Fellow Finance - Time to head back on a growth track

Name: Evli
Price range: $

Fellow Finance reported H2 results in line with our expectations. Growth is expected in 2021, with investments into growth and new products seen to keep net earnings negative. We retain our HOLD-rating and target price of EUR 2.8.

H2 results in line with expectations
Fellow Finance reported H2 results quite in line with our expectations. Revenue amounted to EUR 5.3m (Evli EUR 5.5m) and adj. EBIT to EUR 0.7m (Evli EUR 0.7m). Adj. EPS amounted to EUR -0.02 (Evli EUR -0.01). Commission fees declined 44% y/y while interest income increased 16%. Facilitated loan volumes declined some 30% y/y. The BoD as expected proposes that no dividend be paid for FY2020. Fellow Finance expects revenue growth in 2021 compared with 2020 and to remain slightly unprofitable on net earnings level due to investments into new products and growth.

Supportive factors for growth in place
We expect growth of 7.5% in 2021 and adj. EBIT and adj. EPS of EUR 0.9m and EUR -0.04 respectively. We expect growth to be supported by a good traction in business financing, invoice funding in particular, and easing of temporary regulations on consumer financing in key markets. Investor sentiment also appears better compared with mid-2020 and new co-operation agreements such as the recently announced co-operation with Dynamic Credit also aid loan funding concerns. The new strategic initiatives within payment and e-commerce financing will also aid growth but the impact on 2021 will likely not yet be significant.

HOLD-rating and target price of EUR 2.8
We have made some larger downward revisions to our near-term estimates based on the new guidance. Without clearer signs of Fellow Finance moving towards its targets of around EUR 23m revenue and 15% EBIT-margin in 2023 we currently do not see clear upside potential to valuation. We retain our HOLD-rating and target price of EUR 2.8.

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