Finlab AG (DE:A7AGn) is an early stage investor and incubator of German fintech companies with a strong balance sheet and recurring cash flows. Established in late 2014, it has already demonstrated its ability to select promising fintech companies that have secured follow-up participation from highly reputable investors. 2016 net income more than doubled, driven by significant write-ups of two of its four investments, while NAV grew 21%. Since end 2014, FinLab’s NAV and share price have risen 68% and 285%, respectively. Investors looking to participate in German fintech opportunities may find FinLab of interest.
Cash cow businesses support fintech investing
Established in 2014, FinLab is an early stage investor and incubator of German fintech companies with four fintech investments. It also has investments in two relatively mature, cash-generative asset management businesses: Heliad Equity Partners KGAA (DE:HPBGn) and Patriarch. These investments give FinLab the advantages of a strong balance sheet and stable cash flows, supporting its fintech investing activities.
Significant write-ups drive earnings
2016 net income more than doubled to €14m (€6.5m in 2015) due to significant write-ups of two of its investments. Post year end, a third investment has been positively revalued. These results attest to FinLab’s ability to select and build promising fintech companies. Furthermore, its investments have secured follow-on participation from several highly respected investors, including PayPal co-founder Peter Thiel and US-based Greycroft Partners.
Valuation: NAV growth supports valuation
FinLab currently trades at a c 10% discount to its end 2016 NAV of €66.4m. This is likely understated as it does not capture a post year end revaluation. Furthermore, the largest component of its NAV, Heliad Equity Partners, is valued at a 30% share price discount to its own NAV. If the discount is removed, FinLab’s NAV would rise to over €80m, suggesting a discount to NAV of 25%. FinLab’s NAV and share price have risen 68% and 285%, respectively, since end 2014. There continues to be significant NAV growth potential as its existing fintech investments are still in early stages, and FinLab intends to increase its portfolio to seven to 10 companies. .
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