maverick of online brokerage - fintech group · pdf fileinvested capital 8.1 59.3 43.4 44.9...

Equity Research | Inquire

For important disclosure information please see pages 23 and 25.

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flatex – trading at a discount!

flatex is a fast-growing online broker in the German and Austrian market which offers a

home for active traders. Its relatively low fix cost base allows flatex to attack incumbent

players in the DACH region with discount trading fees. We expect c. 15% client growth to

continue in the years to come as a) current market consolidation in the German online

brokerage market makes some heavy traders homeless and b) its strong brand in

combination with low trading fees makes it an attractive home for frequent traders.

Consequently, we expect revenue CAGR of 11.4% for 2016 to 2019E. Given its strong

market position, we expect FinTech Group to play an active role in market consolidation:

Either as a consolidator or as a takeover candidate.

Strong earnings growth ahead

We expect a rising number of trades driven by continuous client growth at flatex, a further

optimization of bank’s loan book, some client wins at FinTech’s technology platform in

combination with relatively stable cost base, to result in an EPS CAGR of 35.4% from 2016

to 2019 – impressive for stock trading at 11.3x 2018E earnings.

FinTech Group: trading at a discount!

It seems that market participants have forgotten to buy the stock. Yes, we acknowledge that

the liquidity of the stock is low, there is little sell-side coverage, the track record of clean EPS

due to corporate legacy is short; however, a ~40% discount to the relevant online brokerage

peers is extensive. With reduced complexity in its corporate structure going forward, a

potential listing in the Prime Standard of Deutsche Börse, continuous strong earnings

growth, the management team full of stock options and the potential for a higher free float

going forward, we expect this discount to diminish over time, resulting in a re-rating of the

stock. Given 30% upside to our target of €22, we initiate with Buy.

FinTech Group

Hybrid thinking!

FinTech Group is a financial technology company offering IT solutions (B2B) and

banking services with its full-licenced bank (mainly B2C) under one roof. This is a key

competitive advantage as it allows the control of its entire value chain and leveraging

its own technology to external customers. Its cash cow is the fast growing retail

online broker flatex, accounting for the vast majority of our projected 35% EPS CAGR

until 2019. On the back of a) a beneficial environment for growth at flatex; b) reduced

complexity in the corporate structure and c) a cheap valuation at 11.3x 2018E

earnings, we initiate with Buy and a target of €22.

Key financial and valuation metrics

Year-end Dec 2014 2015 2016 2017E 2018E 2019E CAGR 2016-19E

Sales rep. (€ m) 17.1 75.2 95.0 107 120 131 11.4 %

EBITDA adj. (€ m) 3.6 10.1 25.6 36.4 45.4 53.9 28.2 %

EBITDA rep. (€ m) 3.6 19.8 30.6 36.4 45.4 54.0 20.8 %

EBITA adj. (€ m) 3.2 7.6 20.5 30.1 37.8 44.8 29.8 %

EBITA margin 18.8% 10.1% 21.5% 28.3% 31.5% 34.1%

EBITA rep. (€ m) 3.2 17.3 25.5 30.1 37.8 44.8

FCF pre-div (€ m) 22.9 (99.8) (161) 707 166 108 n.a.

FCF yield 24.6% (49.3%) (61.3%) 247.5% 58.1% 37.7%

EPS rep. (€) (0.58) (0.11) 0.50 1.15 1.50 1.80 53.3 %

EPS adj. (€) 0.42 0.31 0.73 1.15 1.50 1.80 35.4 %

EV/Sales (x) 5.4 2.4 2.7 2.5 2.0 1.6

EV/EBITDA (x) 25.7 17.7 10.1 7.3 5.3 3.9

EV/EBITA (x) 28.9 23.5 12.7 8.8 6.4 4.7

P/E (x) 16.7 40.6 21.5 14.8 11.3 9.4

Div yield 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Net debt (€ m) 0.0 (24.8) (2.7) (20.3) (44.2) (73.6)

Net debt/EBITDA (x) 0.0 (2.5) (0.1) (0.6) (1.0) (1.4)

Sources: Company data, Commerzbank Research

Buy (Initiation) TP €22 CP € 17 (Closing 12 May 2017)

Key information

Expected performance 29.4%

Volatility (60d, realized) 26.0%

1M / 3M performance 15.6% / 16.4%

Bloomberg / Reuters: FTK GY, FTKG.DE

Market cap (€ m) 286

EV (€ m) 242

Shares outstanding (m) 16.8

Free float 43.1%

Dly trading vol (last 3-mth) (€ m) 0.2 Source: Commerzbank Research

Changes in estimates

€m 2017 2017 2018 2018

Sales 95.0 - 106.6 -

EBITA 30.1 - 37.8 -

EPS 1.15 - 1.50 - Source: Commerzbank Research

Relative and absolute performance (12M)

Source: Bloomberg

Company events

Date Event

5 July 2017 AGM

Sources: Bloomberg, Company data, Commerzbank Research

Shareholder structure

Major shareholders Stake

GFBK 40.1%

Heliad 16.8%

Free float 43.1% Sources: Bloomberg, Company data, Commerzbank Research

Commerzbank Financial Services research:

Analyst Christoph Blieffert +49 69 136 47033 [email protected]

16 May 2017

http://www.cbcm.com/

mailto:[email protected]

2 16 May 2017

Equity Research | Inquire | FinTech Group

Value 2014 2015 2016 2017E 2018E 2019E

EPS 0.42 0.31 0.73 1.15 1.50 1.80

P/E (x) 16.7 40.6 21.5 14.8 11.3 9.4

BVPS (€) 3.72 4.61 4.49 5.64 7.14 8.95

P/B (x) 1.9 2.8 3.5 3.0 2.4 1.9

EV/EBIT 28.9 23.5 12.7 8.8 6.4 4.7

Dividend per share (€) 0.00 0.00 0.00 0.00 0.00 0.00

Dividend yield 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Buyback volume per share (€) 0.00 0.00 0.00 0.00 0.00 0.00

Total yield (dividend + buyback) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Payout ratio 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Net debt / EBITDA 0.0 (2.5) (0.1) (0.6) (1.0) (1.4)

Growth 2014 2015 2016 2017E 2018E 2019E

Sales growth y/y n.a. 338.9% 26.3% 12.2% 12.5% 9.4%

EBITDA growth y/y n.a. 177.8% 154.6% 42.1% 24.7% 18.8%

EBITA growth y/y n.a. 135.1% 170.5% 47.1% 25.4% 18.5%

EPS growth y/y n.a. (24.3%) 131.1% 58.3% 30.3% 20.5%

Capital employed growth n.a. 635.9% (26.9%) 3.5% 3.0% 1.9%

Capex/depreciation 81.9% 147.1% 178.2% 129.8% 123.0% 109.0%

Capex/sales 1.9% 4.9% 9.7% 7.7% 7.8% 7.6%

Cash flow 2014 2015 2016 2017E 2018E 2019E

OCFPS (€) 1.72 (3.24) (9.04) 42.57 10.44 7.00

P/OCF (x) 4.0 (3.9) (1.7) 0.4 1.6 2.4

FCFPS (€) 1.70 (6.29) (9.58) 42.08 9.88 6.41

FCF yield 24.6 % (49.3 %) (61.3 %) 247.5 % 58.1 % 37.7 %

Capex/sales 1.9% 4.9% 9.7% 7.7% 7.8% 7.6%

DPS/FCFPS 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Cash flow from operations (€m) 23.2 (51.5) (152) 716 176 118

