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

<ul>
<li>We see further scope for consensus earnings and EBITDA disappointment at <a href="https://www.smartkarma.com/entities/mercadolibre-inc" target="_blank" data-smartkarma-citation="entities:27954:1" rel="noopener">MercadoLibre Inc (MELI US)</a>
</li>
<li>In the FinTech operations, where MELI is growing and investing in payments, the competitive pressure is intense, especially but not exclusively in Brazil</li>
<li>We think this intensely competitive environment, reflected in the high sales and marketing costs, will continue to pressure returns and EBITDA margins in the coming quarters</li>
<li>Consequently, we expect further cuts to consensus EPS and EBITDA estimates in the near term, and a prospective share de-rating</li>
<li>Risks to our thesis include less than expected pressure on Merchant Discount Rates in Brazil, boosting revenue growth and a stricter control of opex</li>
</ul>


We see further scope for consensus earnings and EBITDA disappointment at MercadoLibre Inc (MELI US)

In the FinTech operations, where MELI is growing and investing in payments, the competitive pressure is intense, especially but not exclusively in Brazil
We think this intensely competitive environment, reflected in the high sales and marketing costs, will continue to pressure returns and EBITDA margins in the coming quarters
Consequently, we expect further cuts to consensus EPS and EBITDA estimates in the near term, and a prospective share de-rating
Risks to our thesis include less than expected pressure on Merchant Discount Rates in Brazil, boosting revenue growth and a stricter control of opex


MercadoLibre (MELI) - FinTech Operations Opex Pressures to Weigh on Consensus Estimates

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<ul>
<li>A rising pro-market tide has lifted the big-cap banks, but now it is time to be more selective. We see further potential for stock re-rating among the Brazilian banks, as the new Bolosonaro administration executes its pro-market policies.</li>
<li>Our top pick is <a href="https://www.smartkarma.com/entities/24564" target="_blank">Banco Do Brasil Sa (BdoBAS3 BZ)</a> , with a target price of BRL57, which implies 19% re-rating potential. We believe that Banco do Brasil (BdoB) shareholders are set to benefit from less of a “social programme” agenda which in turn should help improve ROE going forward.</li>
<li>Yet the PBV discount between BdoB and its private sector peers - especially against Itaú Unibanco at 52% - has barely narrowed, and we believe that the discount has potential to narrow further as BdoB’s ROE expands and narrows the gap with its private sector peers.</li>
</ul>


A rising pro-market tide has lifted the big-cap banks, but now it is time to be more selective. We see further potential for stock re-rating among the Brazilian banks, as the new Bolosonaro administration executes its pro-market policies.
Our top pick is Banco Do Brasil Sa (BdoBAS3 BZ) , with a target price of BRL57, which implies 19% re-rating potential. We believe that Banco do Brasil (BdoB) shareholders are set to benefit from less of a “social programme” agenda which in turn should help improve ROE going forward.
Yet the PBV discount between BdoB and its private sector peers - especially against Itaú Unibanco at 52% - has barely narrowed, and we believe that the discount has potential to narrow further as BdoB’s ROE expands and narrows the gap with its private sector peers.


Brazil Banks: Banco Do Brasil Focus - Prospects for Improved Returns, Narrowing PBV Discount

Brazil

Cielo is the largest Brazilian credit and debit card operator and the biggest payment system company in Latin America. It acts as a multi-brand acquirer, providing solutions for managing and processing credit, debit, and Pix transactions. The company also offers e-commerce solutions, including anti-fraud, e-commerce APIs, and payment gateways. Cielo S.A. was founded in 1995 and is headquartered in Barueri, São Paulo, Brazil.

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Cielo (CIEL3 BZ)

MercadoLibre (MELI) - FinTech Operations Opex Pressures to Weigh on Consensus Estimates

We see further scope for consensus earnings and EBITDA disappointment at MercadoLibre Inc (MELI US) In the FinTech operations, where MELI is...

Victor Galliano

Brazil Banks: Banco Do Brasil Focus - Prospects for Improved Returns, Narrowing PBV Discount

A rising pro-market tide has lifted the big-cap banks, but now it is time to be more selective. We see further potential for stock re-rating among...

Boost Research

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52-week Range

Market Cap (USDm)

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