Fellow Finance - Growth pace picking up

Fellow Finance’s intermediated loan volumes have picked up nicely in past months, supported by improved availability of financing and less aggressive competition. We now expect growth of 18.1% in 2021. We raise our target price to EUR 3.8 (2.8) and upgrade to BUY (HOLD).

Favourable loan volume development
Fellow Finance has been seeing intermediated loan volumes developing favourably since the second half of 2020, with the growth pace having picked up clearly in recent months. The average monthly volumes in March-April were up close to 100% compared to the volume seen during the early stages of the pandemic. The increase in volumes has to our understanding been largely due to an increased availability of financing and an increase in institutional investor volumes. Within consumer loans the competition also appears to have eased and the competitiveness of Fellow Finance’s offering improved as the more aggressive competitors have taken less aggressive approaches.

Growth seen to pick up to double digits
We have raised our 2021 intermediated loan volume estimate to EUR 186m (prev. 160m), for a 40% y/y growth, and our sales growth estimate to 18.1% (prev. 7.5%). Our profitability estimates remain mostly intact, with the company having estimated for growth projects to keep net earnings slightly negative, which is looking to materialize for instance through the expansion to credit card solutions in cooperation with Enfuce.

BUY (HOLD) with a target price of EUR 3.8 (2.8)
Current valuation puts the intermediation business 2021e EV/Sales at ~1.3x (assuming Lainaamo at BV). Near-term earnings multiples are challenging but with growth picking up, shifting the 2023 targets (sales ~EUR 23m and 15% EBIT-margin) more within grasp, we still see a higher valuation being justified. We raise our target price to EUR 3.8 (prev. 2.8) and upgrade our rating to BUY (HOLD).

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