Cash flow from investing (€m) (0.3) (4.8) (9.2) (8.2) (9.4) (10.0)

Cash flow from financing (€m) 21.8 20.2 1.1 0.3 (0.9) (2.8)

FCF 22.9 (99.8) (161) 707 166 108

Net debt 0.0 (24.8) (2.7) (20.3) (44.2) (73.6)

ROIC analysis 2014 2015 2016 2017E 2018E 2019E

Sales 17.1 75.2 95.0 107 120 131

Tax retention rate (1-tax rate) 68.0% 68.0% 68.0% 68.0% 68.0% 68.0%

EBITA margin (EBITA/sales) 18.8% 10.1% 21.5% 28.3% 31.5% 34.1%

Capital turnover (sales/avg. IC) (x) 4.3 2.2 1.9 2.4 2.6 2.8

ROIC n.a. 15.3% 27.1% 46.4% 56.4% 65.3%

WACC 7.5% 7.5% 7.5% 7.5% 7.5% 7.5%

ROIC-WACC (7.5%) 7.8% 19.6% 38.9% 48.9% 57.8%

Invested capital 8.1 59.3 43.4 44.9 46.2 47.1

Value added on invested capital (€m) (0.3) 2.6 10.1 17.2 22.3 26.9

EV/OpIC (x) 11.6 3.0 6.0 5.9 5.2 4.5

ROE analysis 2014 2015 2016 2017E 2018E 2019E

Net profit margin (net profit/sales) 32.6% 6.1% 17.0% 18.1% 21.0% 23.1%

Asset turnover (sales/total avg assets) (x) 0.4 0.1 0.1 0.1 0.1 0.1

Leverage (total avg assets vs equity) (x) 1.9 9.6 15.5 16.0 14.4 12.7

ROE n.a. 6.7% 18.3% 19.3% 20.6% 20.2%

COE 7.5% 7.5% 7.5% 7.5% 7.5% 7.5%

ROE-COE (7.5%) (0.8%) 10.8% 11.8% 13.1% 12.7%

(ROE-COE) * avg. equity (€m) (1.9) (0.5) 9.5 11.8 16.0 19.1

Company data 2014 2015 2016 2017E 2018E 2019E

Share price 6.92 12.77 15.63 17.00 17.00 17.00

Equity value 93.2 203 263 286 286 286

Enterprise value 93.2 178 260 265 242 212

Share price High 10.60 19.90 20.10 n.a. n.a. n.a.

Share price Low 4.12 8.60 12.23 n.a. n.a. n.a.

Source: Commerzbank Research

Value

Growth

Segmental split

Regional split

ROE analysis

16 May 2017 3


Investment case

The online brokerage maverick FinTech Group is a financial technology company offering IT

solutions (B2B) and banking services (mainly B2C) under one roof – including a core banking

system. This is a key competitive advantage as it allows FinTech Group to efficiently control its

value chain and leveraging its own platform by providing its technology and banking services to

extern customers. Its cash cow is the retail online broker flatex, one of the leading online brokers

in the German and Austrian market, currently attacking market incumbents with a discount

pricing strategy. This strategy resulted in c. 15% client growth in the last two years and we

expect this to continue. FinTech’s online brokerage activities are its most important asset and

account for 65% of revenues. Moreover, FinTech Group also provides IT solutions for banks and

financial companies via its subsidiaries XCOM and FinTech Group Bank (former biw).

Phase I: Reducing internal complexity – to be completed in 2017 FinTech Group’s

corporate structure has been somewhat of a mess in the past due to corporate legacy. However,

with its efficiency strategy “5 to 2”, the company has implemented the right measures to reduce

internal complexity: The number of operating entities is to be reduced to two: 1) FinTech Group

AG, which includes the technology entity XCOM; and 2) FinTech Group Bank, which consists of

FinTech’s banking activities, including the online brokerage brands flatex and ViTrade. Besides

higher visibility, this reorganisation results in cost savings in the low single-digit million.

Phase II: Growing the flatex business – still ongoing We expect flatex to benefit from

ongoing consolidation in the German online brokerage market: clients whose trading provider is

being taken over might reconsider their business relationship and switch to a low cost provider

such as flatex – and its discount pricing strategy in combination with a strong brand should result

in a continuing inflow of new clients who want to substantially reduce their trading costs. We

forecast net commission income to grow at a CAGR of 10% from 2016 to 2019.

Phase III: benefitting from market consolidation – European consolidation has just started

Although European expansion looks relatively easy on paper, the major European online

brokerage markets are dominated by local players. The relatively easy client wins of recent

years are unlikely to be repeated in the future as c.60% of investors already make their own

investment decisions rather than relying on bank advice, so the online brokerage market should

enter a phase of consolidation. This is good news for FinTech Group: the company could

actively participate in consolidation via international expansion or it could become a takeover

target itself.

Management highly incentivised With 924k of stock options which can be exercised at a

share price of €7.30 and additional 164k whose strike price has not been reached yet, FinTech’s

management team is highly incentivised to deliver on operational performance which is the pre-

requisite for a substantially higher share price in our view.

Strong earnings growth ahead Driven by: a rising client base at flatex and ViTrade, which

should result in a rising number of trades in the years to come; further optimisation of its loan

book, resulting in higher net interest income; and a relatively stable cost base, the company’s

high operating leverage leads us to forecast an EPS CAGR of 35% from 2016-19. As a

consequence, we forecast EPS to increase from €0.73 in 2016 to €1.80 in 2019.

Valuation is too cheap: it seems that market participants have forgotten to buy it We

acknowledge that there is low liquidity in FinTech’s shares and only a short track record of clean

EPS which results in a discount to peer group multiples, but we believe a 40-50% discount to

peers is too high. With reduced complexity in its corporate structure going forward, continuous

earnings growth and the potential for a higher free float, we expect this discount to diminish over

time, resulting in a re-rating of the stock. Given 30% upside to our target of €22, we initiate with

Buy.

4 16 May 2017


Investment case at a glance

CHART 1: Rising EPS driven by… CHART 2: … a rising number of clients at flatex

Source: Commerzbank Research, company data Source: Commerzbank Research, company data

CHART 3: … and a growing number of trades… CHART 4: …supported by its discount pricing strategy


CHART 5: Low cost base is a key competitive advantage CHART 6: Stock is a bargain: huge discount to peer group

Source: Commerzbank Research Source: Commerzbank Research, Bloomberg

Table of contents

2.08

5.96.5

8.9 8.99.9 9.9 9.9 9.95 9.95 9.97

0 €

2 €

4 €

6 €

8 €

10 €

12 €

16 May 2017 5


Valuation

We value FinTech Group using a DCF model supported by relative P/E multiples from: a) other

online banks/brokers; and b) IT service companies. We use a WACC of 10.50% and a long-term

growth rate of 2%, which we consider conservative assumptions.

We compute an enterprise value of €369m to which we add FinTech Group’s net cash position

of €3m (including provisions; Commerzbank estimate) at year-end 2016. Dividing the equity

value by the number of diluted shares leads to a fundamental fair value of €22 per share. Our

target price of €22 leaves 30% upside, and we initiate with Buy.

