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>
<a href="https://www.smartkarma.com/entities/itausa-investimentos-itau-pr" target="_blank" data-smartkarma-citation="entities:24513:1" rel="noopener">Itausa-Investimentos Itau-Pr (ITSA4 BZ)</a> has performed broadly in line with its largest holding <a href="https://www.smartkarma.com/entities/itau-unibanco-holding-sa-9d47d196-e503-471b-a84e-ca4401033062" target="_blank" data-smartkarma-citation="entities:24550:1" rel="noopener">Itau Unibanco Holding Sa (ITUB4 BZ)</a> since September end 2019</li>
<li>Despite Itausa's attractive dividend yield, the payout on 2019 earnings has decreased and we think that this is not compelling</li>
<li>The NAV discount has widened recently, but may widen a bit further in the short term should a near-term market recovery drive a rally in Itau Unibanco; the discount remains below the long-run average</li>
<li>Risks to our cautious view include better than expected performance in the invested companies, especially <a href="https://www.smartkarma.com/entities/itau-unibanco-holding-sa-9d47d196-e503-471b-a84e-ca4401033062" target="_blank" data-smartkarma-citation="entities:24550:1" rel="noopener">Itau Unibanco Holding Sa (ITUB4 BZ)</a> </li>
</ul>



Itausa-Investimentos Itau-Pr (ITSA4 BZ) has performed broadly in line with its largest holding Itau Unibanco Holding Sa (ITUB4 BZ) since September end 2019
Despite Itausa's attractive dividend yield, the payout on 2019 earnings has decreased and we think that this is not compelling
The NAV discount has widened recently, but may widen a bit further in the short term should a near-term market recovery drive a rally in Itau Unibanco; the discount remains below the long-run average
Risks to our cautious view include better than expected performance in the invested companies, especially Itau Unibanco Holding Sa (ITUB4 BZ) 


