FinTech Group. Buy TP 30 (from 22) CP Reality, optionality and a wild card. Equity Research Quick Bite

Transcription

1 Secure your Equity Research Quick Bite research access today! FinTech Group Reality, optionality and a wild card Price increases for trading and lending will give earnings growth an extra boost. The introduction of a loan on life insurances (flex-insurance credit) and expanding flatex flex credit with B2B partners provides optionality. Rising interest rates are a wild card to investors. Taking all this together, these are the right ingredients for a further rising share price. We increase our target price to 30 32% upside from current levels and confirm our Buy recommendation. Another push to earnings growth FinTech Group is reaping the rewards of its strong flatex brand in the German online brokerage market and increasing prices: a) trading fees are up by ~ 0.90 for ~50% of total trades and b) the lending rate for its key lending product flatex credit is up by 100bps. Both measures will contribute > 6m of additional EBITDA in 2018 and beyond. Therefore, we increase our earnings estimates by 6.7% in 2018 and 11.1% in New products provide optionality FinTech is making additional efforts to fight its deposit overhang: The new offering is a loan on life insurance policies which allows clients to borrow against their capital life insurance. We estimate a new volume of 60m until YE-2019E. Moreover, FinTech is going to expand its collateralised credit product in cooperation with B2B partners. Strongly rising volumes would provide upside to our earnings estimates an option for investors. 13 November 2017 Buy TP 30 (from 22) CP (Closing 10 November 2017) Key information Expected performance 34.0% Volatility (60d, realized) 26.0% 1M / 3M performance 1.6% / 40.1% Bloomberg / Reuters: FTK GY, FTKG.DE Market cap ( m) 376 EV ( m) 338 Shares outstanding (m) 16.8 Free float 43.1% Dly trading vol (last 3-mth) ( m) 1.0 Changes in estimates m 2017o 2017n 2018o 2018n Sales EBITA EPS Relative and absolute performance (12M) Strong earnings growth ahead Continuous strong client wins in the German online brokerage market, new products and stronger cross-selling efforts in combination with cost containment should result in significant earnings growth in the years to come. We forecast earnings CAGR of 32% by 2019E attractive for a stock trading at 14.0x 2018E earnings, a 32% discount to peers. Strong rally but not too late to buy Since our initiation last May, the stock has rallied by 34%. However, there is still plenty of upside given a) corporate legacy is behind the company and corporate complexity is to be reduced; b) a potential listing in the Prime Standard at Deutsche Börse by Q1/Q2 18 leads to increased transparency, c) strong alignment of interest between management and shareholders via a stock option plan; d) the potential for a higher free float and e) the stock is trading at a ~30% discount to relevant peers. On the back of higher earnings estimates, we confirm our Buy recommendation and increase our target price to 30. Key financial and valuation metrics Year-end Dec E 2018E 2019E CAGR E Sales rep. ( m) % EBITDA adj. ( m) % EBITDA rep. ( m) % EBITA adj. ( m) % EBITA margin 18.8% 10.1% 21.5% 27.8% 32.5% 36.1% EBITA rep. ( m) FCF pre-div ( m) 36.3 (106) (153) n.a. FCF yield 38.9% (52.3%) (58.3%) 51.2% 23.2% 23.2% EPS rep. ( ) (0.58) (0.11) % EPS adj. ( ) % DPS ( ) n.a. EV/Sales (x) EV/EBITDA (x) EV/EBITA (x) P/E (x) Div yield 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Net debt ( m) 0.0 (24.8) (2.7) (13.2) (38.5) (71.0) Net debt/ebitda (x) 0.0 (2.5) (0.1) (0.4) (0.8) (1.2) Sources: Company data, Commerzbank Research For important disclosure information please see pages 14 and 16. research.commerzbank.com / Bloomberg: CBKR Source: Bloomberg Company events Date Event 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 Analyst Christoph Blieffert christoph.blieffert@commerzbank.com

