activities as a securities broker, underwriter, or arranger and financial advisor.

<ul><li>Despite the 91% increase in provisions, BBRI booked 1Q24 net profit of Rp15.9tr in 1Q24 (+2% yoy) with strong PPOP growth of +22% yoy.</li><li>The mgmt raised CoC/NPL guidance to max 3.0% (from 2.2-2.3%) and to max 3.0% (from 2.7-2.9%), but with an expected improvement in 2H24.</li><li>Since Mar24, BBRI’s valuation has de-rated to 2.4x PBV (+0.5SD vs 5- year mean) as the shares fell 15%, underperforming the sector by 11%.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Despite the 91% increase in provisions, BBRI booked 1Q24 net profit of Rp15.9tr in 1Q24 (+2% yoy) with strong PPOP growth of +22% yoy.The mgmt raised CoC/NPL guidance to max 3.0% (from 2.2-2.3%) and to max 3.0% (from 2.7-2.9%), but with an expected improvement in 2H24.Since Mar24, BBRI’s valuation has de-rated to 2.4x PBV (+0.5SD vs 5- year mean) as the shares fell 15%, underperforming the sector by 11%.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Bank Rakyat Indonesia (BBRI IJ) Positive 1Q24 Net Profit Growth Despite Higher Provisions

Product Marketing Manager, Criat

Raghav Chandra Mathur

Product Marketing Manager

Next-Generation Credit Analytics Provider

Criat

Criat specializes in new-generation data-driven credit analytics. Leveraging our industry-leading DeepCredit analytical technologies, we produce daily-updated forward-looking credit assessment and valuation to help financial institutions stay ahead of risks. Coupled with use-case-driven applications, we extract insights, answer questions and enable smarter credit decisions.

Thematic (Sector/Industry)

<ul><li>The strong showing of economic data from the US for the first three months of 2024 has spurred bets that the Federal Reserve’s is going to delay cutting rates towards the latter half of this year.</li><li>The narrative surrounding ‘imminent’ rate cuts that dominated market perception near the end of last year has been thwarted by the Fed’s chair Jerome Powell suggesting that rates are likely to remain elevated, without the market completely discounting the possibility of further rate hikes.</li><li>The immediate fallout from the higher-than-expected March inflation figures led to a systematic drop in Asian currencies, especially for some ASEAN based currencies, such as the Malaysian Ringgit, that have already been embattled by weakening currency against the dollar since the start of this year.</li></ul>

The strong showing of economic data from the US for the first three months of 2024 has spurred bets that the Federal Reserve’s is going to delay cutting rates towards the latter half of this year.The narrative surrounding ‘imminent’ rate cuts that dominated market perception near the end of last year has been thwarted by the Fed’s chair Jerome Powell suggesting that rates are likely to remain elevated, without the market completely discounting the possibility of further rate hikes.The immediate fallout from the higher-than-expected March inflation figures led to a systematic drop in Asian currencies, especially for some ASEAN based currencies, such as the Malaysian Ringgit, that have already been embattled by weakening currency against the dollar since the start of this year.

Strong ASEAN Banks Poised Well to Face Uncertain Rate Outlook

<ul><li>We estimate the big-4 banks’ FY24F earnings to be potentially 1-6% lower if the BI rate is unchanged; BBCA as the least affected bank.</li><li>While previously a higher-for-longer scenario drove a lower ROE and sharp de-rating, FY24F ROE is resilient amid better asset quality.</li><li>We remain Overweight on the banking sector at the current implied CoE of 9.0%, -1SD to its 5-year average. BBCA remains our top pick.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

We estimate the big-4 banks’ FY24F earnings to be potentially 1-6% lower if the BI rate is unchanged; BBCA as the least affected bank.While previously a higher-for-longer scenario drove a lower ROE and sharp de-rating, FY24F ROE is resilient amid better asset quality.We remain Overweight on the banking sector at the current implied CoE of 9.0%, -1SD to its 5-year average. BBCA remains our top pick.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Banks: Solid asset quality and capital to weather macro uncertainties (OVERWEIGHT)

Indonesia

PT Bank Rakyat Indonesia (Persero) Tbk provides commercial banking activities and its related services. The Bank also provides banking activities based on shariah principles.

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Bank Rakyat Indonesia (BBRI IJ)

Indonesian Banks Screener; Negara Stands Out on Value, Growth Potential and Improving Return Trends

Negara is our value pick, with improving returns and the best NPL coverage of the peer group, and we maintain Mandiri as a buy for its best...

Victor Galliano

IDX30/LQ45/IDX80 Index Rebalance: BIG Flows for Some Stocks

The Indonesian indices rebalance at the close today and there will be multiple days of volume going through on some stocks.

Brian Freitas