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  • Grupo Financiero Santander México: Another High Quality Bank In The Santander Group [View article]
    Bax thank you for the feedback. While I agree with your thoughts particularly when the recent actions of the Brazilian and Argentine governments are considered it needs to be taken on a case by case basis. Nationalism is certainly resurgent in Latam but it is always there in one form or another and at the moment you have populist left wing governments in Brazil and Argentina. Which is some what amusing when you consider that Chavez's Venezuela is softening its stance and starting to open the country up to international investment.

    I agree Chile is the most secure and least unstable of any of the Latam countries but there are opportunities in Colombia and Mexico. I guess the big eye opener for me when writing this article because Mexico is not a country I normally analyze and write about, was that it is rated the same as Argentina on the Transparency International Corruption Perception Index. Particularly when the close economic and business relationships with the U.S are considered. Much of this could be to do with the traditional perception of corruption in Mexico combined with the narco-trafficking conflict.

    Despite this BSMX along with its key competitor BBVA Bancomer does shape up as a very good investment opportunity and given that it is an independently listed subsidiary of one of the best managed banks in the world Banco Santander, which means it not only has to comply with Mexican prudential standards but also those imposed by the Santander Group.
    Sep 30, 2012. 08:42 PM | Likes Like |Link to Comment
  • Why I Continue To Like Peru's Credicorp [View article]
    K2 thank you apologies I meant to refer to the banking regulatory framework in Peru not Brazil. Look forward to more comments and if you want any specific stocks analyzed or issues covered off please let me know.
    Sep 30, 2012. 09:31 AM | Likes Like |Link to Comment
  • Why I Continue To Like Peru's Credicorp [View article]
    K2 my pleasure. I actually didn't identify any red flags with regard to BAP when I wrote the article and overall not much has changed. Probably for me the key thing I would be focused on is the political risk in Peru. While the price to BV is high I don't feel it presents a significant issue for the reasons I mentioned earlier. Probably the only issue is how the regulatory framework in Brazil for banks is being managed by the government, particularly with the additional costs that will be incurred with the implementation of the Basel III requirements.
    Sep 30, 2012. 07:24 AM | Likes Like |Link to Comment
  • Vale: A Promising Mining Investment Overwhelmed By Uncertainty [View article]
    Aricool thank you for the update. Yes it seems that it is getting a little crazy down in Brazil and the government's decisions are becoming more erratic as if they are following CFK and Argentina's lead. While I am certainly no conservative, revolutionary erratic left-wing populism gets no one anywhere! The rule of law, transparency and predictable decision making form the keystones of any viable democracy.
    Sep 29, 2012. 09:49 PM | 1 Like Like |Link to Comment
  • Why I Continue To Like Peru's Credicorp [View article]
    k2climber some very good points. I'll tackle the issues around the Peruvian economy first. The drivers of the Peruvian economy are very different to those of the Brazilian economy and overall there are few linkages between the two economies.

    All of Latam's economies are slowing but Peru, Colombia and Chile should continue to grow strongly despite Brazil's slow down. Peru should continue to see GDP growth of around 5% per annum. The key risks being it is an export driven economy reliant upon the demand for base metals and precious metals.

    The other risks are the growing political risk coming from a resurgence of the Shining Path (though I consider this minor) and growing popular discontent regarding absentee foreign ownership and exploitation of the country's natural resources by foreign owned companies and the related environmental damage.

    But overall I would expect Peru's economy to continue expanding strongly along with which given the country's extreme under banked status there is considerable scope for BAP to continue to grow.

    With regard to the PB it is clear that BAP is trading at a premium to book value and other valuation ratios. While this would normally indicate that the bank is fair to over valued by the market, I believe that it will continue to accrue in value and that it can be justified by the banks high asset quality and continuing growth in loans and deposits.

    While a low price to BV is desirable for a bank it is not that desirable when the bank has low quality assets, high levels of provisions and low liquidity which are all symptoms of BSBR. This explains why BSBR is trading at a discount to its price to BV. For BSBR it is likely that it will see impaired and substandard assets increase as the Brazilian economy continues to struggle and the low level of growth starts to impact on unemployment and wages.