Itausa (ITSA4 BZ): Less Bearish, but Still Cautious

<ul>
<li>Our post mortem of 2019 recommendations shows that we have had some successes; good bull calls were <a href="https://www.smartkarma.com/entities/gentera-sab-de-cv" target="_blank" data-smartkarma-citation="entities:27889:1" rel="noopener">Gentera SAB De CV (GENTERA* MM EQUITY)</a> in Mexico, <a href="https://www.smartkarma.com/entities/unicredit-spa" target="_blank" data-smartkarma-citation="entities:21234:1" rel="noopener">UniCredit SpA (UCG IM)</a> in Italy, <a href="https://www.smartkarma.com/entities/credicorp-ltd" target="_blank" data-smartkarma-citation="entities:25963:1" rel="noopener">Credicorp Ltd (BAP US)</a> in Peru, <a href="https://www.smartkarma.com/entities/xp-inc" target="_blank" data-smartkarma-citation="entities:28619:1" rel="noopener">XP Inc (XP US)</a> in Brazil and, to a lesser degree, <a href="https://www.smartkarma.com/entities/banco-do-brasil-sa" target="_blank" data-smartkarma-citation="entities:24564:1" rel="noopener">Banco Do Brasil Sa (BBAS3 BZ),</a><a href="https://www.smartkarma.com/entities/banco-inter-sa" target="_blank" data-smartkarma-citation="entities:28162:1" rel="noopener">Banco Inter SA (BIDI11 BZ)</a> and <a href="https://www.smartkarma.com/entities/itausa-investimentos-itau-pr" target="_blank" data-smartkarma-citation="entities:24513:1" rel="noopener">Itausa-Investimentos Itau-Pr (ITSA4 BZ)</a>
</li>
<li>On the bearish side, <a href="https://www.smartkarma.com/entities/cielo-sa" target="_blank" data-smartkarma-citation="entities:24750:1" rel="noopener">Cielo SA (CIEL3 BZ)</a> worked well to October 2019 , also <a href="https://www.smartkarma.com/entities/itau-corpbanca" target="_blank" data-smartkarma-citation="entities:27602:1" rel="noopener">Itau CorpBanca (ITAUCORP CI)</a> and, in 4Q 2019, the bear call on <a href="https://www.smartkarma.com/entities/b3-sa-brasil-bolsa-balcao" target="_blank" data-smartkarma-citation="entities:24580:1" rel="noopener">B3 Sa - Brasil Bolsa Balcao (B3SA3 BZ) </a>is bearing fruit</li>
<li>Less successful calls include the bear stances on <a href="https://www.smartkarma.com/entities/grupo-financiero-banorte-o" target="_blank" data-smartkarma-citation="entities:24780:1" rel="noopener">Grupo Financiero Banorte-O (GFNORTEO MM)</a> and <a href="https://www.smartkarma.com/entities/mercadolibre-inc" target="_blank" data-smartkarma-citation="entities:27954:1" rel="noopener">MercadoLibre Inc (MELI US)</a> and the bull positions on <a href="https://www.smartkarma.com/entities/ripley-corp-sa" target="_blank" data-smartkarma-citation="entities:28022:1" rel="noopener">Ripley Corp SA (RIPLEY CI), </a><a href="https://www.smartkarma.com/entities/el-puerto-de-liverpool-sab-de" target="_blank" data-smartkarma-citation="entities:27611:1" rel="noopener">El Puerto de Liverpool SAB de (LIVEPOLC MM)</a> and <a href="https://www.smartkarma.com/entities/banco-santander-chile-a1d94c50-bd10-465a-a389-8383b9836732" target="_blank" data-smartkarma-citation="entities:28621:1" rel="noopener">Banco Santander Chile (BSAC US)</a> </li>
<li>We believe that the rotation into value in 2H 2019 should continue into at least 1Q 2020, benefiting European and Emerging Market banks and financials amongst other sectors</li>
<li>In the value category, for 2020, we continue to like <a href="https://www.smartkarma.com/entities/banco-do-brasil-sa" target="_blank" data-smartkarma-citation="entities:24564:1" rel="noopener">Banco Do Brasil Sa (BBAS3 BZ)</a> , <a href="https://www.smartkarma.com/entities/unicredit-spa" target="_blank" data-smartkarma-citation="entities:21234:1" rel="noopener">UniCredit SpA (UCG IM)</a> and <a href="https://www.smartkarma.com/entities/cielo-sa" target="_blank" data-smartkarma-citation="entities:24750:1" rel="noopener">Cielo SA (CIEL3 BZ)</a> now a bull call since October</li>
<li>In the fintech growth space, we would also highlight <a href="https://www.smartkarma.com/entities/banco-inter-sa" target="_blank" data-smartkarma-citation="entities:28162:1" rel="noopener">Banco Inter SA (BIDI11 BZ)</a> </li>
<li>
<a href="https://www.smartkarma.com/entities/credicorp-ltd" target="_blank" data-smartkarma-citation="entities:25963:1" rel="noopener">Credicorp Ltd (BAP US)</a> has further to go, in our view, and so it remains a positive recommendation for 2020</li>
<li>Names to watch, for any potential catalysts for change, include <a href="https://www.smartkarma.com/entities/grupo-financiero-banorte-o" target="_blank" data-smartkarma-citation="entities:24780:1" rel="noopener">Grupo Financiero Banorte-O (GFNORTEO MM)</a> and <a href="https://www.smartkarma.com/entities/itau-corpbanca" target="_blank" data-smartkarma-citation="entities:27602:1" rel="noopener">Itau CorpBanca (ITAUCORP CI)</a> </li>
<li>Risks include worsening sentiment towards equity markets, and a swing to a more "risk off" investment climate driven by global GDP growth concerns, increased US-China trade tensions and any increase in political tension in Latin America and Southern Europe</li>
</ul>


Our post mortem of 2019 recommendations shows that we have had some successes; good bull calls were Gentera SAB De CV (GENTERA* MM EQUITY) in Mexico, UniCredit SpA (UCG IM) in Italy, Credicorp Ltd (BAP US) in Peru, XP Inc (XP US) in Brazil and, to a lesser degree, Banco Do Brasil Sa (BBAS3 BZ),Banco Inter SA (BIDI11 BZ) and Itausa-Investimentos Itau-Pr (ITSA4 BZ)

On the bearish side, Cielo SA (CIEL3 BZ) worked well to October 2019 , also Itau CorpBanca (ITAUCORP CI) and, in 4Q 2019, the bear call on B3 Sa - Brasil Bolsa Balcao (B3SA3 BZ) is bearing fruit
Less successful calls include the bear stances on Grupo Financiero Banorte-O (GFNORTEO MM) and MercadoLibre Inc (MELI US) and the bull positions on Ripley Corp SA (RIPLEY CI), El Puerto de Liverpool SAB de (LIVEPOLC MM) and Banco Santander Chile (BSAC US) 
We believe that the rotation into value in 2H 2019 should continue into at least 1Q 2020, benefiting European and Emerging Market banks and financials amongst other sectors
In the value category, for 2020, we continue to like Banco Do Brasil Sa (BBAS3 BZ) , UniCredit SpA (UCG IM) and Cielo SA (CIEL3 BZ) now a bull call since October
In the fintech growth space, we would also highlight Banco Inter SA (BIDI11 BZ) 

