Many fintech challengers boast eye-watering growth as they disrupt financial services sectors. But they often fail to back that up with profits, or even a credible path to profitability. LendInvest is different. It is a rare combination of a significant fintech with rapid growth AND profitability, furthermore its July 2021 IPO looks to have coincided with an acceleration in both.
A self-built technology platform underpins a superior offering to borrowers (mostly SME landlords and property developers), and capital providers (including some of the world’s largest financial institutions seeking access to the attractive UK property finance asset class), which has in turn fuelled rapid top-line growth. It has also been a key driver of operating leverage, which is now kicking in, and consequently profits.
LendInvest operates in a huge market – the total outstanding balance of UK residential mortgages is £1.5trillion. But its market share of target sub-sectors remains tiny. Couple this with competitors that are either large incumbent banks or building societies operating outdated processes, or other fintechs that are nowhere near the scale of LendInvest, and its growth potential becomes obvious.
Our fundamental valuation is 310p per share, with upside potential if key value drivers (such as AUM growth and lowering the ‘own-capital’ requirements of growth) are better than expected.