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#P2P lending sector valuation update ($LC, $ONDK, $TBDY, #Ferratum)

The last time we published a Alternative Financing sector valuation update was in March. A lot has happened since then and the companies have had the opportunity to reveal their first set of numbers for this year. Also, a new player has entered the elite list of listed alternative financing provider, namely Erratum, listed in Germany since early 2015. The companies we are looking at in the sector are right now:  TrustBuddy (TBDY:SS), Lending Club (LC) and On Deck Capital (ONDK) and Ferratum:

  • According to data provided by Yahoo Finance, analysts expect Lending Club to report 2015 revenues of USD 391m and an EPS of USD 0.06. In combination with an enterprise value of USD 8.7bn and a share price of USD 17.9, this implies a 2015 EV/Sales multiple of 22x and a PE-ratio of 298x respectively. For 2016, the numbers are 14x and 94x respectively.
  • For On Deck Capital, analysts expect 2015 revenues of USD 259m and an EPS of -0.21. In combination with an enterprise value of USD 1.3bn and a share price of USD 15.8, this implies a 2015 EV/Sales multiple of 5x and a negative PE-ratio. For 2016 the numbers are 3x and 39x.
  • According to data provided by www.onvista.de, Ferratum is expected to report EPS of EUR 0.59 in 2015 and EUR 1.13 in 2016. No sales estimates were available today. In combination with a share price of EUR 24,63, the implied PE-ratio is 42x for 2015 and 22x for 2016.
  • There are currently no analysts covering TrustBuddy so we are using our own estimates. Following announced cost saving measures, TrustBuddy stated in its recent Q1 2015 report that it expects positive cash flow and earnings in the “not too distant future”.  With a current enterprise value of SEK 152m and a share price of SEK 0,32, TrustBuddy is currently trading at a 2015 EV/Sales multiple of around 1x and a negative 2015 PE-ratio. For 2016 the numbers are 0.7x and 4x respectively.

Here is the peer group valuation in summary:

PeerGroupValuation PeerGroupValuation

PeerGroupValuation

Conclusion:

TrustBuddy continues to look tremendously undervalued compared to its listed peers. We believe that this is partly due to the fact that it is listed in Sweden and that no analysts are currently covering the company. Furthermore, Swedish media and authorities have so far been rather sceptical towards the concept of P2P lending in general and TrustBuddy is still awaiting an official license. While such mispricing in the market could certainly prolong a while longer, we due believe that it will be corrected eventually. Trustbuddy recently announced a new strategic plan, focusing its business purely on SME P2P lending and a long-term consumer product. This implies that the company is leaving the short-term consumer lending product, which received a lot of badwill from the public and authorities due to high percentage-interest charge on the loans. We note that TrustBuddy seems in a pole-position to expand its highly successful SME P2P lending product. Already today, the company is Europe’s biggest SME P2P lending provider via its Dutch company Geldvoorelkaar. Geldvoorelkaar has to date lent out capital of close to EUR 58.5m. As announced by TrustBuddy, it aims to enter the Nordics and Belgium with its SME business during 2015.

Nordic Investor

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