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.

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/bradespar-sa" target="_blank" data-smartkarma-citation="entities:24510:1" rel="noopener">Bradespar SA (BRAP4 BZ)</a> is an attractive investment, as a discounted vehicle through which to gain exposure to iron ore miner <a href="https://www.smartkarma.com/entities/vale-sa-7721577f-6c6a-4536-a829-92551c2bcd7f" target="_blank" data-smartkarma-citation="entities:27725:1" rel="noopener">Vale SA (VALE3 BZ)</a> </li>
<li>We believe that the current 25% discount to the NAV at Bradespar is excessive, and that this should narrow in the near term</li>
<li>Vale’s fundamentals are robust, supported by s strong iron ore price and, as an exporter, benefiting from a weak BRL</li>
<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> is trading close to its long run and 18 month average discount to the NAV; we are neutral on Itausa</li>
<li>Risks to our positive view on Bradespar include a sustained weakening in iron ore prices, a strengthening of the BRL as well as a worsening of sentiment towards Brazil and Latin American equities generally</li>
</ul>



Bradespar SA (BRAP4 BZ) is an attractive investment, as a discounted vehicle through which to gain exposure to iron ore miner Vale SA (VALE3 BZ) 
We believe that the current 25% discount to the NAV at Bradespar is excessive, and that this should narrow in the near term
Vale’s fundamentals are robust, supported by s strong iron ore price and, as an exporter, benefiting from a weak BRL

Itausa-Investimentos Itau-Pr (ITSA4 BZ) is trading close to its long run and 18 month average discount to the NAV; we are neutral on Itausa
Risks to our positive view on Bradespar include a sustained weakening in iron ore prices, a strengthening of the BRL as well as a worsening of sentiment towards Brazil and Latin American equities generally


A Tale of Two Brazilian HoldCos; We Prefer Bradespar (BRAP4 BZ) Over Itausa (ITSA4 BZ)

Managing Director

Elan Gore

TMI Data Science

TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade & traditional media.  Our proprietary software, TMI Machine, is a text-mining platform designed with the buy-side & capital markets professional in mind, text-mining the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income & individual equities.  TMI provides custom leading indicators and systematic trading strategies, operating at the nexus of linguistics & statistics drawing on vast experience in investment banking and hedge fund settings in senior quantitative and fundamental roles.  

TMI Data Science was founded by Elan Gore, an award-winning Senior Global Basic Materials Equity Analyst & China Economist with 15 years of experience in North American hedge funds & institutional managers; and Alessandro Porrino, Ph.D., an Algorithmic Trading Analyst and Programmer with 10 years of front-office experience ranging from complex FX option pricing to auto-hedging strategies at Bank of America Merrill Lynch and Standard Chartered.  Mr. Gore holds an MBA in Finance from New York University Stern School of Business, and Mr. Porrino holds a Ph.D. in Systems Engineering from Brunel University London.

Quantitative Analysis

<ul>
<li>TMI's short-term iron ore sentiment indicator has turned negative while steel sentiment holds up; a divergence of this magnitude hasn't been observed since 2018</li>
<li>This dynamic appears to be driven by recent Chinese steel shutdowns on environmental grounds, which the market perceives as aimed at cooling the iron ore price more so than the typical "anti-pollution" measures</li>
<li>Text mining shows a recent +2x STDEV increase in Chinese media mentions of steel in an environmental context, seen as supportive for steel prices but potentially negative for iron ore</li>
<li>More alarmingly, we are seeing a +2x STDEV spike in discussion of iron ore in a policy context, as Chinese authorities appear to be more attuned to CISA's complaint that foreign iron ore miners are disproportionately benefiting from the recovery while Chinese steelmakers suffer</li>
<li>Although underlying activity levels remain strong, the combination of punitive policies and an improving supply picture suggests tightness in iron ore may have peaked</li>
</ul><section><div id="ember4041"><div><div><div class="content-highlight"><p>TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary software text-mines the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. </p></div></div></div></div></section>


TMI's short-term iron ore sentiment indicator has turned negative while steel sentiment holds up; a divergence of this magnitude hasn't been observed since 2018
This dynamic appears to be driven by recent Chinese steel shutdowns on environmental grounds, which the market perceives as aimed at cooling the iron ore price more so than the typical "anti-pollution" measures
Text mining shows a recent +2x STDEV increase in Chinese media mentions of steel in an environmental context, seen as supportive for steel prices but potentially negative for iron ore
More alarmingly, we are seeing a +2x STDEV spike in discussion of iron ore in a policy context, as Chinese authorities appear to be more attuned to CISA's complaint that foreign iron ore miners are disproportionately benefiting from the recovery while Chinese steelmakers suffer
Although underlying activity levels remain strong, the combination of punitive policies and an improving supply picture suggests tightness in iron ore may have peaked
TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary software text-mines the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. 

