creditshelf — Emerging marketplace for SME loans

creditshelf — Emerging marketplace for SME loans

creditshelf (CSQ) is addressing the underserved SME credit market in Germany through the development of its fully integrated online platform, including product portfolio extension and acquisition of new investors. As is typical for an early-stage business, CSQ is currently loss-making, but is seeing dynamic sales growth. Future growth will be supported by the €16.5m gross proceeds raised during the IPO, completed last July.

Milosz Papst

Written by

Milosz Papst

Head of Content, Investment Trusts

creditshelf

Financials

Price

€71.13

Market cap

€95m

Share price graph

Share details

Code

CSQ

Shares in issue

1.33m

Net debt as at 30 June 2018

€0.2m

Business description

creditshelf operates as a credit marketplace for small and medium-sized companies in Germany. Its online platform is designed to match SME borrowers with investors willing to invest in loan receivables. The company brokers the corresponding loans backed by a fronting bank.

Bull

High potential of SME credit market in Germany.

Competitive product features compared to other SME financing alternatives.

Prospective extension of co-operation with banks could drive the number of SME borrowers.

Bear

Early-stage business with no profits.

Still relatively small number of investors.

Full reliance on one fronting bank.

Analyst

Milosz Papst

+44 (0) 20 3077 5700

Emerging marketplace for SME loans

creditshelf (CSQ) is addressing the underserved SME credit market in Germany through the development of its fully integrated online platform, including product portfolio extension and acquisition of new investors. As is typical for an early-stage business, CSQ is currently loss-making, but is seeing dynamic sales growth. Future growth will be supported by the €16.5m gross proceeds raised during the IPO, completed last July.

Higher credit volumes and gross margin

CSQ reported a 287% y-o-y revenue increase to €765m in H118, largely driven by the growth in credit volume brokered (up by 86% vs H117). The company’s gross margin improved on the back of higher ticket size (€530k vs H117 at €275k) and average duration (18.2 months vs 10.9 in H117). In Q217, CSQ introduced service fees in addition to the brokerage fees already charged, with the former contributing 32% to group revenues in H118 (vs 25% in H117). PBT was negative at €2.9m (H117: negative €0.7m) and was affected, among others, by the IPO-related retention bonus (€1.4m), increased marketing expenses (€376k vs H117: €80k) as well as share-based compensation costs (€577k vs H117: €23k).

IPO proceeds to assist growth strategy

CSQ successfully completed its IPO in July at an issue price of €80 per share, translating into €16.5m gross proceeds (vs initial target at €15–20m). This includes c €1.5m bought by the majority limited partner of the largest shareholder. The funds will be used to finance the further development of data-driven processes, algorithms and models used on the platform (which should consume c 20–35% of the net proceeds) and to invest in new products with the current focus on factoring and analysis-as-a-service (10-13%), as well as marketing, IT infrastructure and incentive programmes (39-61%). CSQ is in discussions with banks related to referrals of SME borrowers. All these actions are aimed at achieving CSQ’s mid-term target of €500m loans brokered pa vs H118 last 12 months (LTM) at €41m.

Valuation: Reflects an early-stage growth profile

It is difficult to value CSQ’s shares due to its early-stage, high-growth profile, still negative earnings and limited number of comparable listed peers operating similar platforms. We note that some of them, unlike CSQ, are balance sheet lenders and thus not directly comparable. The shares currently trade at an LTM Mcap/sales ratio of 53x, compared to Funding Circle (its closest peer) at 11x.

Consensus estimates

Year
end

Revenue
(€k)

PBT
(€k)

EPS
(c)

DPS
(c)

Mcap/Sales
(x)

Yield
(%)

12/15

11

(354)

N/A

N/A

N/M

N/A

12/16

248

(1,238)

N/A

N/A

N/M

N/A

12/17

1,202

(1,114)

N/A

N/A

79

N/A

12/18e

3,900

(6,300)

(3.22)

N/A

24

N/A

Source: creditshelf accounts, Bloomberg consensus estimates as at 10 October 2018. Note: consensus based on estimates of a single analyst.

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Frankfurt +49 (0)69 78 8076 960

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Germany

London +44 (0)20 3077 5700

280 High Holborn

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United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison's solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are "wholesale clients" for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document.
A marketing communication under FCA rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a "personalised service" and, to the extent that it contains any financial advice, is intended only as a "class service" provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited ("FTSE") (c) FTSE [2014]. "FTSE(r)" is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE's express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

CFT — Food for thought

The recently completed merger between Glenalta and CFT creates a business with significant funding to support the group’s ambition to be a leading consolidator of processing, packaging and sorting technologies in the food and beverage sector. Benefiting from the global population megatrends or urbanisation and growing middle classes demanding higher-quality food and drink products, CFT should also augment growth by entering new product segments with high growth dynamics.

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