Fellow Finance : Guidance withdrawn amid uncertainty - Evli Research
Guidance withdrawn due to coronavirus uncertainty
Fellow Finance withdrew its 2020 guidance due to the weakened visibility caused by the coronavirus outbreak. The company previously expected turnover to grow in 2020 and the growth efforts to decrease operating profit compared to 2019, with growth expected to accelerate during 2021-2022. The uncertainty affects investor sentiment, which we expect to have a negative near-term effect on facilitated loan volumes. Furthermore, Fellow Finance will in the elevated uncertainty situation have to put the brakes on some of its growth plans internationally, which will affect growth in the coming years.
Estimates lowered on weakened investor demand prospects
We have lowered our estimates for facilitated loan volumes, driven by the change in investor sentiment, and as a result our estimates for revenue and profitability. Fortunately, fees from managing the current portfolio along with fees from Lainaamo’s loan commitments will support revenue while the variable cost components, mainly the commissions to loan brokers, should slightly soften the profitability impact. We now expect a 6% revenue decline in 2020 (prev. 4% increase) and an operating profit of EUR 0.6m (prev. EUR 1.3m).
HOLD-rating with a target price of EUR 3.0 (4.0)
On our revised estimates and increased uncertainty, we adjust our target price to EUR 3.0 (4.0). We assume only a fairly moderate deterioration of the economy due to the coronavirus, while a larger deterioration could result in a clear increase in loan defaults and have a clear negative impact on the company.
Link to research:
Fellow Finance withdrew its 2020 guidance due to the weakened visibility caused by the coronavirus outbreak. The company previously expected turnover to grow in 2020 and the growth efforts to decrease operating profit compared to 2019, with growth expected to accelerate during 2021-2022. The uncertainty affects investor sentiment, which we expect to have a negative near-term effect on facilitated loan volumes. Furthermore, Fellow Finance will in the elevated uncertainty situation have to put the brakes on some of its growth plans internationally, which will affect growth in the coming years.
Estimates lowered on weakened investor demand prospects
We have lowered our estimates for facilitated loan volumes, driven by the change in investor sentiment, and as a result our estimates for revenue and profitability. Fortunately, fees from managing the current portfolio along with fees from Lainaamo’s loan commitments will support revenue while the variable cost components, mainly the commissions to loan brokers, should slightly soften the profitability impact. We now expect a 6% revenue decline in 2020 (prev. 4% increase) and an operating profit of EUR 0.6m (prev. EUR 1.3m).
HOLD-rating with a target price of EUR 3.0 (4.0)
On our revised estimates and increased uncertainty, we adjust our target price to EUR 3.0 (4.0). We assume only a fairly moderate deterioration of the economy due to the coronavirus, while a larger deterioration could result in a clear increase in loan defaults and have a clear negative impact on the company.
Link to research:
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