TMI Indicators: Iron Ore Sentiment Deteriorates As Increased Policy Focus Drives Greater Caution

Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

<p><br/> While 2020 began on an optimistic note, sentiment has changed significantly with the outbreak of the COVID-19 coronavirus, which has spread rapidly across continents.آ <br/><br/> In our view, key concerns include: [1] potential demand impact on industries with significant human interaction; [2] potential impact on the economy if consumer sentiment deteriorates materially; [3] potential impact on labour force productivity; [4] potential impact on the supply chains of industries; and [5] potential impact on financial markets. We are cautious on companies which are highly levered, cyclical, have limited liquidity or significant debt maturities in the near term.<br/><br/> In the report, we assess the impact of COVID-19 on: [1] Europe, China/Asia and the Americas; [2] supply chains; and [3] the sectors and companies under our coverage.<br/></p>

  While 2020 began on an optimistic note, sentiment has changed significantly with the outbreak of the COVID-19 coronavirus, which has spread rapidly across continents.آ    In our view, key concerns include: [1] potential demand impact on industries with significant human interaction; [2] potential impact on the economy if consumer sentiment deteriorates materially; [3] potential impact on labour force productivity; [4] potential impact on the supply chains of industries; and [5] potential impact on financial markets. We are cautious on companies which are highly levered, cyclical, have limited liquidity or significant debt maturities in the near term.   In the report, we assess the impact of COVID-19 on: [1] Europe, China/Asia and the Americas; [2] supply chains; and [3] the sectors and companies under our coverage. 

COVID-19: Impact On Global High Yield - Lucror Analytics

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

Download the Morningstar Fact Sheet : http://corporate.morningstar.com/US/documents/MarketingFactSheets/AboutMorningstarFactsheet.pdf

<p>The agreed AUD 418 million acquisition of ASX-listed copper and gold producer, <a href="https://www.smartkarma.com/entities/1358" target="_blank" data-smartkarma-citation="entities:1358:1">Avanco Resources Ltd (AVB AU)</a>, is an interesting move for no-moat-rated <a href="https://www.smartkarma.com/entities/1138" target="_blank" data-smartkarma-citation="entities:1138:1">OZ Minerals Ltd (OZL AU)</a>. The acquisition brings one small operating copper and gold mine in Brazil, an undeveloped copper/gold resource, and an undeveloped gold resource. All assets are 100% owned. In addition, Avanco also has the option to acquire 100% of a further copper/gold resource from <a href="https://www.smartkarma.com/entities/24125" target="_blank" data-smartkarma-citation="entities:24125:1">Vale SA - Pref (VALE5 BZ)</a>. Collectively, the assets…</p>

The agreed AUD 418 million acquisition of ASX-listed copper and gold producer, Avanco Resources Ltd (AVB AU), is an interesting move for no-moat-rated OZ Minerals Ltd (OZL AU). The acquisition brings one small operating copper and gold mine in Brazil, an undeveloped copper/gold resource, and an undeveloped gold resource. All assets are 100% owned. In addition, Avanco also has the option to acquire 100% of a further copper/gold resource from Vale SA - Pref (VALE5 BZ). Collectively, the assets…

Avanco Acquisition Adds Growth but Is Value Neutral for Oz Minerals. FVE Maintained

Materials, IPO & Equity Analyst

Venkat Ramana Nandyal

Equity Bottom-Up

<p>Initiating coverage of <a href="https://www.smartkarma.com/entities/24163" target="_blank" data-smartkarma-citation="entities:24163:1">Ferrexpo Plc (FXPO LN)</a> with a target of £2.10/sh.</p><ol class=""><li>Markets are unduly concerned about the geopolitical risks and balance sheet risk. We do not anticipate any significant geopolitical or default risk to warrant the massive discount.</li><li>Balance sheet deleverage expected to continue in FY17, internal cash generation sufficient to repay debt, may require some refinancing at iron ore price &lt; US$50/t</li><li>New Projects and Brown field expansions expected to increase value by as much as 18% to base case </li><li>FXPO is valued at £2.73/share, an upside of ~60% to last close price.</li></ol>

Initiating coverage of Ferrexpo Plc (FXPO LN) with a target of £2.10/sh.Markets are unduly concerned about the geopolitical risks and balance sheet risk. We do not anticipate any significant geopolitical or default risk to warrant the massive discount.Balance sheet deleverage expected to continue in FY17, internal cash generation sufficient to repay debt, may require some refinancing at iron ore price &lt; US$50/tNew Projects and Brown field expansions expected to increase value by as much as 18% to base case FXPO is valued at £2.73/share, an upside of ~60% to last close price.

FXPO: Geopolitical & Balance Sheet Risks Overblown; Deep Discount Provides Buying Opportunity

Brazil

Vale S.A. is a Brazilian multinational corporation engaged in metals and mining, and one of the largest logistics operators in Brazil. It is a leading producer of iron ore and nickel, also extracting copper, manganese, and ferroalloys. The company was founded in 1942 and is headquartered in Rio de Janeiro, Brazil.

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Vale (VALE5 BZ)

A Tale of Two Brazilian HoldCos; We Prefer Bradespar (BRAP4 BZ) Over Itausa (ITSA4 BZ)

Bradespar holdco is a vehicle that provides discounted exposure to iron ore miner Vale; we see the current 25% discount to the Bradespar NAV as...

Victor Galliano

TMI Indicators: Iron Ore Sentiment Deteriorates As Increased Policy Focus Drives Greater Caution

TMI

Elan Gore

COVID-19: Impact On Global High Yield - Lucror Analytics

While 2020 began on an optimistic note, sentiment has changed significantly with the outbreak of the COVID-19 coronavirus, which has spread...

Lucror Analytics

Avanco Acquisition Adds Growth but Is Value Neutral for Oz Minerals. FVE Maintained

The agreed AUD 418 million acquisition of ASX-listed copper and gold producer, Avanco Resources Ltd (AVB AU), is an interesting move for...

Morningstar, Inc.

FXPO: Geopolitical & Balance Sheet Risks Overblown; Deep Discount Provides Buying Opportunity

Initiating coverage of Ferrexpo Plc (FXPO LN) with a target of £2.10/sh. Markets are unduly concerned about the geopolitical risks and balance...

Venkat Ramana Nandyal

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