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>Brazil caps interchange fees on prepaid and debit cards, as from 1st April 2023, limiting revenues for Brazilian card issuers; Nubank and Inter seem most exposed, less so PagSeguro</li>
<li>We expect that Brazil fintechs StoneCo and Cielo, with their small card issuance operations, should be broadly unaffected</li>
<li>Nubank’s prospective revenue hit is more than 5%, Inter close to 5% and PagSeguro’s hit at 1-2%; we remain negative on Nubank, turn cautious on Inter, but find PagSeguro attractive</li>
</ul>


Brazil caps interchange fees on prepaid and debit cards, as from 1st April 2023, limiting revenues for Brazilian card issuers; Nubank and Inter seem most exposed, less so PagSeguro
We expect that Brazil fintechs StoneCo and Cielo, with their small card issuance operations, should be broadly unaffected
Nubank’s prospective revenue hit is more than 5%, Inter close to 5% and PagSeguro’s hit at 1-2%; we remain negative on Nubank, turn cautious on Inter, but find PagSeguro attractive


Brazil Fintech: New Cap on Card Interchange Fees, Nubank and Inter Look Most Exposed

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/tyro-payments-ltd" target="_blank" data-smartkarma-citation="entities:28393:1" rel="noopener">Tyro Payments (TYR AU)</a> rejected an indicative proposal from the Potentia consortium at A$1.27 per share as it was highly conditional and materially undervalued the business.</li>
<li>Grok, the largest shareholder will vote for a Potentia scheme unless there is a rival scheme which is A$0.25 per share higher than the value of the Potentia proposal.</li>
<li>Potentia's move puts Tyro in play, and Grok’s involvement will force the Board to get an improved offer and/or flush out a competing bidder. There is another round to go.</li>
</ul>



Tyro Payments (TYR AU) rejected an indicative proposal from the Potentia consortium at A$1.27 per share as it was highly conditional and materially undervalued the business.
Grok, the largest shareholder will vote for a Potentia scheme unless there is a rival scheme which is A$0.25 per share higher than the value of the Potentia proposal.
Potentia's move puts Tyro in play, and Grok’s involvement will force the Board to get an improved offer and/or flush out a competing bidder. There is another round to go.


Tyro in Play as It Rejects Potentia’s A$1.27 Offer

Equity Bottom-Up

<ul>
<li>Our payment company screens focus on the market value to processed volume ratio versus the take rate, market value to sales, and valuations relative to EBITDA and earnings growth</li>
<li>In the megacaps, we like Mastercard on valuation and growth; in emerging markets we favour PagSeguro and SBI Card, and small cap Getnet, also we believe that Stone is oversold</li>
<li>We are negative on Paytm and DLocal, which both did IPOs in 2021; we believe that both companies’ growth prospects are more than discounted by their earnings and EBITDA valuations</li>
</ul>


Our payment company screens focus on the market value to processed volume ratio versus the take rate, market value to sales, and valuations relative to EBITDA and earnings growth
In the megacaps, we like Mastercard on valuation and growth; in emerging markets we favour PagSeguro and SBI Card, and small cap Getnet, also we believe that Stone is oversold
We are negative on Paytm and DLocal, which both did IPOs in 2021; we believe that both companies’ growth prospects are more than discounted by their earnings and EBITDA valuations


Payment Companies – Focus on Value and Growth

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<ul><li>The epic collapse of Stone’s recent share price has similarities to the waterfall price declines of mortgage-related stocks back in 2009.</li><li>Panic sellers, aided by algorithms, have sunk this Brazilian fintech company down to levels not seen since its IPO.</li><li>First, a little about Stone (STNE). They provide financial technology to merchants to conduct electronic commerce across in-store, online, and mobile channels in Brazil.</li></ul>

The epic collapse of Stone’s recent share price has similarities to the waterfall price declines of mortgage-related stocks back in 2009.Panic sellers, aided by algorithms, have sunk this Brazilian fintech company down to levels not seen since its IPO.First, a little about Stone (STNE). They provide financial technology to merchants to conduct electronic commerce across in-store, online, and mobile channels in Brazil.

Did the Collapse of Stone (STNE) Create an Opportunity for Value Investors?

