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.

Thematic (Sector/Industry)

<ul>
<li>BoJ’s tweaking of yield curve controls places Japanese financials on a more positive investment footing, and given the modest valuations, there is healthy potential for further re-rating</li>
<li>We assess the large-cap and select mid-cap Japanese commercial banks’ exposures to JGBs and foreign sovereign bonds and their loan books’ gearing to the prospect of higher rates</li>
<li>We see value, in particular, in Resona, Mizuho and SMFG with attractive valuations supported by modest LDRs, good loan sensitivity to higher rates and relatively modest exposure to JGBs</li>
</ul>


BoJ’s tweaking of yield curve controls places Japanese financials on a more positive investment footing, and given the modest valuations, there is healthy potential for further re-rating
We assess the large-cap and select mid-cap Japanese commercial banks’ exposures to JGBs and foreign sovereign bonds and their loan books’ gearing to the prospect of higher rates
We see value, in particular, in Resona, Mizuho and SMFG with attractive valuations supported by modest LDRs, good loan sensitivity to higher rates and relatively modest exposure to JGBs


Japanese Banks – Our Picks for a Steepening Yield Curve

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a> is ultimately quite skippable. While ¥4,620 seems like "the wrong price" over a 5-year period, it is not clear that is the wrong price now.  </li>
<li>Global military touches a new high. South Korean defence contractors, such as <a href="https://www.smartkarma.com/entities/hyundai-rotem-company" target="_blank" data-smartkarma-citation="entities:1554:1" rel="noopener">Hyundai Rotem Company (064350 KS)</a>, are big beneficiaries.</li>
<li>Historically, the "event" which helps Murakami-san get out - with respect to <a href="https://www.smartkarma.com/entities/arclands-corporation" target="_blank" data-smartkarma-citation="entities:10395:1" rel="noopener">Arclands Corporation (9842 JP)</a>/<a href="https://www.smartkarma.com/entities/arcland-service-co-ltd" target="_blank" data-smartkarma-citation="entities:2392:1" rel="noopener">Arcland Service (3085 JP)</a> - is not one which is suitable for "normal" investors. </li>
</ul>



Toshiba Corp (6502 JP) is ultimately quite skippable. While ¥4,620 seems like "the wrong price" over a 5-year period, it is not clear that is the wrong price now.  
Global military touches a new high. South Korean defence contractors, such as Hyundai Rotem Company (064350 KS), are big beneficiaries.
Historically, the "event" which helps Murakami-san get out - with respect to Arclands Corporation (9842 JP)/Arcland Service (3085 JP) - is not one which is suitable for "normal" investors. 


Last Week in Event SPACE: Toshiba, Asian Defence Contractors, Arclands Corp/Services, Bank of Kyoto

Travis Lundy

<ul>
<li>Last year, Silchester International Investors wrote a series of letters to Bank of Kyoto management and then asked to put items on the AGM agenda. It lost. </li>
<li>A Bloomberg article last week suggests Silchester will ask for a ¥62 special div and a ¥5bn buyback this year. The Silchester letter is "due" by 30 April. </li>
<li>The Bank has already delivered most of the ask this year (¥3bn in upped div, and ¥5bn in buybacks). Silchester will lose. Expect no Conversion on the Road to Kasumigaseki.
</li>
</ul>


Last year, Silchester International Investors wrote a series of letters to Bank of Kyoto management and then asked to put items on the AGM agenda. It lost. 
A Bloomberg article last week suggests Silchester will ask for a ¥62 special div and a ¥5bn buyback this year. The Silchester letter is "due" by 30 April. 
The Bank has already delivered most of the ask this year (¥3bn in upped div, and ¥5bn in buybacks). Silchester will lose. Expect no Conversion on the Road to Kasumigaseki.



