VEF: An emerging star - ABG

An intriguing opportunity to tap into the private fintech market
VEF is an investment company founded in 2015 through a spin-off from VNV Global. The company invests in private fintech players in frontier and emerging markets, with a heavy tilt towards Latin America. We find the opportunity in emerging markets especially attractive, as the segment is estimated to account for 50% of global GDP growth over the next 20 years, thus offering a superior long-term growth profile. In addition, we believe that disruptive digital fintechs can benefit especially in emerging markets as they can help customers avoid the expensive services of traditional banks. We find VEF’s profile intriguing, as there are currently few ways to tap into the growing digital fintech theme in either public or emerging markets. VEF targets well-managed businesses with all lines of financial services, including payments, credit, savings and investments. The company focuses particularly on highly populated and scalable markets, such as Brazil, India, Mexico and Pakistan, as these represent the largest structural growth opportunities.

NAVPS CAGR of 25% since inception
VEF primarily targets early to mid-stage fintechs, with the aim of acquiring minority stakes (~10-20%) in order to get board representation. The company aims to be an active, long-term investor, providing experience and in-depth knowledge to help entrepreneurs and their teams advance on their growth journey. Since its inception VEF has built up an impressive track record of creating shareholder value, with a net asset value per share CAGR of 25%. This has been driven by strong value growth from current portfolio investments such as Creditas, Konfio and TransferGo, but also from the exits of Tinkoff Bank and iyzico, both of which generated IRRs of over 50%.

Fair value range per share of SEK 3.4-6.2
We have used three different approaches to derive a fair value range for VEF: 1) a 19% discount to its last calculated NAV, in line with the five-year average discount; 2) a target IRR of 20%, in line with the current IRR average of the portfolio, and 3) a target IRR of 30%, in line with the company’s own IRR target. In sum, we arrive at a fair value range of SEK 3.4-6.2.

Länk till analysen i sin helhet: https://www.introduce.se/foretag/vef/Equity-research/2021/8/vef---an-emerging-star/