2 Investment case at a glance CHART 1: Rising EPS driven by, CHART 2: a growing number of clients at flatex, k E 2018E 2019E E 2018E 2019E flatex others including ViTrade, company data, company data CHART 3: and an increasing number of trades, m CHART 4: supported by its discount pricing strategy, flatex other trades, company data, company data CHART 5: Low cost base is a key competitive advantage, CHART 6: Stock is attractive: major discount to peer group FTG 1y forward P/E Peer group 1y average P/E, Bloomberg 2 13 November 2017

3 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% (previously: 10.5%; down by 50bps due to higher diversification of revenues) and a long-term growth rate of 2%, which we consider conservative assumptions. We compute an enterprise value of 503m to which we add FinTech Group s net cash position of 3m (including provisions; Commerzbank estimate) at year-end Dividing the equity value by the number of diluted shares leads to a fundamental fair value of 30 per share. Our target price of 30 leaves 32% upside, and we confirm our Buy recommendation. TABLE 1: DCF valuation FinTech Group m E 2018E 2019E 2020E 2021E EBITDA Notional tax Capex NOPAT Discounted NOPAT PV of cash flows 115 Terminal value 388 Enterprise value 503 Net debt/(cash) -3 Equity value 506 NOS 16.8 Value per share ( ) 30.1 Target price ( ) 30.0 Implied 2018E P/E ratio 18.7 Current price ( ) 22.7 Upside/downside 32.2% Our target price implies a 2018E P/E multiple of 18.7x. 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 as well and the company s earnings statements have been impacted by many one-off effects, making an analysis challenging. But in our view, flatex is a growing and highly profitable asset that is worth owning. We believe this huge discount to peers is unjustified and we expect FinTech Group to re-rate over time. The next trigger for re-rating would be the listing in the Prime Standard of Deutsche Börse which we expect for Q2 18, at the latest. CHART 7: FinTech Group: peer group overview P/E comparison CHART 8: FinTech Group vs. online brokerage peers: already cheaper for longer FinTech Group Online banks/brokers 2017E 2018E 2019E IT companies FTG 1y forward P/E Peer group 1y average P/E, Bloomberg. Note: share prices as at 8 November 2017, Bloomberg 13 November

4 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 leverage ratio and risk profile of FinTech s investment portfolio. Peer group comparison Online brokerage We compare FinTech Group s B2B online broker/banking activities which account for ~80% of group pre-tax profit with a peer group of global online banks. While peers trade at 21.3x 2018 earnings, Fintech Group only trades at 14.7x a material discount. TABLE 2: Peer group: Online brokers/banks Curr ency Price Mkt Cap P/E Dividend yield (lcy) (lcy m) 2017E 2018E 2019E 2017E 2018E Comdirect Bank AG* 9.7 1, Charles Schwab Corporation* US$ , Swissquote Group Holding SA* CHF TD Ameritrade Holding Corp* US$ , Avanza Bank Holding AB* SEK , BinckBank NV* E Trade* US$ , Interactive Brokers* US$ , Average FinTech Group Discount of FinTech to peer group -11.7% -31.3% -36.9% Source: Commerzbank * Research, Bloomberg. Note: share prices as at 8 November 2017 IT services TABLE 3: Peer group: IT service companies In a second step, we compare FinTech Group s B2B IT services with a peer group consisting of international peers trading at 24.0x 2018 earnings a 39% premium to FinTech. 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, Fidessa Group Plc* GBp 2, Fidelity National Information Services Inc* US$ 83 27, SS&C Technologies Holdings, Inc.* US$ 37 7, GFT Technologies SE * Average Discount of FinTech to peer group -26% -39% -45% Source: Commerzbank, Research, * Bloomberg. Note: share prices as at 8 November November 2017