Credicorp Ltd (BAP US) has further to go, in our view, and so it remains a positive recommendation for 2020
Names to watch, for any potential catalysts for change, include Grupo Financiero Banorte-O (GFNORTEO MM) and Itau CorpBanca (ITAUCORP CI) 
Risks include worsening sentiment towards equity markets, and a swing to a more "risk off" investment climate driven by global GDP growth concerns, increased US-China trade tensions and any increase in political tension in Latin America and Southern Europe


Galliano's Latin Notes 2019 Recommendations in Review, and Initial Thoughts for 2020

<ul>
<li>
<a href="https://www.smartkarma.com/entities/itausa-investimentos-itau-pr" target="_blank" data-smartkarma-citation="entities:24513:1" rel="noopener">Itausa-Investimentos Itau-Pr (ITSA4 BZ)</a>'s NAV discount has narrowed since our initiation in January 2019 from 24% to 18% currently, outperforming its core investment <a href="https://www.smartkarma.com/entities/itau-unibanco-holding-sa-9d47d196-e503-471b-a84e-ca4401033062" target="_blank" data-smartkarma-citation="entities:24550:1" rel="noopener">Itau Unibanco Holding Sa (ITUB4 BZ)</a> </li>
<li>We estimate that Itausa has delivered an annualized total return of c15% in local currency, driven mainly by a dividend yield of 9%+, since our initation</li>
<li>Despite the attractive dividend yield, we believe total returns could be limited going forward, and recommend investors to lock in gains; Itausa's tightest NAV discount over the last 10 years was 16% in December 2011</li>
<li>Itausa's is part of the consortium that is in the process of acquiring Liquigas, the liquified gas distribution company, that will increasingly diversify its investment portfolio but we believe that the consortium is paying a full price </li>
<li>The main risk to our thesis would be a rally in Brazilian banks and, particularly, in <a href="https://www.smartkarma.com/entities/itau-unibanco-holding-sa-9d47d196-e503-471b-a84e-ca4401033062" target="_blank" data-smartkarma-citation="entities:24550:1" rel="noopener">Itau Unibanco Holding Sa (ITUB4 BZ),</a> resulting in Itausa's further re-rating</li>
</ul>



Itausa-Investimentos Itau-Pr (ITSA4 BZ)'s NAV discount has narrowed since our initiation in January 2019 from 24% to 18% currently, outperforming its core investment Itau Unibanco Holding Sa (ITUB4 BZ) 
We estimate that Itausa has delivered an annualized total return of c15% in local currency, driven mainly by a dividend yield of 9%+, since our initation
Despite the attractive dividend yield, we believe total returns could be limited going forward, and recommend investors to lock in gains; Itausa's tightest NAV discount over the last 10 years was 16% in December 2011
Itausa's is part of the consortium that is in the process of acquiring Liquigas, the liquified gas distribution company, that will increasingly diversify its investment portfolio but we believe that the consortium is paying a full price 
The main risk to our thesis would be a rally in Brazilian banks and, particularly, in Itau Unibanco Holding Sa (ITUB4 BZ), resulting in Itausa's further re-rating


Itausa (ITSA4 BZ) - Take Profits on Narrowing NAV Discount

Accelerating Tomorrow’s Independent Research

Boost Research

Boost Research Ltd is an appointed representative of Messels Ltd which is authorised and regulated by the FCA of the UK. 

This document is issued by Boost Research Limited solely for its clients. It may not be reproduced, redistributed or passed to any other person in whole or in part for any purpose without written consent of Boost Research. The material in this document is not intended for distribution or use outside the United Kingdom. This material is not directed at you if Boost Research is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you.

This document is provided for information purposes only and should not be regarded as an offer, solicitation, invitation, inducement or recommendation relating to the subscription, purchase or sale of any security or other financial instrument.  This document does not constitute, and should not be interpreted as, investment advice.  It is accordingly recommended that you should seek independent advice from a suitably qualified professional advisor before taking any decisions in relation to the investments detailed herein. All expressions of opinions and estimates constitute a judgement and, unless otherwise stated, are those of the author and the research department of Boost Research only, and are subject to change without notice. Boost Research is under no obligation to update the information contained herein. Whilst Boost Research has taken all reasonable care to ensure that the information contained in this document is not untrue or misleading at the time of publication, Boost Research cannot guarantee its accuracy or completeness, and you should not act on it without first independently verifying its contents. This document is not guaranteed to be a complete statement or summary of any securities, markets, reports or developments referred to herein. No representation or warranty either expressed or implied is made, nor responsibility of any kind is accepted, by Boost Research or any of its respective directors, officers, employees or analysts either as to the accuracy or completeness of any information contained in this document nor should it be relied on as such. No liability whatsoever is accepted by Boost Research or any of its respective directors, officers, employees or analysts for any loss, whether direct or consequential, arising whether directly or indirectly as a result of the recipient acting on the content of this document, including, without limitation, lost profits arising from the use of this document or any of its contents.

