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>Ripley Corp operates in Chile and Peru, in retailing, real estate investments in shopping malls as well as banking and other consumer financial services in both countries. Ripley is the second largest issuer of credit cards in Chile and Peru</li>
<li>We estimate that the Ripley finance operations, based on our Sum of The Parts (SOTP) valuation, have a valuation range of USD1.14bn to USD1.43bn, which would equate to a low of 69% and a high of 86% versus Ripley Corp’s market capitalization</li>
<li>Although Ripley Corp appears expensive versus its LatAm peers, we believe that it is an attractive investment versus its Chilean peers especially on consensus PE multiples of 16.2x for 2019E and 15.2x for 2020E</li>
<li>The high net debt to equity ratio of the group is not a major concern, as interest cover is healthy; we like the high return and focused consumer banking businesses in Chile and Peru which, in our opinion, account for most of the group’s market value</li>
</ul>


Ripley Corp operates in Chile and Peru, in retailing, real estate investments in shopping malls as well as banking and other consumer financial services in both countries. Ripley is the second largest issuer of credit cards in Chile and Peru
We estimate that the Ripley finance operations, based on our Sum of The Parts (SOTP) valuation, have a valuation range of USD1.14bn to USD1.43bn, which would equate to a low of 69% and a high of 86% versus Ripley Corp’s market capitalization
Although Ripley Corp appears expensive versus its LatAm peers, we believe that it is an attractive investment versus its Chilean peers especially on consensus PE multiples of 16.2x for 2019E and 15.2x for 2020E
The high net debt to equity ratio of the group is not a major concern, as interest cover is healthy; we like the high return and focused consumer banking businesses in Chile and Peru which, in our opinion, account for most of the group’s market value


Ripley Corp's Banking Business Dominates the Group's Market Valuation

Thematic (Sector/Industry)

<ul>
<li>We lift the lid on the consumer finance arms of ten leading LatAm retailers, providing corporate summaries in this primer on those entities with “skin in the game” of LatAm consumer credit</li>
<li>Our top pick is Mexican department store retailer <a href="https://www.smartkarma.com/entities/27611" target="_blank" data-smartkarma-citation="entities:27611:1">El Puerto de Liverpool SAB de (LIVEPOLC MM)</a> , given its attractive valuations; it is also the third largest issuer of credit cards in Mexico and the portfolio has a relatively low NPL ratio with healthy NPL coverage</li>
<li>Brazilian department store and apparel retailer <a href="https://www.smartkarma.com/entities/28023" target="_blank" data-smartkarma-citation="entities:28023:1">Guararapes Confeccoes SA (GUAR3 BZ)</a> is the second largest private label card issuer in Brazil and an attractive value, we believe, even if in the consumer credit arm its NPL coverage levels are a bit lower than its peers</li>
<li>In Chile, we like the business and geographic focus of <a href="https://www.smartkarma.com/entities/28022" target="_blank" data-smartkarma-citation="entities:28022:1">Ripley Corp SA (RIPLEY CI)</a>, despite Ripley's high debt to equity ratio, and its high return banking business in Chile in particular</li>
<li>
<a href="https://www.smartkarma.com/entities/27954" target="_blank" data-smartkarma-citation="entities:27954:1">MercadoLibre Inc (MELI US)</a> is the leader in LatAm e-commerce, with structural growth potential. It has a fast growing and, we believe, profitable payments operation in MercadoPago and small but high growth potential credit business in MercadoCredito, yet we believe that the current intensifying Brazilian competitive climate and Argentine political and economic outlook are real and near-term headwinds for the share price</li>
</ul>


We lift the lid on the consumer finance arms of ten leading LatAm retailers, providing corporate summaries in this primer on those entities with “skin in the game” of LatAm consumer credit
Our top pick is Mexican department store retailer El Puerto de Liverpool SAB de (LIVEPOLC MM) , given its attractive valuations; it is also the third largest issuer of credit cards in Mexico and the portfolio has a relatively low NPL ratio with healthy NPL coverage
Brazilian department store and apparel retailer Guararapes Confeccoes SA (GUAR3 BZ) is the second largest private label card issuer in Brazil and an attractive value, we believe, even if in the consumer credit arm its NPL coverage levels are a bit lower than its peers
In Chile, we like the business and geographic focus of Ripley Corp SA (RIPLEY CI), despite Ripley's high debt to equity ratio, and its high return banking business in Chile in particular

MercadoLibre Inc (MELI US) is the leader in LatAm e-commerce, with structural growth potential. It has a fast growing and, we believe, profitable payments operation in MercadoPago and small but high growth potential credit business in MercadoCredito, yet we believe that the current intensifying Brazilian competitive climate and Argentine political and economic outlook are real and near-term headwinds for the share price


Banking on Retail: A Primer on The Credit Operations of Leading LatAm Retailers

Chile

Falabella S.A. provides digital and physical retail space in Latin America. The Company runs different formats such as department stores, home improvement, supermarkets, regional shopping centers and power centers, and provide financial services. Falabella operates in 7 countries.

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Falabella (FALAB CI)

Ripley Corp's Banking Business Dominates the Group's Market Valuation

Ripley Corp operates in Chile and Peru, in retailing, real estate investments in shopping malls as well as banking and other consumer financial...

Victor Galliano

Banking on Retail: A Primer on The Credit Operations of Leading LatAm Retailers

We lift the lid on the consumer finance arms of ten leading LatAm retailers, providing corporate summaries in this primer on those entities with...

Victor Galliano

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)