5 EPS upgrades for 2018 and beyond Management has announced four initiatives to increase earnings for next year and thereafter: Loans on life insurance: FinTech Group Bank will start to offer collateralised lending on life insurance products with a LTV of 100% and a lending rate of 4.9%. Lombard lending on share-based compensation plans: FinTech Group Bank is considering to provide holders of share-based compensation plans at Equatex (Equatex flex credit), the opportunity to borrow against their life insurance policy within the compensation plan with a LTV of 25% and a rate of 4.9%. Price increase at flatex: Management decided to increase trade costs for a) trades on direct exchanges from 5 to 5.90 and b) to pass through charges for OTC trades (for Tradegate, L&S and Geetex) to the customer. Moreover, the lending rate for flatex credit flex (lombard lending on securities volume) will be raised from 3.90% to 4.90% at 1 January Crypto currencies at flatex: flatex will offer trading in crypto currencies such as Bitcoin in order to increase the attractiveness of the trading platform. As a result of these measures, we increase our 2018 EPS forecast from 1.50 to 1.60 (+6.7%) and our 2019E EPS forecast from 1.80 to 2.0 (+11.1%). As a result, we compute 32% earnings CAGR until 2019E (2017E 2019E). The main earnings drivers are: Rising net interest income: We incorporate into our estimate a) the increase in the lending rate from 3.90% to 4.90%; b) additional volume arising from loans on life insurances of 58m by 2019E. We forecast a rise in net interest income from 10.7m in 2017 to 16.9m in 2018 and 22.2m in Rising net commission income: We incorporate into our forecast a) higher trading fee income as a result of the recent price increase and b) some fine-tuning of our estimates for the number of trades. Our forecast for NCI goes by 8.4% for 2018 and 7.3% for November

6 TABLE 4: FinTech Group: earnings forecast until 2019 m E 2018E 2019E E 2018E 2019E CAGR 16-19E Provision of services % -13.3% 14.7% 20.0% 6.1% Commission income % 18.3% 8.4% 7.3% 11.2% Interest income % 35.0% 60.4% 31.6% 41.8% Other operating revenues % -48.3% 28.5% 3.0% -11.9% Revenues % 9.1% 15.2% 12.2% 12.1% Raw materials and consumables used % -4.0% 0.5% 6.4% 0.9% Personnel expenses % 10.9% 2.7% 4.0% 5.8% Marketing expenses % 14.0% 4.2% -6.1% Other administrative expenses % 18.7% 16.1% 6.0% 13.5% EBITDA % 13.3% 34.4% 23.9% 23.5% Depreciation and amortization % 14.4% 29.6% 20.0% 21.2% EBIT % 13.0% 35.3% 24.7% 24.0% Financial results % 56.9% -22.0% -25.0% -2.8% EBT % 10.8% 39.5% 26.7% 25.1% Income tax expenses % 89.9% 40.1% 30.8% 51.5% Earnings from continuing operations % -4.6% 39.2% 25.1% 18.4% Earnings from discontinued operations % -98.9% % Earnings from operations % 56.4% 39.8% 25.1% 39.8% Minorities Profit attributable to shareholders % 128.7% 39.8% 25.1% 58.7% Adjustments % Adj. Profit to shareholders % 58.6% 39.2% 25.1% 40.3% EPS % 128.7% 39.8% 25.1% 58.7% Adj. EPS % 58.6% 39.2% 25.1% 40.3% Key performance matrix Transactions executed, m % 11.8% 3.2% 5.7% 6.9% Number of retail customers, k % 18.0% 13.0% 9.0% 13.3% Transactions per customer % -5.2% -8.7% -3.0% -5.7% 6 13 November 2017

7 New products expanding its lending book FinTech Group has launched plans to expand its lending book: The new offer will include a) loans on life insurances with an LTV of 100% and b) lending on share-based compensation plans in cooperation with Equatex (similar to flatex flat credit; the product s features are similar to a lombard loan). The company is already an active lender with its collateralised credit product (lombard loan) for its online brokerage clients and offers borrowing on its securities accounts with an LTV of up to 25% on blue chips and bonds only a very low risk offering for Fintech Group. Based on a lending volume of 187m at H1-17 (lombard loan and other loan products), this product is already the most important contributor to FinTech Group s net interest income. We forecast rising net interest income for FinTech Group driven by a) continuously growing loan balances on the back of additional customer wins and a higher penetration of the existing client base and b) rising loan volumes for life insurance policies. CHART 9: Rising interest income driven by lombard lending and loans on life insurances E 2018E 2019E Treasury book Loan book Cash balance Loans on life insurances Customers liquidity One-time effect Moreover, management decided to increase the lending rate for its collateralised credit product from 3.90% to 4.90%. We factor this price increase into our estimates but slightly adjust our volume forecast downwards by 4% in 2018 to reflect the somewhat lower attractiveness of the product, i.e. incorporating the dividend yield; passing it through to flatex via the lending rate and taking full advantage of rising stock markets is no longer possible. After the price increase, flatex still has a highly competitive product. CHART 10: Lending rates flatex vs. competition 13 November