JAPAN ACTIVISM: Silchester and Bank of Kyoto (8369) Redux

<ul>
<li>Today, <a href="https://www.smartkarma.com/entities/rakuten-group-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten (4755 JP)</a> and <a href="https://www.smartkarma.com/entities/rakuten-bank-ltd" target="_blank" data-smartkarma-citation="entities:35638:1" rel="noopener">Rakuten Bank (5838 JP)</a> <a href="https://www.rakuten-bank.co.jp/press/2023/pdf/230322-2.pdf" target="_blank" rel="noopener">announced</a> that Rakuten Bank had <a href="https://global.rakuten.com/corp/news/press/2023/0322_01.html" target="_blank" rel="noopener">received TSE approval to list</a> (English) on TSE Prime, with expected listing date 21 April 2023.</li>
<li>This had been <a href="https://global.rakuten.com/corp/news/press/2022/0704_02.html?year=2022&amp;month=7&amp;category=corp%20ir%20fintech" target="_blank" rel="noopener">in the works since July 2022</a>, and they <a href="https://www.bloomberg.com/news/articles/2022-09-21/rakuten-is-said-to-pick-goldman-daiwa-for-banking-unit-ipo#xj4y7vzkg" target="_blank" rel="noopener">selected advisors</a> in September 2022. The low end of the offer price range seems attractive. More diligence needed.</li>
<li>There will be index inclusions. Unlike <a href="https://www.smartkarma.com/entities/sbi-sumishin-net-bank" target="_blank" data-smartkarma-citation="entities:34572:1" rel="noopener">SBI Sumishin Net Bank (7163 JP)</a> which is going to TSE Standard, Rakuten Bank is going to Prime.</li>
</ul>


Today, Rakuten (4755 JP) and Rakuten Bank (5838 JP) announced that Rakuten Bank had received TSE approval to list (English) on TSE Prime, with expected listing date 21 April 2023.
This had been in the works since July 2022, and they selected advisors in September 2022. The low end of the offer price range seems attractive. More diligence needed.
There will be index inclusions. Unlike SBI Sumishin Net Bank (7163 JP) which is going to TSE Standard, Rakuten Bank is going to Prime.


Rakuten Bank (5838 JP) - Another Net-Bank IPO, This One With TOPIX and Other Index Inclusions

<ul>
<li>The word floating around late Friday as books closed was that foreigners had bid strongly. More than the entire <a href="https://www.smartkarma.com/entities/japan-post-bank-co-ltd" target="_blank" data-smartkarma-citation="entities:838:1" rel="noopener">Japan Post Bank (7182 JP)</a> offering size in fact.</li>
<li>The offering is an interesting problem, as discussed before. Different people are going to buy it for different reasons. </li>
<li>This insight looks at the breakdown of ratios and the resultant foreign ownership, along with post-offer supply/demand balance.</li>
</ul>


The word floating around late Friday as books closed was that foreigners had bid strongly. More than the entire Japan Post Bank (7182 JP) offering size in fact.
The offering is an interesting problem, as discussed before. Different people are going to buy it for different reasons. 
This insight looks at the breakdown of ratios and the resultant foreign ownership, along with post-offer supply/demand balance.


Japan Post Bank - Estimating Foreign Ownership and Deal Flowback

Japan

The Bank of Kyoto, Ltd. is a regional bank in Kyoto.  The Bank provides banking services including deposits, savings, loans, foreign exchange transactions, and securities investments.  The Bank of Kyoto also provides financial services such as letter of credit, leasing, loans, and credit cards.

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Bank of Kyoto (8369 JP)

Japanese Banks – Our Picks for a Steepening Yield Curve

We assess Japanese commercial banks’ exposures to JGBs and foreign sovereign bonds and their loan books’ gearing to the prospect of higher rates,...

Victor Galliano

Last Week in Event SPACE: Toshiba, Asian Defence Contractors, Arclands Corp/Services, Bank of Kyoto

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

JAPAN ACTIVISM: Silchester and Bank of Kyoto (8369) Redux

Silchester International Investors last year sent letters to Bank of Kyoto and three other Japanese banks, and made AGM proposals. They will...

Travis Lundy

Rakuten Bank (5838 JP) - Another Net-Bank IPO, This One With TOPIX and Other Index Inclusions

Rakuten Bank IPO has been in the works since July 2022. It's here. Timing could have been better. Rakuten Bank specialises in B2C transactions,...

Travis Lundy

Japan Post Bank - Estimating Foreign Ownership and Deal Flowback

I expect the JPB deal will price after the close on Monday. Determinants as to success in aftermarket will be foreign active demand (incl...

Travis Lundy

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