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DNB Markets: VEF - Mixed signals

VEF marked down its portfolio by 13% QOQ in Q3, putting YTD NAV growth at 11% (in USD), still lagging behind its portfolio peers (up 20–80% in USD). Its share price is down 19% YTD, implying a 56% discount to a fairly conservative NAV. We believe too much focus is placed on balance sheet concerns; our impression is that investors are focused on the bond maturing in Q2 2025, which could drive VEF to strengthen its balance sheet in the next 12–24 months. We note VEF’s high-beta characteristics and expect a continued recovery in long-duration growth valuation multiples, should interest rates

DNB Markets - VEF: Green shoots

VEF's share price is down 12% in SEK YTD despite: 1) a 25% recovery in its NAV YTD (in USD), which lags green shoots from its portfolio peers (up 30–70% in USD); 2) a portfolio-weighted FX tailwind of 14% YTD; and 3) a 54% discount to a fairly conservative NAV. We believe balance sheet concerns are receiving too much focus, with USD45m cash available (9% of NAV) and its bond not maturing until Q2 2025e, but sense a more accentuated priority to strengthen its balance sheet in the next 12–24 months. We note VEF’s high-beta characteristics and expect a continued recovery in long-duration growth

DNB Markets: VEF - Continues to play defence

VEF has taken a conservative stance on its NAV while adjusting its holdings growth strategies through 2022–2023, with cash available equal to 11% of NAV in a tighter liquidity environment. We believe the main potential NAV catalysts that could challenge VEF shares’ 42% discount to NAV are: 1) Creditas nearing its break-even ambitions (volume growth, widening margins, and lower CAC); 2) funding rounds at or above VEF’s reported NAV (mainly Juspay); and 3) a continued recovery in long-duration growth valuation multiples, should interest rates peak. We have raised our fair value to SEK3.3–5.7 (3.

DNB Markets: VEF - High veta if market mood shifts

VEF took a defensive stance in 2022, focusing on strengthening its balance sheet and reprioritising growth strategies across its portfolio, while conservatively reflecting the reduction in public fintech valuation multiples in its NAV. For 2023e, we note its 40% discount to reported NAV and high-beta characteristics heading into a potential market recovery. To reflect this, we have updated our fair value to SEK3.0–5.7 (3.7–5.4).Q4 highlights: 1) VEF marked down its portfolio by 14% QOQ in Q4 adjusted for net investments (-39% YOY in 2022, but -50% YOY on total NAV), mainly reflecting a

DNB Markets - VEF: Starting to lean forward again

VEF continues to trade below pre-covid levels at a 40% discount to reported NAV (58% to our estimated NAV). We believe the ice-cold winds blowing in the fintech VC industry appear relatively warmer at VEF’s holdings’ southern latitudes with still-strong operational performance (120%+ portfolio-weighted revenue growth YOY) with 65% of its NAV capitalised to break-even. Hence, we have raised our fair value to SEK3.7–5.4 (3.4–4.8).Q3 key highlights: 1) VEF's NAV was flat (+1%) QOQ (-42% YTD) in USD adjusted for net invested capital (in line with our forecast), which we believe reflects

DNB Markets - VEF: This too shall pass

VEF’s Q2 NAV fell 40% QOQ, which we believe reflects conservatism from VEF, as its largest asset, Creditas, recently received funding from new investors at a 100%+ higher valuation than VEF’s NAV. The market is unlikely to dismiss private fintech-related events such as Klarna’s ~85% down round as an anomaly. However, as VEF is trading at a 44% discount to its Q2 NAV, the market appears to be implicitly pricing in an IRR of -5% on its invested capital over the next three years (versus its 18% 7-year NAVPS IRR and exits at ~27%). We have cut our fair value to SEK3.4–4.8 (6.3–7.4).Q2 takeaways.

