Edison Investment Research Limited
London, UK, 7 November 2020
VEF (VEFL) initiation: Digitalisation dynamo
VEF is a unique, fairly young company focused on fintech in emerging markets where financial services are underpenetrated and populations are jumping straight to digitalisation, with COVID-19 accelerating this trend. It is particularly focused on Brazil, which offers enormous growth potential with over 200 million people, high online penetration, scalability, incumbents with concentrated market shares and high pricing, and regulatory support for fintechs. VEF trades at a discount to NAV (13%) following a 20% NAV increase in Q320 and could offer a very attractive entry point for growth-oriented investors who cannot easily get exposure to this asset class. Its track record is limited, but realisations so far have made a 65% IRR, and VEF is backed by highly regarded shareholders.
VEF is trading at a 13% NAV discount. Underlying assets are valued under a mark to model approach (normally on a revenue multiple) or on a recent transaction basis. The portfolio is on an FY19 revenue multiple of 17x, but revenue quadrupled in the two years to FY19 and we believe strong momentum should continue.
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