This document is provided with the understanding that Boost Research is not acting in a fiduciary capacity and it is not a personal recommendation to you. Investing in securities entails risks. Past performance is not necessarily a guide to future performance. The value of and the income produced by products may fluctuate, so that an investor may get back less than he invested. Investments in the entities and/or the securities or other financial instruments referred to are not suitable for all investors and this document should not be relied upon in substitution for the exercise of independent judgment in relation to any such investment. The stated price of any securities mentioned herein will generally be the closing price at the end of any of the three business days immediately prior to the publication date on this document. This stated price is not a representation that any transaction can be effected at this price.

Boost Research and its respective analysts are remunerated for providing investment research to professional investors, corporations, other research institutions and consultancy houses. Boost Research, or its respective directors, officers, employees and clients may have or take positions in the securities or entities mentioned in this document.  Any of these circumstances could create, or be perceived as creating, conflicts of interest. Boost Research’ analysts are not censored in any way and are free to express their personal opinions. As a result, Boost Research may have issued other documents that are inconsistent with and reach different conclusions from, the information contained in this document. Those documents reflect the different assumptions, views and analytical methods of their authors. No director, officer or employee of Boost Research is on the board of directors of any company referenced herein and no one at any such referenced company is on the board of directors of Boost Research.

Messels is authorised and regulated in the United Kingdom by the Financial Conduct Authority for the provision of investment advice. Residents of the United Kingdom should seek specific professional financial and investment advice from a stockbroker, banker, solicitor, accountant or other independent professional adviser authorised pursuant to the Financial Services and Markets Act 2000. This report is intended only for investors who are 'professional clients' as defined by the FCA, and may not, therefore, be redistributed to other classes of investors.

The content of this report is covered by our Policy of Independence which may be viewed at www.messels.com.

 

Analysts’ Certification

The analysts involved in the production of this document hereby certify that the views expressed in this document accurately reflect their personal views about the securities mentioned herein. The analysts point out that they may buy, sell or already have taken positions in the securities, and related financial instruments, mentioned in this document

<ul>
<li>
<a href="https://www.smartkarma.com/entities/24513" target="_blank" data-smartkarma-citation="entities:24513:1">Itausa-Investimentos Itau-Pr (ITSA4 BZ)</a> is the main indirect vehicle through which to gain discounted equity exposure to premium ROE-generating Brazilian bank, <a href="https://www.smartkarma.com/entities/24550" target="_blank" data-smartkarma-citation="entities:24550:1">Itau Unibanco Holding Sa (ITUB4 BZ)</a>.</li>
<li>Itausa trades at a 24% discount to its NAV, with Itau Unibanco accounting for 91% of the asset value of the holding.</li>
<li>The current NAV discount is close to the 10-year high of 28%, and wider than the 10-year average discount of 21% and the 10-year low of 16%.</li>
</ul>



Itausa-Investimentos Itau-Pr (ITSA4 BZ) is the main indirect vehicle through which to gain discounted equity exposure to premium ROE-generating Brazilian bank, Itau Unibanco Holding Sa (ITUB4 BZ).
Itausa trades at a 24% discount to its NAV, with Itau Unibanco accounting for 91% of the asset value of the holding.
The current NAV discount is close to the 10-year high of 28%, and wider than the 10-year average discount of 21% and the 10-year low of 16%.


Itausa: Discounted Access to Premium Quality Itau

Brazil

Itausa SA operates as a investment holding company. The Company, through its subsidiaries, invests in companies in such areas as the financial, as well as the wood paneling, ceramic and metal sanitary, ceramic coatings, clothing, footwear, and gaspipelines. Itausa serves clients worldwide.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Itausa (ITSA4 BZ)

Itausa (ITSA4 BZ): Less Bearish, but Still Cautious

Itausa-Investimentos Itau-Pr (ITSA4 BZ) has performed broadly in line with its largest holding Itau Unibanco Holding Sa (ITUB4 BZ) since...

Victor Galliano

Galliano's Latin Notes 2019 Recommendations in Review, and Initial Thoughts for 2020

Our post mortem of 2019 recommendations shows that we have had some successes; good bull calls were Gentera SAB De CV (GENTERA* MM EQUITY) in...

Victor Galliano

Itausa (ITSA4 BZ) - Take Profits on Narrowing NAV Discount

Itausa-Investimentos Itau-Pr (ITSA4 BZ)'s NAV discount has narrowed since our initiation in January 2019 from 24% to 18% currently, outperforming...

Victor Galliano

Itausa: Discounted Access to Premium Quality Itau

Itausa-Investimentos Itau-Pr (ITSA4 BZ) is the main indirect vehicle through which to gain discounted equity exposure to premium ROE-generating...

Boost Research

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)