DNB Markets - VEF: Market volatility not new to VEF

VEF’s NAV declined only ~3% QOQ in Q1 despite turbulent markets. With a portfolio of leading fintech holdings across some of the world’s fastest-growing markets, the investment community now expects VEF to report only a ~7% IRR on invested capital (versus its 30% track record), as the stock is trading 47% below NAV. We have cut our fair value to SEK6.3–7.4 (6.8–8.1) on our updated NAV forecasts, to which we apply a 10% discount to NAV.Q1 takeaways: 1) VEF's NAV declined 3% QOQ in USD in Q1, as it marked down its Russian exposure to zero (all Russia-related potential downside now reflected),

DNB Markets: VEF - Trading 21% below NAV

VEF continued the strong 30%+ NAVPS CAGR seen over the past six years, while its share price appears to have decoupled from NAV: it is trading 21% below NAV (compared to its recent 20%+ above). As we continue to believe Creditas could seek a US IPO in 2022, VEF may offer the highest NAV growth prospects in the investment company sector for 2022 as well as insulation owing to its sharp difference to NAV. If not for its pending main market re-listing, we believe the company would buy back its own shares at the current share price. We have raised our fair value to SEK6.8–8.1 (5.5–7.0) on our

DNB Markets - VEF: Many shots at goal

VEF is increasingly getting recognition for its impressive 5-year NAVPS CAGR and rare emerging market VC fintech portfolio, in our view, with its discount to reported NAV reversing to a 29% premium. This implies the market believes it can generate a ~25% IRR from its unlisted portfolio over the next five years (3.2x MOIC), in line with its track record. VEF is well capitalised after its capital raise, reducing the financial risk, and we see ~20% 12-month forward NAV growth, with several potential NAV catalysts to support a re-rating. We have raised our fair value to SEK5.5–7.0 (4.6–6.2).

DNB Markets: VEF - On track with more expected

VEF’s 30%+ NAV CAGR track record and improved ESG assessment have become increasingly credited by the investment community as its discount to NAV has eroded in recent months. VEF offers exposure to a diversified, fast-growing unlisted fintech portfolio. We forecast 30%+ NAV growth to 2022e and have applied a 10% premium to our NAV forecasts. We have raised our fair value to SEK4.6–6.2 (4.0–5.3).Q2 portfolio highlights. 1) VEF’s NAV was largely unchanged QOQ in Q2 in USD although the stage appears set for NAV growth from Juspay, TransferGo, and Jumo in the coming quarters; 2) investment

DNB Markets - VEF: Undiscovered sweet spot

VEF remains broadly overlooked, despite offering growth-oriented investors unique exposure to leading venture capital (VC) investments in rapidly growing, emerging market fintech ecosystems. We forecast 25%+ NAV growth in 2021, as we believe Creditas, Konfio, and Juspay could raise capital at higher valuations, as well as seeing potential upside from portfolio exits. We have raised our fair value to SEK4.0–5.3 (3.9–5.1).Q1 portfolio highlights. 1) VEF’s NAV rose by 4% QOQ in Q1 in USD, as the operating performance of its attractive fintech portfolio more than offset 10%+ FX headwinds and 15–

DNB Markets - VEF: One ‘unicorn’ down, two to go

The Covid-19 pandemic is accelerating fintech momentum in emerging markets, where VEF’s tech-enabling leaders are gaining significant advantage over incumbent banks with high fees and unsophisticated products. We see VEF as a unique, multifaceted story, and forecast ~20% NAV growth in 2021, driven mainly by Konfio; with a lot of sector liquidity and industry deals, we do not rule out portfolio exits. We have raised our fair value to SEK3.9–5.1 (3.2–4.4).Portfolio highlights in Q4. 1) VEF’s NAV rose 16% QOQ in Q4 (6% in local currencies), driven mainly by a recent USD255m funding round in

DNB Markets - VEF: Already strong, but more to come

VEF’s holdings delivered another strong quarter with 20% NAV growth. Recent industry deals have shown that investors are increasingly rewarding emerging market fintech, and we highlight that VEF offers unique access to 12 leading VC fintechs (~75% in Latin America). We see several potential near-term NAV catalysts, such as a probable financing round in Creditas (38% of GAV), which could lead to significant growth in the coming year; thus, we have raised our fair value to SEK3.2–4.4 (2.6–4.2).Portfolio highlights in Q3. 1) VEF’s NAV grew 20% QOQ in Q3 (16% in local currencies), driven mainly

DNB Markets - Vostok Emerging Finance: Scarcity value with upside potential

VEF offers rare access to: 1) leading VC fintech companies in emerging markets; and 2) a strong NAV value creation track record. We see several potential NAV catalysts by 2021e that could make investors more confident in the medium-term NAV growth prospects. Although it is not a low-risk investment, we like the investment opportunity evolving in VEF and initiate coverage with a fair value of SEK2.6–4.2/share.Rare VC access to one of the most attractive emerging fintech markets. Vostok Emerging Finance (VEF) is an investment company that lends access to scarce VC fintech in scale emerging

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