8 Wild card on the table: Rising interest rates in Europe would be a free option for shareholders: Management is guiding for 10m of additional net interest income for a 100bps parallel upward shift of the yield curve. However, this sensitivity does not take into account that the 40bps charge on customer deposits would become obsolete as clients would not accept this fee any longer. Therefore, for the first 100bps upward shift, we regard 6m higher net interest income as realistic, which represents 12.7% of our 2019E pre-tax profit forecast. Expanding into loans on life insurance policies significant potential FinTech Group is going to further broaden its secured lending portfolio with loans on life insurance policies. Life insurance has been a popular savings vehicle in Germany in the past with a guaranteed yield and a certain tax exemption for interest income. However, there is no way out of the policy for holders other than cancellation a very expensive option given cancellation costs of up to 80% of the amount saved as a consequence of high close-out costs, i.e. the contract starts with a negative equity balance. However, cancellations of these illiquid contracts are a common phenomenon in Germany: customers need the allocated cash in the insurance contract in special situations such as real estate purchases, divorce, unemployment, etc. The market for life insurance products in Germany is huge with 85m contracts in 2016 and 882bn of assets under management. Of these 85m contracts, 14.8% are not relevant for our market assessment as these policies insure death only and do not accumulate capital; hence, without capital accumulation, there is nothing to borrow for policy holders. Thus, every German citizen has on average at least one contract with approximately 12k of savings in it. CHART 11: German life insurance contracts, m CHART 12: Assets under management in German life insurance, bn , Statistica, Statistica FinTech Bank will launch a loan collateralised with the repurchase value of life insurance products (flex-insurance credit). The limit for lending is a LTV of 100% which makes the loan fully collateralised. The targeted lending rate is 4.9%; management is calculating 20-50bp for administrative and distribution costs resulting in a net yield of >400bps. Management guides for 100m of volume at the year-end We agree on the huge potential and already incorporate some revenue contribution from this product into our estimate based on the following assumptions: We assume that in a first step, the life insurance loan offer is for the flatex client base only as the company does not have to invest in marketing. Based on an average of 194k flatex customers in 2018, an average equity holding in a German life insurance contract of 12,200 and a cancellation rate per year of 5%, the potential loan volume for FinTech would be 122m. Incorporating a 90% LTV, the volume drops to 96m. Assuming that 25% of flatex clients use the product instead of selling or cancelling the policy and borrow at the maximum loan-to-value, we calculate a volume of 14m in 2018, increasing to 60m in Additional volume upside may arise if FinTech Group starts to distribute this product in cooperation with its B2B partners to reach policy holders outside of its existing client base November 2017

9 TABLE 5: Lending volume forecast for life insurance loan k 2018E 2019E 2020E flatex customers, k Number of life insurance contracts, k Equity in life insurance products, m 2, , ,073.9 Anticipated cancellation rate 5% 5% 5% Potential loan volume, m New lending volume: 25% of customers using life insurance loan, m Average lending volume, m Note: We assume an average equity balance of 12.2k per policy The success of the product depends on management s ability to convince policy holders not to sell or cancel their policy but to borrow against it. A doubling of customers using the product to 50% would increase the new lending volume to ~ 65m which is much closer to management guidance of 100m for 2018E than our 58m forecast at year-end 2019E. With more visibility on the success of the product, we see room for higher volume and consequently upgraded earnings estimates. Expanding into securitised lending for Equatex customers In a second growth initiative, FinTech Group Bank is considering to offer Equatex clients the opportunity to borrow against equity in its share-based compensation plan at a 4.9% ending rate and a LTV of 25%. What is the medium-term potential? FinTech Group Bank has ~ 5bn of Equatex assets under administration. We believe a 10% penetration rate similar to the flatex flex credit is possible in the medium term, yielding a market potential of ~ 500m. Considering a 25% LTV as the maximum lending for an Equatex customer, we estimate a market potential of 125m in the medium term. We do not increase our loan book volume forecast given low visibility on any potential additional volumes. Pricing schedule upward adjustments Trading fees at flatex to rise for existing customers as of January 2018 What will change? Management will increase trading fees for its existing client base for a) trades on direct exchanges from 5 to 5.90 and b) OTC trades additional charges will now be passed on to the customer resulting in additional EBITDA of 4.5m in Moreover, the lending rate for flatex credit flex (lombard lending on securities volume) will be raised from 3.90% to 4.90% at 1 January 2018 ~1.5m of additional EBITDA in What is flatex pricing strategy? Flatex is a low-cost provider in the German online broker market with trading fees 40% lower than major competitors. In contrast to ING and comdirect, 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. 13 November

