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New product launches expected in 2021

Fellow Finance held a strategy event on December 8th. Focus is being set on new payment and e-commerce products for SMEs and consumers, which include credit cards and invoice payment services. With the challenging consumer lending environment and potential extension of the temporary cap on consumer credit interest rates (credit cards excluded) the services could offer more recurring and higher margin fees. The rollouts of the new products are planned for 2021. The company has also restricted its international expansion plans, now focusing on selected existing international markets and new openings in the coming years are unlikely.

Rapid growth still expected

Fellow Finance set its 2023 financial targets, seeking EUR 23m in revenue, of which a significant share from business finance and international markets, and an EBIT-margin of 15%. In 2020 the company expects revenue of approx. EUR 11m and earnings to be negative (H2/2020 close to zero). Our revenue estimates remain largely intact while our 2020 EBIT estimate is up by EUR 0.5m and our 2021-2023 EBIT-margin estimates down by 2-6pp.

HOLD with a target price of EUR 2.8

Although we have lowered our mid-term profitability estimates, the new initiatives appear rather appealing and raise our confidence in Fellow Finance’s ability to navigate the challenging consumer lending environment. Performance in business lending has also been better than anticipated, and loan volumes are picking up nicely. We retain our HOLD-rating and TP of EUR 2.8.

Source: Finwire News.