Last week, Netfonds announced the implementation of the share deal (cross shareholding) between Netfonds and VB Select. Both parties had signed a LOI already last July. The shares of VB Select were contributed into Netfonds via capital increase in kind. With the deal Netfonds is becoming main shareholder of VB Select, holding now 50.1%. In return, the previous owner of the VB Select shares received 112,915 new shares of Netfonds, worth c. € 4.6m. Assuming that VB Select is free of debt and generated an EBIT of € 0.5 – 1.0m, Netfonds should have paid around 12x EV/EBIT (eNuW), which would be a highly value accretive deal, since Netfonds is currently trading > 30x EV/EBIT 2022e.

VB Select is a leading financial advisory network with more than 150 advisors and a longstanding (>12 years) and reliable partner, using the liability umbrella of Netfonds Financial Services. On the back of the strong growth of the recent years VB Select should also be the economically most important partner (eNuW). In our view, the strategic deal should unlock new growth opportunities thanks to:

• Synergy effects arising from the roll-out of Netfonds IT-solution “finfire” that should ease processes, settlement and customer handling with its 360-degree holistic and customer centric platform.
• Cross-selling of insurances via VB Select advisors, selling insurances directly to its clients. The advisors of VB Select should benefit from Netfonds bargaining power against the product (fund and insurance) issuers.
• New business opportunities such as the recently founded joint venture “Netfonds Credit Service”, offering financial services for real-estate and commercial financing.

Overall, the strategic cooperation should strengthen Netfonds sales force and expand its leading market position in an oligopolistic market with high entry barriers. Long-term structural drivers (growing AuM´s and number of advisors) paired with ongoing digitization of the financial sector and stricter regulation should further fuel topline within the next years. Thanks to the scalability of the platform business, EBIT margins should expand to >5% in FY25 (eNuW). Short-term tailwinds should come from rising stock prices, which should grow AuMs and increase absolute fees that are directly linked to the AuMs.

BUY with an unchanged PT of € 59.00, based on DCF.