TABLE 1: DCF valuation – FinTech Group

€m 2016 2017E 2018E 2019E 2020E 2021E

EBITDA 31 36 45 54 62 68

Notional tax -11 -14 -16 -19 -20

Capex -8 -9 -10 -11 -11

NOPAT 17 22 28 33 37

Discounted NOPAT 16 18 21 22 22

PV of cash flows 99

Terminal value 268

Enterprise value 367

Net debt/(cash) -3

Equity value 369

NOS 16.8

Value per share (€) 22.0

Target price (€) 22.0

Implied 2018E P/E ratio 14.7

Current price (€) 16.8

Upside/downside 30%


Our target price implies a 2018E P/E multiple of 14.7x. Currently, FinTech trades at a significant

discount to online banks/brokers and to IT companies servicing banks and companies involved

in the financial industry. We acknowledge that the free float in the stock is low, sell-side

coverage is low and the company’s earnings statements have been impacted by many one-off

effects, making an analysis challenging, but flatex is a growing and highly profitable asset that is

worth owning in our view. We believe this huge discount to peers is unjustified – and we expect

FinTech Group to re-rate over time.

CHART 7: FinTech Group: peer group overview – P/E

comparison

CHART 8: FinTech Group vs. online brokerage peers:

already cheaper for longer

Source: Commerzbank Research, Bloomberg Source: Commerzbank Research, Bloomberg

6 16 May 2017


The largest risk to our estimates is a substantial drop in customers’ trading activity or a price war

in trading fees with one of the incumbent players, which would limit FinTech’s growth

opportunities. However, given the unfavourable cost bases of many competitors, their ability to

cut trading fees is very limited, making the second threat rather unlikely. Nevertheless, a default

in the bank’s bond/loan portfolio could result in an impairment, which would negatively impact its

earnings and capital ratio; higher capital requirements could result in additional capital injections

from FinTech Group into its bank. There is no disclosure on biw’s core capital, leverage ratio and

risk profile of FinTech’s investment portfolio.

Peer group comparison

Online brokerage

Avanza – Avanza is a Sweden-based company engaged in the financial services sector. It

provides online services to private customers, including high net-worth individuals (HNWI) and

day traders, as well as to corporate customers. The company posted a total income of

SEK 919m and an operating profit of SEK 465m in 2016. It has c. 571 thousand customers with

a total savings capital of SEK 231bn at 2016 year end.

BinckBank – BinckBank is an online bank for investors and savers. The company has a leading

brokerage position in the Netherlands and Belgium and is ranked third in France. It provides

services for private customers, companies/legal entities, and independent asset managers.

BinckBank has offices in the Netherlands, Belgium, France, Italy, and Spain, and offers its

services under the brands Binck and Alex. The company generated total income of €147.7m and

net income of €30.5m in 2016.

Charles Schwab Corp – The Charles Schwab Corporation is a savings and loan holding

company. The Company engages in wealth management, securities brokerage, banking, money

management and financial advisory services. It generated net revenue of €7.5bn and pre-tax

income €3.0bn in 2016. The company managed €2.8trn of client assets in over ten million active

brokerage accounts at year-end 2016.

Comdirect bank – The comdirect group is a leading direct bank and the market leader in online

securities business for modern investors, offering brokerage, banking and advice. Established in

1994, the company earlier focused on online brokerage but is now a full-service bank with more

than two million private customers. In 2015, the company executed 23.5m trades and had total

assets under custody of €65bn at year end. It generated a pre-tax income of €90.6m in that year.

E*TRADE Financial Corporation – E*Trade provides online brokerage and related products

and services primarily to individual retail investors under the brand E*TRADE Financial. The

company also provides investor-focused banking products, primarily sweep deposits, to retail

investors. It serves customers through its digital platforms and network of industry-licensed

customer service representatives and Financial Consultants, over the phone and by e-mail. At

year-end 2016, the company managed 3.5m brokerage accounts with $276bn brokerage

customer assets. It generated net revenue of $1,941m and net income of $552m in 2016.

Interactive Brokers Group, Inc. – Interactive Brokers Group, Inc. is an automated global

electronic broker and market maker. It specialises in routing orders, and executing and

processing trades in securities, futures, foreign exchange instruments, bonds and mutual funds

on over 120 electronic exchanges and in market centres around the world. It also offers custody,

prime brokerage, securities and margin lending services to customers. The company generated

net revenue of $1,396m in 2016. It operated 385k client accounts as at 31 December 2016.

Swissquote Group - Swissquote is a provider of online financial and trading services in

Switzerland. In 2016, the company posted net revenue of CHF 150.2m and operating profit of

CHF 23.2m. The company managed 303k accounts with total assets under custody of

CHF 17.9bn at year-end 2016. Swissquote also provides stock brokerage services to self-

directed investors and asset managers; custodian services against fees and foreign exchange;

margin loans to customers against pledging of assets; fiduciary placements on behalf and at the

16 May 2017 7


risk of clients against commission fees; and services to corporations for the management of their

stock option programmes, among others.

TD Ameritrade – TD Ameritrade Holding Corporation is a provider of securities brokerage

services and related technology-based financial services. The company provides its services to

retail investors, traders and independent registered investment advisors. In 2016, the company

recorded net revenue of $3.3bn and a total operating income of $1.3bn. The company executed

c. 117m trades in c. 7m accounts in 2016.

TABLE 2: Peer group: Online brokers/banks

Currency

Price Mkt Cap P/E Dividend yield

(lcy) (lcy m) 2017E 2018E 2019E 2017E 2018E

Comdirect Bank AG EUR 9.7 1,373 24.2 23.0 20.0 2.5 2.6

Charles Schwab Corporation USD 39.6 52,964 24.3 20.4 17.8 0.8 0.9

Swissquote Group Holding SA CHF 27.9 427 18.8 17.1 15.3 2.3 2.6

TD Ameritrade Holding Corp USD 37.3 19,697 22.2 18.1 14.6 2.0 2.2

Avanza Bank Holding AB SEK 365.1 10,894 26.3 23.5 20.5 2.9 3.3

BinckBank NV EUR 4.6 327 9.1 11.0 9.8 5.5 4.6

E Trade USD 34.4 9,455 17.6 15.1 13.7 0.0 0.0

Interactive Brokers USD 35.0 14,326 25.2 22.1 19.0 1.1 1.1

Average 21.0 18.8 16.3 2.2 2.2

FinTech Group 14.8 11.3 9.4 0.0 0.0

Discount of FinTech to peer group -30.4% -40.3% -43.1%

Source: Commerzbank Research, Bloomberg. Note: share prices as at 12 May 2017

IT services

GFT Technologies – GFT Technologies SE (GFT SE) is a Germany-based company engaged

in the design, delivery and maintenance of customised Information Technology solutions. The

company generated revenues of c. €423m and profit before taxes of c. €33m in 2016. The

company also designs business models to optimise and mobilise banking processes for the

financial sector; sources IT specialists and consultancy services for companies in various

sectors; and manages external Information Technology service providers for its clients.

Fidelity National Information Services – Fidelity National Information Services Inc. is a global

leader in financial services technology, with a focus on retail and institutional banking, payments,

asset and wealth management, risk and compliance, consulting and outsourcing solutions. In

2016, it generated net revenue of $9.2bn and an adjusted EBITDA of $2.9bn.