10 CHART 13: flatex a discount strategy to gain market share: minimum fee per trade, company data What will be the earnings impact of this price increase? We factor the price increases for onexchange and OTC trades into our estimates, which in our view will affect ~50% of flatex trades. However, given that flatex s price advantage over the competition is fading, we expect some lower client wins in the future and consequently reduce the number of trades per account by ~2%. The net effect is an increase in net commission income by 5.5m or 7% for 2018/2019. Why can flatex offer discount fees? We regard flatex as the industry s cost leader. Total costs per trade amounted to c. 3.1 in 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 14: Direct and indirect costs per trade, 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) November 2017

11 Appendix Online banking peer group Avanza Avanza is a Swedish-based company 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 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 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 The company managed 2.8trn of client assets in over 10 million active brokerage accounts at year-end Comdirect bank The comdirect group is a direct bank and major player 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 2 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 . 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 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 It operated 385k client accounts as at 31 December 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 Swissquote also provides stock brokerage services to selfdirected 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 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 November

12 IT service peer group 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 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 November 2017

13 TABLE 5: Financials Balance Sheet ( m) E 2018E 2019E CAGR E Property, plant & equipment % Intangible fixed assets (0.5%) Goodwill Total operating fixed assets % Net working capital (0.3) (15.8) (16.1) (16.2) (16.1) 0.7% as a % of sales (0.4%) (16.6%) (15.5%) (13.6%) (12.0%) Operating invested capital % ROIC (%) 15.3% 26.1% 40.4% 52.2% 63.3% IC/sales (x) Investments n.a. Capital employed % ROCE 15.3% 26.1% 40.4% 52.2% 63.3% Cash and cash equivalents % Interest-bearing liabilities (11.2%) Interest-bearing provisions n.a. Net debt (530) (378) (552) (639) (726) 24.4% thereof pension provisions n.a. n.a. n.a. n.a. n.a. Total equity % Equity Ratio 7.1% 5.9% 7.1% 8.6% 10.3% ROE 6.7% 18.3% 20.6% 24.2% 23.7% Total assets 1,208 1,534 1,374 1,457 1,530 (0.1%) Income Statement ( m) E 2018E 2019E CAGR E Sales % growth y/y 338.9% 26.3% 9.1% 15.3% 12.2% Operating expenses % Gross margin 82.0% 73.2% 76.4% 79.3% 80.3% EBITDA % as a % of sales 13.4% 27.0% 33.5% 38.9% 42.9% Depreciation and intangible amortisation % EBITA % as a % of sales 10.1% 21.5% 27.8% 32.5% 36.1% Impairments EBIT as a % of sales 10.1 % 21.5 % 27.8 % 32.5 % 36.1 % Net interest result (2.7) (1.2) (1.9) (1.5) (1.1) (2.8%) Result from participations Other financial result Adjustments PBT % Tax expense (1.0) (4.0) (7.5) (10.5) (13.7) 51.3% Adjustment Tax rate 33.0% 24.8% 27.9% 28.1% 29.0% Net profit from continuing operations % as a % of sales 6.1% 17.0% 18.7% 22.5% 25.0% Minorities 0.4 (3.9) Net income attributable to shareholders % Cash Flow Statement ( m) E 2018E 2019E CAGR E Operating cash flow (58.7) (144) n.a. as a % of sales (78.0%) (151.5%) 194.6% 81.0% 72.7% Gross capex (3.7) (8.0) (8.9) (9.4) (10.0) 7.6% Asset disposals 0.0 (1.2) Net financial investments Net acquisitions (43.6) Gross capex as a % of sales 4.9% 8.4% 8.6% 7.9% 7.5% Gross capex as a % of depreciation 147.1% 155.4% 150.2% 123.0% 109.0% Free cash flow (106) (153) n.a. as a % of sales (140.8%) (161.2%) 186.0% 73.1% 65.2% Dividends Free cash flow (post dividend) (106) (153) Increase /(decrease) in debt 7.2 (3.3) 12.0 (6.3) (15.4) Increase /(decrease) in equity 19.1 (5.0) (12.7) Other financing cash flows FX effects Other items Change in cash 480 (152) November

