Alisa Bank - An interesting opportunity

Seeking to combine with fintech company PURO Finance
PURO Finance is a fintech company specialized in invoice financing, with total income of approx. EUR 3.1m and PTP of EUR 0.6m in 2023. The company’s business is based on self-developed technology, with its financing services offered under several brands. The combination will be carried out through a share exchange, after which Alisa Bank’s current shareholders will own approx. 60% of the company. The combination is aimed to be completed during May 2024, conditional upon EGM approval and other customary preconditions. 

Lucrative earnings improvement potential
The transaction in our view is appealing primarily through synergies and as such earnings improvement, in light of which the share exchange percentages seem fair for both parties. The clearly most tangible and significant part of the synergies arise from an estimated approx. EUR 1.3m saving in interest expenses through replacing PURO’s debt capital with Alisa Bank’s predominantly deposit based financing. On our standalone estimates, along with PURO’s own profitability, 2025e PTP would potentially double up. The profitability improvement would clearly reduce the need for further capital structure strengthening, which has been a challenge for Alisa Bank, through the earnings-based improvement to CET. Focus is also set to shift towards SME funding, in particular the more profitable invoice funding, with consumer lending volumes set to be secondary and dependent upon capital adequacy targets.

HOLD with a target price of EUR 0.20
On our preliminary estimates, the mid-term valuation upside for the combined company appears slightly more favourable. The loan book growth potential, however, remains uncertain given the expected limited immediate impact to CET 1(%).