Fidessa – Fidessa, a UK-based company, provides trading, investment and information

solutions for the financial community of buy-side and sell-side professionals, from global

institutions and investment banks to boutique brokers and niche hedge funds. In 2016 Fidessa

achieved revenue of £331.9m and profit before tax of £48.8m.

SS&C – SS&C Technologies Holdings, Inc. is a provider of mission-critical, sophisticated

software products and software-enabled services that allow financial services providers to

automate complex business processes and effectively manage their information processing

requirements. In 2015, the company generated revenues of $1bn with an operating income of

$64.7m.

Temenos – Temenos Group is a software provider, partnering with banks and other financial

institutions. More than 2,000 firms globally, including 38 of the top 50 banks, use Temenos for

processing their daily transactions. In 2016, the company had non-IFRS group revenues of

$635.1m and an EBIT of $186.5m.

8 16 May 2017


TABLE 3: Peer group: IT service companies

Currency Price Mkt Cap P/E EV/EBITDA Dividend yield

(lcy) (lcy m) 2017E 2018E 2019E 2017E 2018E 2019E 2017E 2018E

Temenos Group AG CHF 89 6,193 37.5 32.5 28.3 24.6 21.6 18.8 0.7 0.8

Fidessa Group Plc GBp 2,498 966 27.1 24.7 23.2 10.9 10.3 9.8 3.7 3.9

Fidelity National Information Services Inc USD 83 27,475 19.5 17.2 15.8 11.7 10.9 10.3 1.4 1.4

SS&C Technologies Holdings, Inc. USD 37 7,491 18.9 16.7 15.5 14.7 13.3 12.1 0.7 0.7

GFT Technologies SE EUR 20 527 17.6 14.9 12.3 12.5 10.9 9.3 1.8 2.0

Average 24.1 21.2 19.0 14.9 13.4 12.1 1.6 1.7

Discount of FinTech to peer group -46% -54% -59%

Source: Commerzbank, Research, Bloomberg. Note: share prices as at 12 May 2017

16 May 2017 9


FinTech Group at a glance

Structured as a holding company, FinTech Group is a leading German provider of innovative

financial technology. After streamlining its organisational structure, the group will consist of two

divisions: a financial service and a tech entity:

• FinTech Group AG: XCOM AG, the IT systems provider, will be merged into FinTech

Group AG. This will pool the technological expertise of the group, which should

consequently strengthen the service to existing customers with long-term contracts, the

acquisition of new mandates, and the innovative power of the company.

• FinTech Group Bank: It will include the former biw AG. FinTech’s online brokerage

platforms flatex and ViTrade will be merged into this entity. The bank already provides all

account services, regulatory duties, its liability umbrella, and the core banking system for

flatex and ViTrade. flatex and ViTrade retain their brands and are the two main B2C

platforms. We expect FinTech Group Bank to contribute 84% to group revenues and 75% to

group EBITDA.

CHART 9: FinTech Group: at a glance CHART 10: FinTech Group: revenue spilt


CHART 11: FinTech Group: gross profit split CHART 12: FinTech Group: EBITDA spilt


10 16 May 2017


FinTech Group: on EPS growth track

We expect continuously rising earnings at FinTech Group, with 2017 EPS of €1.15, compared to

company guidance of €1.0, and 2018 EPS of €1.50. Our EPS CAGR forecast is 35.4% for 2016-

19. We expect FinTech to achieve its mid-term EBITDA target in 2019: our EBITDA forecast is

€54m for that year.

Main earnings driver are:

• Rising commission income: We expect a 13% CAGR for the number of retail clients and

higher commission income, at a CAGR of 8.9% up to 2019.

• Higher net interest income: We forecast modest growth of the investment portfolio and

further optimisation of the investment strategy, resulting in an NII CAGR of 35.5% (2016-

2019).

• Relatively stable operating expenses: We assume only modest growth in operating

expenses from €64.4m in 2016 to €77.2m in 2019 which reflects a CAGR of 6.3%

Losses from discontinued operations are reduced to zero after the disposal of Aktionärsbank to

Obotricia Capital. As FinTech Group already owns 98% of XCOM, minorities no longer apply for

FinTech Group in 2017. We apply a tax rate of 30% for the group.

In order to access the operating performance of the company, we make the following

adjustments to 2015 and 2016 reported earnings:

• We adjust 2015 reported profit to shareholders by c. €10m to reflect a book gain from the

sale of its CFD book to Commerzbank.

• We adjust 2016 reported profit to shareholders by €5m. This arises from: a) a €3m positive

contribution from the treasury portfolio resulting from write-up on a Heta bond as well as the

realisation of unrealised gains; and b) €2m from a potential reversal of provisions.

16 May 2017 11


TABLE 4: FinTech Group: earnings forecasts until 2019

€m 2015 2016 2017E 2018E 2019E 2016 2017E 2018E 2019E CAGR 16-19E

Provision of services 13.9 15.6 17.2 18.9 20.8 12.2% 10.0% 10.0% 10.0% 10.0%

Commission income 52.4 64.0 70.1 76.6 82.6 22.2% 9.5% 9.2% 7.8% 8.9%

Interest income 2.7 7.8 11.5 16.3 19.4 192.6% 47.7% 41.4% 19.2% 35.5%

Other operating income 5.7 7.4 7.8 8.2 8.4 29.8% 5.0% 5.0% 3.0% 4.3%

Revenues 75.2 95.0 106.6 119.9 131.2 26.3% 12.2% 12.5% 9.4% 11.4%

Raw materials and consumables used -13.6 -25.5 -24.2 -25.8 -26.7 87.8% -5.0% 6.7% 3.3% 1.6%

Personnel expenses -23.8 -19.5 -19.9 -22.2 -23.1 -18.1% 2.2% 11.5% 4.0% 5.8%

Marketing expenses -2.9 -4.1 -5.4 -4.8 -4.5 42.7% 31.6% -10.5% -6.1%

Other administrative expenses -15.1 -15.3 -20.6 -21.6 -22.9 1.8% 34.5% 5.0% 6.0% 14.4%

EBITDA 19.8 30.6 36.4 45.4 54.0 55.0% 18.9% 24.7% 18.8% 20.8%

Depreciation and amortization -2.5 -5.2 -6.3 -7.6 -9.2 106.4% 22.5% 21.0% 20.0% 21.2%

EBIT 17.3 25.5 30.1 37.8 44.8 47.5% 18.2% 25.4% 18.5% 20.7%

Financial results -2.7 -1.2 -2.5 -1.8 -1.6 -54.1% 103.9% -28.0% -10.0% 9.7%

EBT 14.6 24.2 27.6 36.0 43.2 66.1% 13.9% 30.3% 20.0% 21.2%

Income tax expenses -1.0 -4.0 -8.3 -10.8 -12.8 307.4% 109.5% 30.3% 18.8% 48.0%

Earnings from continuing operations 13.6 20.3 19.3 25.2 30.3 48.9% -4.7% 30.3% 20.5% 14.3%

Earnings from discontinued operations -15.8 -8.0 0.0 0.0 0.0 -49.4%

Earnings from continuing operations -2.1 12.3 19.3 25.2 30.3 -679.5% 56.9% 30.3% 20.5% 35.0%