    In the case of BAP it has high asset quality, relatively low lending loss provisions in comparison to its loans and strong growth, all of which has attracted from the market a premium.

    The other factor to consider when evaluating price to BV is the amount of assets held as intangibles and BSBR like many Brazilian companies is carrying considerable amounts of intangibles on its balance sheet while BAP isn't. While BSBR looks very attractive on every valuation ratio or measure it has consistently failed to perform and is now carrying a large portion of substandard assets with a considerable amount of intangible assets.

    I also doubt that BAP will seek to increase tier 1 capital as it is currently at what is considered to be the optimal level. Plus given the economic cost of capital it would be preferable to see BAP invest money in revenue generating activity. The bank has plenty of scope to do this both inside of Peru and externally.
    Sep 29, 2012. 09:16 PM | Likes Like |Link to Comment
  • Grupo Financiero Santander México: Another High Quality Bank In The Santander Group [View article]
    SAN is Banco Santander on the NYSE and BSAC is Banco Santander Chile on the NYSE, they changed the tickers a few months back. The ticker for Santander Mexico is BSMX. Apologies for omitting the Santander Mexico ticker from the article, an oversight on my part.
    Sep 29, 2012. 08:42 PM | Likes Like |Link to Comment
  • Telefonica: Cheap For A Reason (Equity) [View article]
    Thanks Veritas, I really don't like being so negative on a company as it is far easier to pick the faults than it is to identify the positives in any situation. But in the case of TEF I just can't find any positives. I started, when I wrote my first article on TEF, taking a particularly positive view expecting to uncover another BBVA or Santander, but sadly the deeper I dig the worse the scenario looks.

    Obviously the company won't be dissolved or broken up, especially as they have bitten the bullet and started to move in the right direction to ensure the future of the company. But unfortunately shareholders will be paying for the program of value destruction that management set in train with their ill fated growth and acquisition program for sometime.
    Sep 29, 2012. 01:48 AM | Likes Like |Link to Comment
  • Is The Outlook For YPF Growing More Positive? (Part 1) [View article]
    I think that is the key to the argument that CFK and the Argentine govt are trying to take the best of both worlds while not accepting the negatives from accepting one path or the other. The capping of domestic oil prices and heavy taxation of oil exports is a significant disincentive for companies operating in the sector in Argentina to expand their business as it does cap their returns.

    Although since taking control of YPF the govt has softened this regime making YPF and any ventures it enters into with foreign investors in the Vaca Muerta ultimately more profitable.

    This regime also obviously impacts the return that investors can generate so going back to your earlier comment could be a motivation for the way in which Repsol managed YPF. Overall I still believe the govt has to find the best solution for both investors and Argentina and the actions of Repsol I believe were not delivering for either party other than for Repsol itself and the Eskenazis family who (as you pointed out) were using the dividend payment to pay down the loan used to purchase their stake in YPF.
    Sep 28, 2012. 09:42 PM | Likes Like |Link to Comment
  • Is The Outlook For YPF Growing More Positive? (Part 1) [View article]
    Thank you for the update . If it is possible please keep us updated on the progress of the play obviously at this time your in the money.
    Sep 28, 2012. 12:58 PM | Likes Like |Link to Comment
  • Grupo Financiero Santander México: Another High Quality Bank In The Santander Group [View article]
    You should be you have a degree of insight and understanding that can add value! I would love to see an article and I am sure the editors would as well. If you need and assistance or guidance please feel free to message me.
    Sep 28, 2012. 11:59 AM | Likes Like |Link to Comment
  • Is The Outlook For YPF Growing More Positive? (Part 1) [View article]
    Jeremy while I disagree particularly on the point on Repsol looting the company, which I agree is quite strong language you have raised some good points. However, the numbers to present a strong juxaposition to your argument and the control of private property is only ever subject to the utility that the controlling power ever derives from it. Unfortunately as the numbers show YPF is better in the hands of erratic CFK Argentina than cool and calculated but lazy Repsol. Perhaps the line in the sand needs to go the other way absentee foreign ownership and expropriation of captial for the benefit of others will no longer be tolerated.
    Sep 28, 2012. 11:50 AM | Likes Like |Link to Comment
  • Is The Outlook For YPF Growing More Positive? (Part 1) [View article]
    Oldwarrior I tend to take what CFK and the Argentine government say with a grain of salt but after checking the financials over the last 6 years combined with reviewing company statements, press releases etc it became clear that essentially as you have put it Repsol were looting the company.