Equity Capital Markets

<div><p><a href="https://www.smartkarma.com/entities/paytm-mobile-solutions-pvt-ltd" target="_blank" data-smartkarma-citation="entities:26149:1" rel="noopener">Paytm (PAYTM IN)</a>, formally known as One97 Communications, is India’s largest payments platform based on the number of consumers, number of merchants, number of transactions and revenue as of 31 March 2021, according to RedSeer. Paytm has an overall payments transaction volume market share of 40%, and wallet payments transaction market share of 65-70% in India as of FY21, according to RedSeer. </p></div><div><p>Paytm will launch its IPO on 8 November at an indicative price range of Rs2,080-2,150 per share. The IPO comprises a primary raise of Rs83,000 million ($1.1 billion) and a secondary raise up to Rs100,000 million ($1.3 billion). The total IPO proceeds of $2.4 billion are around 10% higher than its earlier target. The three-day share sale will conclude on 10 November.</p></div><div><p>In <a href="https://www.smartkarma.com/insights/paytm-ipo-initiation-a-payments-led-super-app" target="_blank" data-smartkarma-citation="insights:54983" rel="noopener">Paytm IPO Initiation: A Payments-Led Super-App</a>, we stated as India’s largest payments platform, Paytm is well placed to benefit from this structural tailwind. While the COVID-19 pandemic was disruptive particularly to the non-payments business, Paytm should return to growth as the impact of the pandemic wanes and vaccination rates rise in India. </p></div><div><div><div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/paytm-ipo-bright-spot" target="_blank" data-smartkarma-citation="insights:59999" rel="noopener">Paytm IPO: Bright Spot</a>, we stated that the recent results show a strong return to growth, reducing loss margin and reinforce our view that Paytm has attractive fundamentals. Our valuation analysis suggests that the price range is reasonable.</p></div></div></div>

Paytm (PAYTM IN), formally known as One97 Communications, is India’s largest payments platform based on the number of consumers, number of merchants, number of transactions and revenue as of 31 March 2021, according to RedSeer. Paytm has an overall payments transaction volume market share of 40%, and wallet payments transaction market share of 65-70% in India as of FY21, according to RedSeer. Paytm will launch its IPO on 8 November at an indicative price range of Rs2,080-2,150 per share. The IPO comprises a primary raise of Rs83,000 million ($1.1 billion) and a secondary raise up to Rs100,000 million ($1.3 billion). The total IPO proceeds of $2.4 billion are around 10% higher than its earlier target. The three-day share sale will conclude on 10 November.In Paytm IPO Initiation: A Payments-Led Super-App, we stated as India’s largest payments platform, Paytm is well placed to benefit from this structural tailwind. While the COVID-19 pandemic was disruptive particularly to the non-payments business, Paytm should return to growth as the impact of the pandemic wanes and vaccination rates rise in India. In Paytm IPO: Bright Spot, we stated that the recent results show a strong return to growth, reducing loss margin and reinforce our view that Paytm has attractive fundamentals. Our valuation analysis suggests that the price range is reasonable.

Brazil

StoneCo Ltd. provides financial technology solutions. The Company offers end-to-end cloud-based technology platform to conduct electronic commerce across in-store, online, and mobile channels. StoneCo serves customers in Brazil.

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StoneCo (STNE US)

Brazil Fintech: New Cap on Card Interchange Fees, Nubank and Inter Look Most Exposed

Regulatory pressure, due to the interchange fee cap, worsens the revenue outlook for Nubank especially, as well as that of Inter; we see...

Victor Galliano

Tyro in Play as It Rejects Potentia’s A$1.27 Offer

Potentia's move puts Tyro in play, and Grok’s involvement will force the Board to get an improved offer and/or flush out a competing bidder. There...

Arun George

Payment Companies – Focus on Value and Growth

A number of payment fintechs, after the recent market slide, are trading at attractive valuations again; we like Mastercard, SBI Card, Pagseguro,...

Victor Galliano

Did the Collapse of Stone (STNE) Create an Opportunity for Value Investors?

The epic collapse of Stone’s recent share price has similarities to the waterfall price declines of mortgage-related stocks back in 2009. Panic...

Stock Telegram

Paytm IPO: Valuation Insights

Paytm will launch its IPO on 8 November to raise $2.4 billion. Our valuation analysis suggests that the price range is reasonable.

Arun George

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