Minorities 0.4 -3.9 0.0 0.0 0.0 -1045.9%

Profit attributable to shareholders -1.7 8.4 19.3 25.2 30.3 -591.5% 129.4% 30.3% 20.5% 53.3%

Adjustments -9.7 -5.0 0.0 0.0 0.0 -48.5%

Adj. profit to shareholders 5.0 12.2 19.3 25.2 30.3 144.9% 58.3% 30.3% 20.5% 35.4%

EPS (€) -0.11 0.50 1.15 1.50 1.80 -573.4% 124.8% 30.1% 20.5% 52.2%

Adj. EPS (€) 0.31 0.73 1.15 1.50 1.80 138.9% 58.3% 30.3% 20.5% 35.4%

Consensus EPS (€) 0.31 1.05 1.12 1.34 n/a 234.1% 6.7% 19.2%

Adj. EPS CBK vs. consensus estimates 2.7% 12.1%

Key performance matrix

Transactions executed, m 10.1 10.5 11.4 12.2 12.9 3.1% 9.0% 6.7% 5.7% 7.1%

Number of retail customers, k 176.6 212.0 248.1 280.3 305.6 20.1% 17.0% 13.0% 9.0% 13.0%

Transactions per customer 57.4 49.3 45.9 43.4 42.1 -14.1% -6.9% -5.6% -3.0% -5.2%

Source: Commerzbank Research, company data.

12 16 May 2017


FinTech Group Bank AG

FinTech Group Bank AG bundles FinTech Group’s B2B and B2C banking activities.

• Online brokerage: flatex and ViTrade (84% of revenues)

- flatex: flatex is an online broker specialising in securities transactions under the

flatex brand. It targets active, well-informed traders acting and investing

independently. It covers all security types, all German and many international stock

exchanges, off-the-floor trading, and both CFDs and FX trading (currency trading).

The focus is on clients with c. 45 transactions per year.

- ViTrade: ViTrade is an online broker with a focus on heavy-traders (>100 trades

per month).

• Banking services: FinTech Group Bank (former: biw) AG has a German banking licence

and offers a range of white label banking services. Its most important business activity is

transaction processing for its internal customers, flatex and ViTrade, and it had c. 9m trades

in 2016. The entity is involved in other business activities whose EBITDA contribution is

either very low or has an optional value.

• White label banking services (5% of revenues)

- Cooperation with Rocket Internet: FinTech Group Bank set up a fully digital

banking and credit business for Rocket Internet.

- Processing of stock option plans: FinTech Group Bank processes and

manages stock option plans for Equatex, a leading administrator of option

plans for blue chip companies.

- Deposit gathering: FinTech Group Bank provides Deutsche Pfandbriefbank

with white label banking services for deposit gathering in the German market

via pbbdirekt. Management expects shortly the acquisition of additional clients

in this business segment.

• Credit and treasury: FinTech Group Bank invests the deposit base of flatex and ViTrade to

generate net interest income. It generated €7.8m (11% of revenues) in 2016 and we expect

this income source to increase to €16.3m in 2018, driven by various optimisation measures

and a growing deposit base.

CHART 13: FinTech Group Bank AG at a glance

Source: Commerzbank Research, company data

16 May 2017 13


Online brokerage: flatex – a home for active traders

What is the competitive environment? flatex is one of the leading online brokers for private

clients in Germany and together with ViTrade is FinTech Group Bank’s main revenue

contributor. The company mainly competes against captive brokers such as comdirect bank,

81.2% owned by Commerzbank, ING-Diba part of ING group, Maxblue, 100%-owned by

Deutsche Bank, Consors bank, a subsidiary of BNP Paribas, which includes the former DAB

bank, and S Broker, which is part of Deka Bank, owned by the German Savings Banks. After the

acquisition of OnVista Bank by comdirect, flatex and IB interactive broker are the only major

discount brokers in the German market. While the competition mainly follows a multi-pillar

strategy, which includes the sale of multiple banking products, flatex and ViTrade follow a pure

online brokerage strategy with a focus on heavy traders.

CHART 14: Number of executed trades – flatex in third position

Source: Commerzbank Research, company data: Note: Maxblue and CortalConsors do not disclose executed trades.

Trades of DAB Bank are annualised and adjusted for seasonal patterns. 2015 data, in million trades.

What is flatex’s target client group? flatex is the home for heavy-traders. Given its high order

activity, this client group is particularly price sensitive. For many competitors, commission

income from trading activity remains an important income source, but trading activity is much

lower as they offer less sophisticated trading services for the German mass retail customer.

Market share gains are difficult to achieve for flatex given: a) the total number of heavy traders is

somewhat limited; and b) online banks are aggressively marketing their brokerage offering

among the existing client base. Given the low marginal costs of an additional custody account,

any additional trade counts for the incumbent banks. This strategy is very hard for flatex to

replicate, given customer acquisitions costs of €130-€150 per new client, which has to be

amortised in year one after acquisition.

14 16 May 2017


CHART 15: flatex: strong focus on heavy traders: trades per account

Source: Commerzbank Research, 2015 data

What is the pricing strategy? Flatex competes for market share with a discount pricing

strategy, which is unique in the German market. It charges a flat fee of €5 plus third party fees

for trades at Xetra or German stock exchanges, €5.90 for OTC trades and €9.90 for US trades.

Competitors usually charge on average 25bp on the order volumes with a minimum fee in the

range of €9-€10 per trade. While the product offer is virtually the same among the top online

banks/brokers in the market, pricing is a key differentiating factor among heavy traders.

CHART 16: flatex – a discount strategy to gain market share: minimum fee per trade


Despite its comparatively low marketing budget and thanks to its relatively low fee structure,

flatex has been able to defend a market share of c. 20% of the peer group total in a highly

competitive market environment.

16 May 2017 15


CHART 17: Stable market share among the top 5 players in German online brokerage

Source: Commerzbank Research, company data. Note: No data available for Maxblue. Based on number of trades

Why can flatex offer discount fees? flatex is cost leader in the industry in our view. Total costs

per trade amounted to c. €3.1 in 2016. The company generates the lowest indirect costs per

trade (personnel expenses and administrative expenses) given its overall lean cost structure. As

flatex’s customers have an incentive to use OTC trading platforms for execution, the direct costs,

which include the fees paid to the relevant stock exchange, are below average as well.

CHART 18: Direct and indirect costs per trade

Source: Commerzbank Research, company data: Note: we allocate operating expenses as a % of brokerage related fees to

total income. We use the latest annual public data available. For FinTech Group’s indirect costs, we assume €7.5m of

operating costs, which is the 2016 cost base of TP & white-label banking services and €9.8m of losses from consolidation,

which we consider as IT costs for XCOM’s trading system (intercompany).

FinTech’s low cost per trade is its key competitive advantage and facilitates its discount offering

in the brokerage market. Despite its low trading fees, FinTech is one of the most profitable

players in the German brokerage market: We calculate €2.9 per executed trade.

16 16 May 2017


CHART 19: Total income and costs per trade CHART 20: Total income per trade

Source: Commerzbank Research, company data. Latest annual data available

data. We assume €7.5m of operating costs for FinTech which is the 2016 cost

base of TP & white-label banking services.


