By: Nicholas Tenuta, AIM student at
Marquette University
Disclosure:
The AIM Equity Fund currently holds this position. This article was written by
myself, and it expresses my own opinions. I am not receiving compensation for
it and I have no business relationship with any company whose stock is
mentioned in this article.
Summary
• Grupo
Supervielle (NASDAQ: SUPV) provides a multitude of banking services to
consumer and institutional clients throughout Argentina. They operate through
the following segments: retail banking, corporate banking, treasury, consumer
finance, insurance and asset management, and other services.
• Even under unappealing macro conditions
in the past, SUPV has performed well.
• The outlook for the macro economy of
Argentina in 2018 and 2019 are very positive. New tariff adjustments are
expected to normalize the high inflation rates in Argentina, while large
investments by the private sector and an increase in exports to Brazil are
expected to increase GDP to a sustainable 4% in the next two years.
• The financial services being offered are
currently underutilized by the Argentinian population, giving SUPV a positive
outlook for future growth.
• SUPV is focused on growing through three
main facets: user experience, digitalization and talent management.
Key
points: Despite overly
high inflation rates in Argentina, large amounts of fiscal deficit, and a
recent drought causing harm to the food supply in Argentina, Mr. Ricard
Arriazu, the bank’s economic advisor, has a positive outlook for the future
macroeconomic conditions of Argentina. He expects to see 3-4% growth in key
sectors including agriculture, energy and infrastructure in 2019 due to the
large investments in in construction, machinery and equipment.
The current investments in construction are
now primarily driven by the private sector, oppose to the public sector, which
is a good sign for SUPV. Also, after April of this year, he expects inflation
to decrease due to the newly adjusted tariffs on electricity gas and water. The
recovery of the Brazilian economy should also increase Argentina’s exports
(mostly auto and gas related goods), boosting the expected GDP to a sustainable
4%.
Mr. Supervielle, Chairman and CEO of SUPV,
is excited about the future opportunities in the financial sector. The large
major banks have made their imprint on this market, and are starting to consume
more of the market space. They have started to outperform the majority of
public entities. In total, he also feels that the financial services being
offered are still not being used to their full potential. An example of this
would be the lack of credit card users. In 2017, total savings accounts in
Argentina amounted to almost 50 million while credit card users were only
around 15 million. SUPV intends to take advantage of this large market space.
SUPV has focused their attention in 3 main
areas when pushing for continued growth. The first of these is user experience,
digitalization and talent management.
What
has the stock done lately?
In the past 6 months, SUPV has saw a price
increase of over 25%. When the economy took a down turn in February, the stock
still saw an increase in price around 2%. This past month however, the stock is
currently up and additional 5.01% and doesn’t seem to be slowing down
Past
Year Performance: In Q4 of
2017, SUPV saw a 60% increase in net income YoY and 36% increase QoQ. SUPV’s
net income grew 86% for the 2017 fiscal year. The price of this stock has
seemed to be consistent with its phenomenal performance, growing 81.15% in the
past year.
Source: FactSet
My Takeaway
Grupo Supervielle is growing at an
exponential rate and they are consistently outperforming competitors and the
market as a whole. Even when the macro outlook was as attractive as it is now,
SUPV still performed at a very high level. With the 2018 macro predications
getting even better I do not see SUPV slowing down. However, many of the
positive factors mentioned are contingent on sound political practices which
show some risks. Assuming the political conditions remain constant, SUPV is on
track for another phenomenal year.