14 Reference to first page of disclaimer FinTec Group price chart Distribution of ratings: Number of recommendations from Commerzbank Research, at the end of Q (38.6%) Buy 9 (11.8%) 98 (49.7%) Hold 7 (7.1%) 23 (11.7%) Sell/Reduce 1 (4.3%) thereof recommendations for issuers to which investment banking services were provided during the preceding twelve months In accordance with ESMA MAR requirements this report was completed 10/11/ :07 CET and disseminated 13/11/ :57 CET. In respect to Article 4 of ESMA MAR, for an overview of recommendations made in the previous 12 months on any instrument or issuer covered in this report as well as an overview of all recommendations made by the producer(s) of this report in the previous 12 months, please follow this link: This document has been created and published by the Research department within the Corporate Clients division of Commerzbank AG, Frankfurt/Main or Commerzbank s branch offices mentioned in the document. Commerzbank AG is a provisionally registered swap dealer with the CFTC. If this report includes an analysis of one or more equity securities, please note that the author(s) certify that (a) the views expressed in this report accurately reflect their personal views; and (b) no part of their compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or views expressed by them contained in this document. The research analyst(s) named on this report are not registered / qualified as research analysts with FINRA. Such research analyst(s) may not be associated persons of Commerz Markets LLC and therefore may not be subject to FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. It has not been determined in advance whether and in what intervals this document will be updated. Unless otherwise stated current prices refer to the most recent trading day s closing price or spread which may fluctuate. Conflicts of interest Disclosures of potential conflicts of interest relating to Commerzbank AG, its affiliates, subsidiaries (together Commerzbank ) and its relevant employees with respect to the issuers, financial instruments and/or securities forming the subject of this document valid as of the end of the month prior to publication of this document*: Please refer to the following link for disclosures on companies included in compendium reports or disclosures on any company covered by Commerzbank analysts: * Updating this information may take up to ten days after month end. Ratings and definitions Commerzbank Research fundamental equity analysts rate the shares of the companies they cover on total return basis using a twelve-month horizon. Stocks showing implied total return potential of more than 20% are rated Buy. Stocks showing implied total return of more than 0% but less than 20% are rated Hold. Stocks showing implied downside on a total return basis (<0%) are rated Reduce. Summary of the equity rating system: Buy: +20 % Hold: 0-20% Reduce: <0% For more information please refer to: Explanation of valuation parameters and risk assessment Unless otherwise stated in the text of the financial analysis/investment research, target prices in the publication are based on either a discounted cash flow valuation and/or comparison of valuation ratios with companies seen by the analyst as comparable or a combination of the two methods. The result of this fundamental valuation is adjusted to reflect the analyst's views on the likely course of investor sentiment. Whichever valuation method is used there is a significant risk that the target price will not be achieved within the expected timeframe. Risk factors include unforeseen changes in competitive pressures or in the level of demand for the company s products. Such demand variations may result from changes in technology, in the overall level of economic activity or, in some cases, from changes in social values. Valuations may also be affected by changes in taxation, in exchange rates and, in certain industries, in regulations. Investment in overseas markets and instruments such as ADRs can result in increased risk from factors such as exchange rates, exchange controls, taxation, political and social conditions. Disclaimer This document is for information purposes only and does not take into account specific circumstances of any recipient. The information contained herein does not constitute the provision of investment advice. It is not intended to be and should not be construed as a recommendation, offer or solicitation to acquire, or dispose of, any of the financial instruments and/or securities mentioned in this document and will not form the basis or a part of any contract or commitment whatsoever. Investors should seek independent professional advice and draw their own conclusions regarding suitability of any transaction including the economic benefits, risks, legal, regulatory, credit, accounting and tax implications. The information in this document is based on public data obtained from sources believed by Commerzbank to be reliable and in good faith, but no representations, guarantees or warranties are made by Commerzbank with regard to accuracy, completeness or suitability of the data. Commerzbank has not performed any independent review or due diligence of publicly available information regarding an unaffiliated reference asset or index. The opinions and estimates contained herein November 2017

