Fintech Group AG (DE:FTKG) is growing strongly. Management has created an integrated online broking business which can offer products across the value chain, from white labelled technology platforms to banking services. In our view, this gives it a significant advantage over its peers. The online broking sector in Germany has been consolidating and the fintech sector remains buoyant. Despite being the fastest growing major broking business in Europe, the shares trade at a discount to the sector.
Investment case
A key differentiator is that FTG owns both a bank and a software technology business, which uniquely gives it exposure to the bulk of the value chain. Management’s goal is to grow the business both organically and through acquisitions so that it generates €150m of annual revenues in the mid-term along with EBITDA of €50m and net profit of €30m. Additionally, FTG is a play on a strengthening economy and subsequent rising interest rate environment as the group stands to benefit from interest income on its extensive customer deposits. With the ECB deposit rate at minus 0.4%, we believe there is more scope for rises than further declines.
Regulatory backdrop
In May, the German regulator BaFin introduced new rules that put restrictions on the provision of CFDs and spread bets in the retail market. This is good news for FTG, which predominantly offers stocks and warrants on its platform, as it shuts out the major CFD and spread betting companies from the German retail market.
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