Consolidation pressure in the online brokerage industry is rising

Consolidation pressure in the online bank/brokerage industry is rising driven by: a) falling net

interest income on the back of a declining interest rate environment, which includes limited re-

pricing potential for deposits alongside continuous asset yield pressure; and b) rising costs

mainly driven by additional regulatory requirements and IT investments. For example, Cortal

Consors, owned by BNP Paribas, announced the acquisition of DAB bank in 2014. In December

2016, comdirect bought OnVista Bank, which was loss-making in 2015. We believe flatex is in a

good strategic position given a) its low cost base resulting in relatively low costs per trade and b)

its own IT infrastructure which allows a fast adaption to changing market conditions.

What are the implications for FinTech Group?

• Potential takeover target: FinTech Group, with its online broker flatex, is the only

remaining independent market participant and could become a takeover target as well

• Growing customer base: FinTech is trying to make use of friction losses resulting from

client migration during integration of the takeover target. For some clients, a forced portfolio

transfer from one broker to another is an inflection point: a portfolio transfer to a third party

that offers even more beneficial trading fees is not unlikely. We estimate that from 12k of

new registered clients at flatex in Q1 17, 4-5k are former DAB bank clients which did not

want to accept the Cortal Consors pricing model. From FinTech’s perspective, the customer

needs to be breakeven after one year at the latest, which results in a maximum marketing

budget of c. €130-€150.

Net commission income: flatex is the main revenue source

Net commission income is the major revenue source at FinTech Group, accounting for 67% of

total revenues in 2016. We estimate that 95% of commission income derives from FinTech’s

transaction processing activities, which include flatex, ViTrade (B2C) and for third parties (B2B).

mwb fairtrade is the main customer in third party processing. FinTech’s B2C activities contribute

c. 85% to executed trades, while third-party processing accounts for c. 15%. We assume that

B2C trades have significantly higher profitability than B2B trades.

16 May 2017 17


CHART 21: Commission income breakdown CHART 22: Breakdown of transactions executed

Source: Commerzbank Research estimates. Source: Commerzbank Research, company data: Note: ViTrade trades are a

Commerzbank Research estimate only.

We forecast a continuous increase in commission income from €64m in 2016 to €82.6m in 2019

– a CAGR of 8.9%. This increase is driven by two factors:

• Client growth: We expect continuous client growth at flatex driven by: a) clients looking for

trading platforms with relatively low costs; and b) disruption in the German online brokerage

market as a consequence of continuing consolidation. Some clients might be tempted to

switch their trading platform.

• Relatively stable trades per account: We include slightly declining trades per account in

our forecast as: a) continuous client growth might dilute the number of heavy traders going

forward; and b) we expect volatility in equity markets to normalise going forward vs. high

volatility in 2016 with two major unexpected volatility events (Brexit, Trump election),

resulting in overall lower trading activity.

CHART 23: Rising net commission income driven by...

(€m)

CHART 24: …increasing number of trades… (in million

trades)


18 16 May 2017


CHART 25: …supported by a continuously rising number of

clients at flatex…

CHART 26: …and relatively stable trading activity per

account


In contrast to major competitors such as DAB Bank, ING diba, maxblue and comdirect bank,

which have expanded their product portfolio horizontally into a full-service bank, FinTech Group

follows a different strategy. The focus is on expanding the value chain vertically:

FinTech Group established a 50%/50% joint venture with Morgan Stanley, in which flatex

distributes structured products launched by Morgan Stanley under the flatex brand. We estimate

that FinTech Group receives fees in excess of the average €5.90 for every trade in Morgan

Stanley products. We also assume that FinTech Group receives asset under management fees

in the range of 1%-2%, which would result in €2m-€3m of net commission income in 2017.

Net interest income at FinTech Group Bank

At 8%, net interest income is an important and growing revenue driver as we expect the

company to further optimise its investment strategy.

Similar to its major competitors, flatex faces a deposit overhang, which is a significant challenge

in times of negative interest rates. Based on a deposit base of €1.3bn at flatex and ViTrade, we

estimate interest expenses of €1.3m as unused deposits need to be invested at negative interest

rates at the ECB (€415m at year-end 2015). In order to avoid penalty interest at the ECB, flatex

has launched several initiatives to invest its deposit overhang.

CHART 27: Investment portfolio of FinTech Group Bank – 2017 estimates

Source: Commerzbank Research estimates

• Treasury book: flatex invests deposits in a bond portfolio with a low risk profile. We

estimate an invested amount of €515m in 2016 with an average yield of 32bp.

• Receivables to ECB: Excess deposits are held at the ECB and generate a negative 40bp

yield. Interest expenses are recognised in FinTech Group’s financial result. We expect this

16 May 2017 19


amount to be significantly reduced in 2016 as the regulator no longer obliges FinTech Group

Bank to deposit excess cash at the ECB after its successful capital strengthening.

• Loan book: In order to increase its net interest income, FinTech Group offers its flatex

customers a lombard loan at relatively attractive rates: 3.9% is a discount offer relative to

the competition. Clients with a securities portfolio that matches flatex’s scoring requirements

(the offer is basically limited to highly liquid blue chips) are allowed to draw a credit volume

that corresponds to a loan-to-value of 25% up to a maximum amount of €50k. In contrast to

the competition, clients have no obligation to use this credit line to buy additional stocks – it

may also be used for private consumption. We also understand that the company further

optimises its asset yield by investing in factoring and higher-yielding senior unsecured

bonds (likelihood of potential asset impairments rising as well).

CHART 28: flatex – discount offer for lombard loans


• Negative deposit rates: Since mid-March 2017, flatex has charged customers 40bp on

their deposits. We estimate that the chargeable deposit base is c. €900m.

We expect interest income to rise in the years to come, mainly driven by: a) a 40bp charge on

deposits (FinTech has decided to pass the ECB’s negative interest rates through to its

customers; and b) higher penetration of lombard loans (we expect volumes to increase by €90m

and €70m in 2017 and 2018 respectively).

20 16 May 2017


TABLE 5: Interest income breakdown

€m 2015 2016 2017E 2018E

Interest-bearing assets

Receivables to ECB 416 178 200 200

Other cash balance 2 461 473 535

Treasury book 480 515 520 530

Loan book 50 140 230 300

Customers liquidity = deposits 947 1,294 925 1,096

Total interest-bearing assets 947 1,294 1,423 1,565

Yield (%)

Receivables to ECB -0.31% -0.40% -0.40% -0.40%

Cash 0.05% 0.05% 0.05% 0.05%

Treasury book 0.35% 0.32% 0.30% 0.25%

Loan book 4.00% 4.00% 4.00% 4.00%

Customers liquidity 0.40% 0.40% 0.40%

Interest income, €m

Treasury book 1.7 1.6 1.4 1.1

Loan book 1.0 3.8 7.4 10.6

Cash balance 0.0 0.2 0.3 0.3

Customers liquidity 0.0 0.0 2.5 4.4

One-off effect 0.0 2.3 0.0 0.0

Total interest income 2.7 7.8 11.5 16.3

Source: Commerzbank Research estimates

FinTech Group AG: the technological backbone

This division includes XCOM, which is the technological backbone of the company. It offers

banks and financial services a full software solution to run a bank/online bank, and individual

software components for transactions processing, payments, trading including its OTC trading

platform LOX and other IT services. XCOM contracts usually have a maturity of five to ten years,

which results in good visibility of earnings.