    I wholeheartedly agree that the Argentine govt has handled the matter very poorly and further stained an already troubling past in the management of economic and business affairs. What makes it worse is if they had of left it solely at YPF and then worked hard to show a clearer and more transparent approach towards economic matters and regulation you could almost forgive them. But now they are appearing to be extremely erratic, for want of better words more erratic than a drunken sailor after an all night bender.

    I don't particularly like REITs but then again I am not into investing for dividends, I tend to look for undervalued growth opportunities hence the interest in YPF. The second part is available here .

    Nice for you to drop by and looking forward to more comments. on a side note I have been taking a closer look at Argentine banks such as BBVA Banco Frances and I am hoping to publish an update on the BBVA group shortly.
    Sep 28, 2012. 03:22 AM | Likes Like |Link to Comment
  • Telefonica: Cheap For A Reason (Equity) [View article]
    That was a good price for TEF. I don't believe that the dividend payment will recommence next year, but at that price there is certainly some value.

    I really like TEO and I wrote an article on the state of the Argentine telco sector sometime ago but the situation has obviously developed further with the recent shenigans around the government stating it will start its own provider, change licensing laws and more closely examine TEF's convoluted ownership arrangement of TEO which they believe is in breach of their anti-monopoly laws.

    One of my regular followers has asked for an update so I will be looking into that shortly. I haven't been submitting articles over the last two weeks as I have been quite busy conducting research on the extra-territorial application of U.S money laundering legislation in Latam, but hopefully will be able to get back to working on my articles this weekend.
    Sep 28, 2012. 03:14 AM | Likes Like |Link to Comment
  • Telefonica: Cheap For A Reason (Equity) [View article]
    I doubt that you'll see TEF at over $20 for sometime to come. Austerity measures are biting deeper in Spain and Brazil has significant structural economic problems combined with a UK recession all of which is deeply impacting revenues in these its core markets.

    There are also issues in its other key Latam markets ranging from the risk of higher regulation in Argentina and Peru, possible expropriation in Argentina and saturated highly competitive markets across Latam where in many cases the company is struggling to grow market share. All of which adds to its cost base at it has to pro-actively manage those issues.

    Essentially for the short-term I see TEF as dead money and not much significant upside for the medium to long-term primarily due to the debt issues, sale of growth assets and lack of capex in infrastructure in its growth markets.

    I also did some FCF to equity cals and a full DCF not long ago and came up with a valuation range of between USD$13 to USD$17 per share depending on the assumptions used.

    I think in the telco sector there are better opportunities for investors, but obviously if you bought TEF at around $12 there is some value.
    Sep 27, 2012. 10:26 PM | Likes Like |Link to Comment
  • Is The Outlook For YPF Growing More Positive? (Part 2) [View article]
    high sierra some very good points. I think a balance needs to be found in any emerging market between maximizing the value for investors in natural resources and the benefit derived by the country and its people. Obviously if it is skewed either way then there will be serious side effects.

    With regard to the relaxation of oil price controls the key issue with doing that while Repsol was majority owner is that profits were being off shored giving little if any economic benefit to Argentina either directly or indirectly. Plus the company was clearly unwilling to make the investment necessary while maximizing the return it was receiving from YPF. This was clearly exacerbating Argentina's balance of payments situation and the outflow of capital from the country by an absentee foreign owner.

    While I am certainly not attempting to apologize for the actions of an erratic and unstable government there is a degree of pragmatism at work on the government's behalf. It also has to be accepted that Respol's management were at best complacent regarding YPF and incompetent at worst.
    Sep 27, 2012. 09:46 PM | Likes Like |Link to Comment