FinLab — Several holdings complete financing rounds

FinLab (DB: A7A)

Last close As at 26/12/2024

EUR10.00

0.10 (1.01%)

Market capitalisation

118m

More on this equity

Research: Financials

FinLab — Several holdings complete financing rounds

FinLab’s H118 results were influenced by the fall in Heliad Equity Partners’ share price and limited revaluation of non-listed holdings. However, after the balance sheet date FinLab announced several positive developments, including the partial profitable exit from Deposit Solutions and new financing rounds at several holdings. According to management, these should translate into NAV/share of around €23 at end-September 2018, ie c 18% higher than the figure as at end-June 2018. Based on this estimate, FinLab is currently trading at an 11% discount to end-September NAV.

Milosz Papst

Written by

Milosz Papst

Head of Content, Investment Trusts

Financials

FinLab

Financials

Price

€18.80

Market cap

€98m

Share price graph

Share details

Code

A7A

Shares in issue

5.2m

Net cash as at 30 June 2018

€8.2m

Business description

FinLab is an incubator and builder of fintech companies based in Germany. It also has holdings in two relatively mature asset management businesses, Heliad and Patriarch, which gives it stable cash flows and a strong balance sheet. It currently has 10 fintech investments.

Bull

Good cash position may translate into NAV and earnings-enhancing acquisitions.

Strong balance sheet and stable cash flows.

Listed exposure to a growing portfolio of fintech companies in Germany.

Bear

Small free float and low liquidity.

Fintech investments are inherently high risk and the portfolio is concentrated.

FinLab may raise capital to fund future investments.

Analyst

Milosz Papst

+44 (0) 20 3077 5700

Several holdings complete financing rounds

FinLab’s H118 results were influenced by the fall in Heliad Equity Partners’ share price and limited revaluation of non-listed holdings. However, after the balance sheet date FinLab announced several positive developments, including the partial profitable exit from Deposit Solutions and new financing rounds at several holdings. According to management, these should translate into NAV/share of around €23 at end-September 2018, ie c 18% higher than the figure as at end-June 2018. Based on this estimate, FinLab is currently trading at an 11% discount to end-September NAV.

H118 results: Net profit down amid lower write-ups

In H118, FinLab reported improved EBIT at €1.02m (vs €0.30m in H117) on the back of a higher dividend from Heliad Equity Partners and the performance fee from Heliad Management. However, net profit declined by 45.7% y-o-y to €1.6m as a result of lower write-ups (primarily related to the revised valuation in conjunction with the next funding round of nextmarkets). Amid a c 21% decline in Heliad Equity Partners’ share price, the overall result (including change in revaluation reserves) was a negative €7.3m vs a positive €7.6m in H117.

New funding rounds fuel growth in NAV

Even though FinLab managed to finalise a new financing round for only one of its holdings in H118, it completed other transactions post-balance sheet date that will have a significant impact on its asset value in H218. The revaluation of Deposit Solutions, accompanied by a partial exit, should add €3 to company’s NAV per share alone. FinLab has also completed a capital increase on its own behalf, issuing 250k new shares at €20.75 each in April 2018. The €5.2m in proceeds should enable further investments. With the acquisition of awamo, FinLab’s fintech portfolio reached 10 holdings compared with management’s target of 10-12 companies.

Valuation: Returning the shares’ premium to NAV

FinLab’s development is driven by its ability to grow NAV over time as earnings in any given year can be less informative due to their high volatility. In H118, it recorded a 6.3% decrease in NAV per share followed by a 17.7% drop in the share price, which saw the premium at which it trades reduced from 13.7% to null. If we remove the discount of 28.2% at end-June for Heliad Equity Partners and its stock trades in line with NAV, FinLab’s NAV increases to €22.01 per share.

Historical financials

Year
end

Revenue
(€m)

PBT
(€m)

EPS
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/14

4.8

1.7

0.36

0.00

52.2

N/A

12/15

6.5

7.1

1.44

0.00

13.1

N/A

12/16

4.9

14.0

2.98

0.00

6.3

N/A

12/17

4.4

14.5

2.85

0.00

6.6

N/A

Source: FinLab accounts. Note: *Diluted figures.

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Sydney +61 (0)2 8249 8342

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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

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