CHART 29: XCOM at a glance

Source: company data, Commerzbank Research

XCOM: The technological backbone of FinTech Group AG

16 May 2017 21


• Banking/E-banking business segment: XCOM AG provides banking and e-banking

components that allow the running of a banking business. These services are sold in the

market under the product names Tradix, Tristan and WebFiliale. It provides, among other

tools, secure and standardised data communication and deployment as well as tools

payment processing, deposit administration and trading systems. Major clients are a)

FinTech Group Bank – XCOM provides the entire banking infrastructure including the

trading system for Flatex and ViTrade; b) Obotritia, which is the new owner of

Aktionärsbank, and c) Deutsche Pfandbriefbank.

• Trading business: XCOM offers its trading system HTX to customers to optimise their

trading and settlement activities. The main customers using HTX are flatex, ViTrade and

mwb fairtrade (third-party costumer). XCOM has also launched L.O.X., a limit monitoring

system for the OTC limit order trade with issuers such as Deutsche Bank and

Commerzbank.

• Payment business: XCOM is a provider of payment solutions and offers a wide range of

services which includes: a) the settlement of retail payments; and b) mobile payments by

smartphone in commerce, in online stores and among friends and acquaintances. The main

customers are Deutsche Post Renten Service and Berenberg, as well as Flatex and

ViTrade.

• IT services business: XCOM’s IT service business includes the provision of the relevant

infrastructure for data centres, server rooms and buildings. Major customers are Postbank

and bank-verlag. This part of the business is no longer one of management’s strategic

focuses and we expect revenues to shrink over time.

CHART 30: Revenue breakdown per segment

Source: Commerzbank Research estimates, annual report XCOM, 2015

For the years to come, we forecast rising revenues, driven by: a) the acquisition of one additional

client for e-banking software with a revenue contribution of c. €1m-€1.5m; 1-2 new clients for

payment solutions with a revenue potential of up to €1m each; and c) 1-2 new users of the

company’s trading software with a contract value of c. €500k per new user. We expect XCOM to

reach a 25% EBITDA margin in 2018.

Banking/E-banking software is the main revenue contributor

22 16 May 2017


CHART 31: Revenue and EBITDA forecast for XCOM

Source: Commerzbank Research estimates, XCOM annual report. Note: c. 60% of revenues are intercompany.

Management highly incentivised

FinTech Group currently has five different stock option plans in place to connect the interests of

shareholders and management, and to make the team’s total compensation competitive. The

first stock option plan was launched in 2014, with subscription rights being issued pursuant

thereto for the first time in 2015. Each subscription right issued pursuant to the share option plan

gives the holder the right to acquire one no-par value bearer share of the FinTech Group in

return for payment of the subscription price stipulated upon issue. The subscription price is

determined on the basis of the average closing price for the share over a fixed period of time

preceding the adoption of the corresponding resolution by the Annual General Meeting, less a

discount. The term of the subscription rights is six years from the issue date; they may only be

exercised upon the expiration of a waiting period (vesting period) of four years and within pre-

defined time slots.

The majority of options were granted with the first incentive plan issued in January 2015. The

issuance price was at €8.60 per share – the options are in the money when the share price of

FinTech Group exceeds the threshold of €17.20 (100% stock price performance) within two

years of the launch of the programme; this condition has been fulfilled.

Except for stock option plan IV, all remaining plans are out of the money and will expire in H2-

2017 unless FinTech’s share price exceeds at least the threshold of €22.80, which is the next

hurdle.

TABLE 6: FinTech Group – stock option plan

Stock option plan Issued on Number of stock

options Price at

subscription Strike In the money

Value of option at €15 share price

Value of stock options

I 26.01.2015 924,000 8.6 17.2 yes 6.4 5,913,600

II 08.07.2015 84,000 14.91 29.82 no 0 0

III 24.08.2015 55,000 11.4 22.8 no 0 0

IV 28.09.2015 20,000 12 18.6 yes 2.6 52,000

V 01.10.2015 5,000 12 23.175 no 0 0

Total 1,088,000 5,965,600


16 May 2017 23


Reference to first page of disclaimer

FinTec Group price chart


Distribution of ratings:

Number of recommendations from Commerzbank Research, at the end of Q1 2017

thereof recommendations for issuers to which investment banking services were provided during the preceding twelve months

72 (37.0%) Buy 12 (16.7%)

89 (45.6%) Hold 10 (11.2%)

34 (17.4%) Sell/Reduce 5 (14.7%)


In accordance with ESMA MAR requirements this report was completed 16/05/2017 07:39 CEST and disseminated 16/05/2017 07:44 CEST.

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24 16 May 2017


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26 16 May 2017


TABLE 7: Balance sheet

Balance Sheet (€m) 2013 2014 2015 2016 2017E 2018E 2019E CAGR 2016-19E

Property, plant & equipment 0.0 1.0 5.3 5.6 7.8 10.2 12.7 31.4%

Intangible fixed assets 0.0 5.1 54.3 57.3 57.0 56.4 54.7 (1.6%)

Goodwill 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total operating fixed assets 0.0 6.1 59.6 62.9 64.8 66.6 67.4 2.3%

Inventories 0.0 0.0 1.1 0.3 0.3 0.3 0.3 0.7%

as a % of sales n.a. 0.0% 1.4% 0.4% 0.3% 0.3% 0.3%

Accounts receivable 0.0 5.3 30.0 4.7 4.9 5.1 5.2 3.4%

as a % of sales n.a. 30.7% 39.9% 5.0% 4.6% 4.3% 4.0%

Accounts payable 0.0 1.6 13.4 5.8 6.1 6.3 6.4 3.0%

as a % of sales n.a. 9.5% 17.8% 6.1% 5.7% 5.3% 4.9%

Other working capital assets 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Other working capital liabilities 0.0 1.7 18.0 18.8 19.1 19.5 19.5

Net working capital 0.0 1.9 (0.3) (19.6) (19.9) (20.3) (20.3) 1.2%

as a % of sales n.a. 11.2% (0.4%) (20.6%) (18.7%) (17.0%) (15.5%)

Operating invested capital 0.0 8.1 59.3 43.4 44.9 46.2 47.1 2.8%

ROIC (%) n.a. n.a. 15.3% 27.1% 46.4% 56.4% 65.3%

IC/sales (x) n.a. 0.5 0.8 0.5 0.4 0.4 0.4

Investments 0.0 0.0 0.0 0.0 0.0 0.0 0.0 n.a.

Capital employed 0.0 8.1 59.3 43.4 44.9 46.2 47.1 2.8%

ROCE n.a. n.a. 15.3% 27.1% 46.4% 56.4% 65.3%

Cash and cash equivalents 0.0 61.5 541 389 1,097 1,262 1,367 52.0%

Interest-bearing liabilities 0.0 0.0 11.6 11.5 11.8 10.9 8.2 (10.7%)

Interest-bearing provisions 0.0 0.0 0.0 0.0 0.0 0.0 0.0 n.a.

