Financials & FinTech research, Galliano’s Financials Research

Victor Galliano

Victor Galliano is an experienced equity banks analyst, having covered Latin America banks and non-bank financials for over 12 years, as well as more recently covering the Italian banks. He has worked in sell side equity research for 30 years in a career spanning Barclays, HSBC, BBVA LatInvest, Barings and NatWest.
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.

Financials & FinTech research

Alibaba (BABA US) & Ant Group: PBoC Proposals Threaten Tighter Regulations

Alibaba (BABA US): Unloved but Undeterred

Alibaba: A Detailed Look at the SOTP, and What that Tells Us About the Ant Group and Core Commerce

Ant Group: IPO Suspension and the Big Data Angle

Ant Group: SOTP Valuation Scenarios Revisited

Ant Group: Limited but Positive 3Q20 Data Disclosed

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>Regulatory pressure is driving Ant Group to place its financial operations into a holding company which would be subject to bank-like regulation, as Chinese regulators seek increasing oversight of the fast growth in consumer and SMB debt</li>
<li>Furthermore, and more importantly, press reports indicate that regulators are pushing for Chinese FinTech giants to share their consumer credit data with state entities, to enhance the centralized “big data” repository at the PBoC</li>
<li>The planned launch of the PBoC’s digital currency - the e-yuan – is intended to try to level the playing field between electronic payments leaders Alipay (Ant) and WeChat pay (Tencent) and the bank system, as well as giving the state a powerful tool for digital financial surveillance</li>
<li>For Ant, more bank-like regulation of credit would imply higher capital requirement for its credit operations as well as slower loan growth, with the sharing of Ant Group’s many terabytes of data with the authorities also potentially detracting from Ant Group’s “big data” edge and, by extension, valuation</li>
<li>We take a preliminary stab at a revised SOTP valuation range – despite the lack of clear regulatory parameters so far – of USD130-160bn for Ant Group, a far cry from the market’s estimated USD250bn+ valuation in 4Q20</li>
<li>We see further upside potential in the near term for Chinese SOE banks, as regulators begin to level the regulatory playing filed with FinTech; it is also time, in our view, to look again at <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a>, 33% shareholder in Ant Group</li>
<li>Risks to our negative view on Ant Group include a less aggressive implementation of regulatory rules on Chinese FinTech, and only limited disclosure on its “big data” lake</li>
</ul>


Regulatory pressure is driving Ant Group to place its financial operations into a holding company which would be subject to bank-like regulation, as Chinese regulators seek increasing oversight of the fast growth in consumer and SMB debt
Furthermore, and more importantly, press reports indicate that regulators are pushing for Chinese FinTech giants to share their consumer credit data with state entities, to enhance the centralized “big data” repository at the PBoC
The planned launch of the PBoC’s digital currency - the e-yuan – is intended to try to level the playing field between electronic payments leaders Alipay (Ant) and WeChat pay (Tencent) and the bank system, as well as giving the state a powerful tool for digital financial surveillance
For Ant, more bank-like regulation of credit would imply higher capital requirement for its credit operations as well as slower loan growth, with the sharing of Ant Group’s many terabytes of data with the authorities also potentially detracting from Ant Group’s “big data” edge and, by extension, valuation
We take a preliminary stab at a revised SOTP valuation range – despite the lack of clear regulatory parameters so far – of USD130-160bn for Ant Group, a far cry from the market’s estimated USD250bn+ valuation in 4Q20
We see further upside potential in the near term for Chinese SOE banks, as regulators begin to level the regulatory playing filed with FinTech; it is also time, in our view, to look again at Alibaba Group (BABA US), 33% shareholder in Ant Group
Risks to our negative view on Ant Group include a less aggressive implementation of regulatory rules on Chinese FinTech, and only limited disclosure on its “big data” lake


Ant Group: Regulatory Pressures Drive the State’s “big Data” Grab, and a Revised SOTP Valuation