15 reflect the current judgement of the author(s) on the date of this document and are subject to change without notice. The opinions do not necessarily correspond to the opinions of Commerzbank. Commerzbank does not have an obligation to update, modify or amend this document or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. This communication may contain trading ideas where Commerzbank may trade in such financial instruments with customers or other counterparties. Any prices provided herein (other than those that are identified as being historical) are indicative only, and do not represent firm quotes as to either size or price. The past performance of financial instruments is not indicative of future results. No assurance can be given that any financial instrument or issuer described herein would yield favourable investment results. Any forecasts or price targets shown for companies and/or securities discussed in this document may not be achieved due to multiple risk factors including without limitation market volatility, sector volatility, corporate actions, the unavailability of complete and accurate information and/or the subsequent transpiration that underlying assumptions made by Commerzbank or by other sources relied upon in the document were inapposite. Commerzbank and or its affiliates may act as a market maker in the instrument(s) and or its derivative that has been mentioned in our research reports. Employees of Commerzbank and or its affiliates may provide written or oral commentary, including trading strategies, to our clients and business units that may be contrary to the opinions conveyed in this research report. Commerzbank may perform or seek to perform investment banking services for issuers mentioned in research reports. Neither Commerzbank nor any of its respective directors, officers or employees accepts any responsibility or liability whatsoever for any expense, loss or damages arising out of or in any way connected with the use of all or any part of this document. Commerzbank may provide hyperlinks to websites of entities mentioned in this document, however the inclusion of a link does not imply that Commerzbank endorses, recommends or approves any material on the linked page or accessible from it. Commerzbank does not accept responsibility whatsoever for any such material, nor for any consequences of its use. This document is for the use of the addressees only and may not be reproduced, redistributed or passed on to any other person or published, in whole or in part, for any purpose, without the prior, written consent of Commerzbank. The manner of distributing this document may be restricted by law or regulation in certain countries, including the United States. Persons into whose possession this document may come are required to inform themselves about and to observe such restrictions. By accepting this document, a recipient hereof agrees to be bound by the foregoing limitations. Additional notes to readers in the following countries: Germany: Commerzbank AG is registered in the Commercial Register at Amtsgericht Frankfurt under the number HRB Commerzbank AG is supervised by both the German regulator, Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), Graurheindorfer Strasse 108, Bonn, Marie-Curie-Strasse 24-28, Frankfurt am Main and the European Central Bank, Sonnemannstrasse 20, Frankfurt am Main, Germany. United Kingdom: This document has been issued or approved for issue in the United Kingdom by Commerzbank AG London Branch. Commerzbank AG, London Branch is authorised by Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), and the European Central Bank and is subject to limited regulation by the Financial Conduct Authority and Prudential Regulation Authority. Details on the extent of our regulation by the Financial Conduct Authority and Prudential Regulation Authority are available from us on request. This document is directed exclusively to eligible counterparties and professional clients. It is not directed to retail clients. No persons other than an eligible counterparty or a professional client should read or rely on any information in this document. Commerzbank AG, London Branch does not deal for or advise or otherwise offer any investment services to retail clients. United States: This document has been approved for distribution in the US under applicable US law by Commerz Markets LLC ( Commerz Markets ), a wholly owned subsidiary of Commerzbank AG and a US registered broker-dealer. Any securities transaction by US persons must be effected with Commerz Markets, and transaction in swaps with Commerzbank AG. Under applicable US law; information regarding clients of Commerz Markets may be distributed to other companies within the Commerzbank group. This research report is intended for distribution in the United States solely to institutional investors and major U.S. institutional investors, as defined in Rule 15a-6 under the Securities Exchange Act of Commerz Markets is a member of FINRA and SIPC. Any derivatives transaction with US persons must be effected in accordance with the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Canada: The information contained herein is not, and under no circumstances is to be construed as, a prospectus, an advertisement, a public offering, an offer to sell securities described herein, solicitation of an offer to buy securities described herein, in Canada or any province or territory thereof. Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable securities laws or, alternatively, pursuant to an exemption from the dealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made. Under no circumstances is the information contained herein to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient. In Canada, the information contained herein is intended solely for distribution to Permitted Clients (as such term is defined in National Instrument ) with whom Commerz Markets LLC deals pursuant to the international dealer exemption. To the extent that the information contained herein references securities of an issuer incorporated, formed or created under the laws of Canada or a province or territory of Canada, any trades in such securities may not be conducted through Commerz Markets LLC. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed upon these materials, the information contained herein or the merits of the securities described herein and any representation to the contrary is an offence. European Economic Area: Where this document has been produced by a legal entity outside of the EEA, the document has been re-issued by Commerzbank AG, London Branch for distribution into the EEA. Singapore: This document is furnished in Singapore by Commerzbank AG, Singapore branch. It may only be received in Singapore by an institutional investor or an accredited investor as respectively defined in section 4A of the Securities and Futures Act, Chapter 289 of Singapore ( SFA ) pursuant to section 274 or section 275 (as applicable) of the SFA. Nothing in this document constitutes accounting, legal, regulatory, tax, financial or other advice and/or recommendations to the recipient of this communication. Further, the communication/information provided herein does not constitute a financial advisory service within the meaning of the Financial Advisers Act, Chapter 110 of Singapore ( FAA ) and therefore, the regulatory requirements and duties that may be owed to a client pursuant to or in connection with the FAA are not applicable to the recipient in connection with this communication. Recipients are advised to seek independent advice from their own professional advisers about the information discussed herein. Hong Kong: This document is furnished in Hong Kong by Commerzbank AG, Hong Kong Branch, and may only be received in Hong Kong by professional investors within the meaning of the Securities and Futures Ordinance (Cap.571) of Hong Kong and any rules made there under, and persons whose ordinary business is to buy or sell shares or debentures. Japan: This information and its distribution do not constitute and should not be construed as a "solicitation" under the Financial Instrument Exchange Act (FIEA). This information may be distributed from Commerzbank international branches outside Japan solely to "professional investors" as defined in Section 2(31) of the FIEA and Section 23 of the Cabinet Ordinance Regarding Definition of Section 2 of the FIEA. Please note that Commerzbank AG, Tokyo Branch has not participated in its preparation. Not all financial or other instruments referred to in this information are available within Japan. You should contact the Corporate Clients division of Commerzbank AG for inquiries on availability of such instruments. Australia: Commerzbank AG does not hold an Australian financial services licence. This document is being distributed in Australia to wholesale customers pursuant to an Australian financial services licence exemption for Commerzbank AG under Class Order 04/1313. Commerzbank AG is regulated by Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) under the laws of Germany which differ from Australian laws. People s Republic of China (PRC): This document is furnished by Commerzbank AG and is only intended for institutions that are eligible for financial transactions. No-one else may rely on any information contained within this document. Any derivative transactions by PRC persons may only be entered into by PRC financial institutions which are permitted to conduct derivatives business in the PRC and have obtained all necessary regulatory approvals in the PRC. Commerzbank AG All rights reserved. Version November

16 Commerzbank Corporate Clients Frankfurt Commerzbank AG London Commerzbank AG New York Commerz Markets LLC Singapore Commerzbank AG Hong Kong Commerzbank AG DLZ - Gebäude 2, Händlerhaus Mainzer Landstraße Frankfurt PO BOX Gresham Street London, EC2P 2XY 225 Liberty Street, 32nd floor, New York, NY , Robinson Road, #12-01 Singapore th Floor, Lee Garden One 33 Hysan Avenue, Causeway Bay Hong Kong Tel: Tel: Tel: Tel: Tel: November 2017