flatexDEGIRO AG
Original-Research: FinTech Group AG (von GBC AG): BUY

Original-Research: FinTech Group AG – von GBC AG

Einstufung von GBC AG zu FinTech Group AG

Unternehmen: FinTech Group AG
ISIN: DE000FTG1111

Anlass der Studie: Research Note
Empfehlung: BUY
Kursziel: 30.50 EUR
Letzte Ratingänderung:
Analyst: Cosmin Filker

Price and term adjustments for trading securities on and off the stock
exchange and for the ‘flatex-flex credit’; Forecasts and target price
raised; New products introduced with a view to raising further sales and
earnings potential

FinTech Group AG has high sales and earnings potential as a result of
recent price adjustments in the B2C segment at online broker flatex. The
key focus is on small price adjustments for securities traded on and off
the stock exchange, as well as for the terms of the ‘flatex-flex credit’,
which will have an immediate impact on earnings, according to our
forecasts.

More specifically, the costs for domestic orders for stock market trading
were increased from the previous EUR5.00 per order to EUR5.90, according to
the current list of prices and services. This price increase is estimated
to bring an additional sales potential of around EUR1.0 million a year. We
believe that approximately 15% of the transactions carried out by FinTech
Group AG each year can be attributed to trading on the stock exchange, and
as this additional sales volume is not offset by additional expenses, this
results in an equivalent rise in earnings. We don’t expect a fall in
transaction numbers as part of this measure as the order costs are still
highly competitive, at EUR5.90 per transaction on the stock exchange.

The rise in the ‘flatex-flex credit’ interest rate from 3.90% p.a. to a
still competitive 4.90% p.a. could, based on the credit book at EUR186.81
million (30/06/2017), result in additional annual sales or earnings
potential of EUR1.86 million, but our conservative forecasts predict an
annual volume of approx. EUR1.0 million.

Lastly, FinTech Group AG will in future pass on foreign exchange charges to
customers for over-the-counter trading (Tradegate, Lang+Schwarz, gettex) so
that, given a consistent number of OTC transactions (around 2.5 million
transactions according to GBC estimates), sales and earnings potential will
be approx. EUR2.0 million each year.

As a result, from the upcoming financial year 2018 onwards, we expect a
positive effect on revenue and earnings of approximately EUR4.0 million.
For the current financial year 2017, the repercussions of this decision
will be significantly lower as it will only take effect from 01/11/2017. We
are adjusting our current sales and earnings projections (see the research
study dated 14/09/17).

In line with our adjustments to forecasts and as part of a residual income
model, there is a new fair value for the company of EUR30.50 per share
(previously EUR28.00). Based on the current share price of EUR22.01, we
confirm the high financial potential of the FinTech Group share and are
therefore updating the buy rating.

New products based on the ‘flatex-flex credit’

In addition to the implemented price adjustments, FinTech Group AG is no
longer planning to offer the ‘flatex-flex credit’ exclusively to its own
customers and will instead make it accessible to the entire market. This is
clear from the Company News dated 11/10/2017.

FinTech Group AG will in future target customers, particularly those with a
short-term liquidity requirement but, in return, with access to a life
insurance policy linked to capital. This is very important as FinTech Group
AG is able to provide the capital value of the life insurance policy as
collateral and therefore benefit, in principle, from the typically high
credit ratings of German insurance companies. The termination rates and
lapse ratios for life insurance policies provide a clear indication of the
market potential of this particular product. With an investment portfolio
for life insurance policies in Germany amounting to approximately EUR885
billion, the annual lapse ratio amounts to 2.8% (Source: GDV – German
Insurance Association), which is roughly equivalent to an annual
termination volume of approximately EUR25 billion. FinTech Group AG is
therefore targeting customers who intend to cover short-term liquidity
shortfalls by terminating a life insurance policy,

A good way to place the new credit product with these customers is to work
with insurance brokers and broker pools. Given a small market share,
FinTech Group AG’s credit book could therefore increase by around EUR130
million per year, which means an additional sales potential of EUR6.4
million at an interest rate of 4.9%. By the end of the current financial
year, the product is still to be tested as part of a ‘Friends and Family’
programme before its scheduled rollout in 2018. Until then, we are not yet
taking into account the resulting additional sales and earnings potential
in our concrete estimates. Given this very extensive market potential, this
new product could become an important driver for sales and earnings within
FinTech Group AG.

The ‘flatex-flex credit’ is also scheduled to be distributed in a different
form as a securities credit via B2B customers in the FinTech Group AG
portfolio. We also recognise the additional sales and earnings potential in
this area, but it will only be included in our estimates once the product
is substantiated.

Die vollständige Analyse können Sie hier downloaden:
http://www.more-ir.de/d/15783.pdf

Kontakt für Rückfragen
Jörg Grunwald
Vorstand
GBC AG
Halderstraße 27
86150 Augsburg
0821 / 241133 0
research@gbc-ag.de
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Offenlegung möglicher Interessenskonflikte nach §34b Abs. 1 WpHG und FinAnV Beim oben analysierten Unternehmen ist folgender möglicher Interessenkonflikt gegeben: (5a,6a,11); Einen Katalog möglicher Interessenkonflikte finden Sie unter:
http://www.gbc-ag.de/de/Offenlegung.htm
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