Net debt 0.0 (61.5) (530) (378) (1,085) (1,251) (1,359) 53.2%

thereof pension provisions n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Shareholders' equity 0.0 50.1 73.2 75.6 94.9 120 150 25.8%

Minority interests 0.0 0.0 12.7 15.1 15.1 15.1 15.1

Total equity 0.0 50.1 85.9 90.6 110 135 166 22.2%

Equity Ratio n.a. 52.6% 7.1% 5.9% 6.5% 7.3% 8.5%

ROE n.a. n.a. 6.7% 18.3% 19.3% 20.6% 20.2%

Other assets 0.0 22.4 576 1,077 517 517 517

Other liabilities 0.0 41.8 1,080 1,407 1,537 1,679 1,757

Total assets 0.0 95.3 1,208 1,534 1,684 1,851 1,957 8.5%


TABLE 8: Latest sector research

Date Ticker CP Title Company/Sector Rec TP

12/05/2017 WUW GY €18.77 Q1 net profit above estimate Wüstenrot & Württembergische AG Buy €23

10/05/2017 LNSX GY €19.29 Q1 results: Strong growth in online retail driven by 1&1

cooperation Sixt Leasing SE Hold €21

05/05/2017 WUW GY €18.71 Highlights from roadshow and Q1 preview Wüstenrot & Württembergische AG Buy €23

04/05/2017 LNSX GY €19.26 Q1 17 preview: improved pre-tax profit expected Sixt Leasing SE Hold €21

03/05/2017 GLJ GY €188.05 Q1 17 pre-tax profit slightly below expectations Grenke Hold €160

03/05/2017 AR4 GY €46.66 CMD feedback: Dirk Markus loves the business AURELIUS Buy €82

28/04/2017 AR4 GY €46 On the road with the CEO: Focus on SECOP and more

disposals AURELIUS Buy €82

27/04/2017 GLJ GY €179.50 Q1 17 preview: A solid quarter expected Grenke Hold €160

27/04/2017 DB1 GY €87.28 Q1 slightly better than expected; small share buyback

announced Deutsche Börse Hold €90

26/04/2017 LSE LN p3307 Q1 beating expectations: strong growth at LCH and index

business London Stock Exchange Group Buy p3700


16 May 2017 27


TABLE 9: Income statement /Cash flow statement

Income Statement (€m) 2013 2014 2015 2016 2017E 2018E 2019E CAGR 2016-19E

Sales 0.0 17.1 75.2 95.0 107 120 131 11.4%

growth y/y n.a. n.a. 338.9% 26.3% 12.2% 12.5% 9.4%

Operating expenses 0.0 13.5 55.5 64.4 70.1 74.5 77.3 6.3%

Adjustments 0.0 0.0 9.7 5.0 0.0 0.0 0.0

EBITDA 0.0 3.6 10.1 25.6 36.4 45.4 53.9 28.2%

as a % of sales n.a. 21.1% 13.4% 27.0% 34.2% 37.9% 41.1%

Depreciation and intangible amortisation 0.0 0.4 2.5 5.2 6.3 7.6 9.2 21.2%

Adjustments 0.0 0.0 0.0 0.0 0.0 0.0 0.0

EBITA 0.0 3.2 7.6 20.5 30.1 37.8 44.8 29.8%

as a % of sales n.a. 18.8% 10.1% 21.5% 28.3% 31.5% 34.1%

Impairments 0.0 0.0 0.0 0.0 0.0 0.0 0.0

EBIT 0.0 3.2 7.6 20.5 30.1 37.8 44.8

Net interest result 0.0 (0.1) (2.7) (1.2) (2.5) (1.8) (1.6) 9.7%

Result from participations 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Other financial result 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Adjustments 0.0 0.0 0.0 0.0 0.0 0.0 0.0

PBT 0.0 3.1 4.9 19.3 27.6 36.0 43.2 30.9%

Tax expense 0.0 2.5 (1.0) (4.0) (8.3) (10.8) (12.8) 48.0%

Adjustment 0.0 0.0 0.7 0.8 0.0 0.0 0.0

Tax rate n.a. (80.1%) 33.0% 24.8% 30.0% 30.0% 29.7%

Net profit from continuing operations 0.0 5.6 4.6 16.1 19.3 25.2 30.3 23.5%

as a % of sales n.a. 32.6% 6.1% 17.0% 18.1% 21.0% 23.1%

Net profit from discontinued operations 0.0 (13.3) (15.8) (8.0) 0.0 0.0 0.0

Minorities 0.0 0.0 0.4 (3.9) 0.0 0.0 0.0

Net income attributable to shareholders 0.0 (7.8) (10.8) 4.2 19.3 25.2 30.3 92.6%

EBITDA as reported 0.0 3.6 19.8 30.6 36.4 45.4 53.9 20.8%

as a % of sales n.a. 21.1% 26.3% 32.2% 34.2% 37.9% 41.1%

EBIT as reported 0.0 3.2 17.3 25.5 30.1 37.8 44.8 20.7%

as a % of sales n.a. 18.8% 23.0% 26.8% 28.3% 31.5% 34.1%

Net income as reported 0.0 (7.8) (1.7) 8.4 19.3 25.2 30.3 53.3%

as a % of sales n.a. (45.2%) (2.3%) 8.9% 18.1% 21.0% 23.1%

Cash Flow Statement (€m) 2013 2014 2015 2016 2017E 2018E 2019E CAGR 2016-19E

EBIT as reported 0.0 3.2 17.3 25.5 30.1 37.8 44.8 20.7%

Cash taxes 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Depreciation & amortization 0.0 0.8 7.5 5.2 6.3 7.6 9.2 21.2%

(Profit) / loss from disposal of assets 0.0 0.0 0.0 0.0 0.0 0.0 0.0

(Increase) / decrease in inventories 0.0 0.0 0.0 0.0 0.0 0.0 0.0

(Increase) / decrease in accounts receivable 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Increase / (decrease) in accounts payable 0.0 1.6 15.8 (634) 560 (0.2) (0.1)

Increase / (decrease) in other WC items 0.0 27.8 (75.6) 464 130 143 78.3

Increase / (decrease) in pension provisions 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Cash operating interest 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Other operating cash flow 0.0 (10.2) (16.4) (12.8) (10.5) (12.2) (14.4)

Operating cash flow 0.0 23.2 (51.5) (152) 716 176 118 n.a.

as a % of sales n.a. 135.6% (68.4%) (159.9%) 671.4% 146.3% 89.7%

Gross capex 0.0 (0.3) (3.7) (9.2) (8.2) (9.4) (10.0) 2.8%

Asset disposals 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Net financial investments 0.0 0.0 (1.1) 0.0 0.0 0.0 -0.0

Net acquisitions 0.0 0.0 (43.6) 0.0 0.0 0.0 0.0

Gross capex as a % of sales n.a. 1.9% 4.9% 9.7% 7.7% 7.8% 7.6%

Gross capex as a % of depreciation n.a. 81.9% 147.1% 178.2% 129.8% 123.0% 109.0%

Free cash flow 0.0 22.9 (99.8) (161) 707 166 108 n.a.

as a % of sales n.a. 133.7% (132.6%) (169.5%) 663.7% 138.5% 82.1%

Dividends 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Dividends to minority shareholders 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Free cash flow (post dividend) 0.0 22.9 (99.8) (161) 707 166 108

Increase / (decrease) in debt 0.0 0.0 0.0 1.1 0.3 (0.9) (2.8)

Increase / (decrease) in equity 0.0 21.8 20.2 0.0 0.0 0.0 0.0

Other financing cash flows 0.0 0.0 0.0 0.0 0.0 0.0 0.0

FX effects 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Other items 0.0 0.0 559 0.0 0.0 0.0 0.0

Change in cash 0.0 44.8 480 (160) 708 165 105


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