Fellow Finance - Looking for signs of growth pick-up
Slower loan volume growth puts pressure on margins
Company guidance for 2019 puts full-year revenue growth at around 19% and the implied H2/19 growth will be around 10%. Intermediated loan volumes during H2 have seen minor declines compared with H2/18, affected by the increased competition within consumer lending in Finland. Revenue growth is as such expected to be driven by higher interest income. We expect margins to have continued to decline with the slower revenue growth and the impact of the increased competition on broker commissions. We expect a dividend proposal of EUR 0.04 per share (2018: 0.04).
2020 expected to remain a ramp-up year
We expect 2020 to continue to be challenging for Fellow Finance. Fellow Finance’s growth story was heavily dented by the stalling intermediated loan volume development and profitability has declined. We expect 2020 to continue to be a ramp-up year for international operations but do not expect the growth to materialize significantly before 2021. Growth investments are also expected to have an impact on margins, and we expect a minor decline in operating profit in 2020.
HOLD with a target price of EUR 4.2 (5.0)
Without any clear signs of growth pick-up, we find it hard to identify clear near-term upside potential. The 2020 guidance should hopefully provide more light on the matter. We lower our target price to EUR 4.2 (5.0) and retain our HOLD-rating.