DNB Markets: VEF - On track with more expected

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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 activity remains high, as the company made net investments of USD31m post Q1, which takes its net cash position to cUSD11m (3% of NAV); thus, we would not rule out that it could opt to seek additional funding later this year should it want to sustain this level of investment activity without any portfolio exits; 3) VEF exited Guiabolso and recouped cUSD3m of the USD30m it invested in October 2017; 4) VEF’s USD20m pro rata commitment in Konfio did not have a material effect on its NAV, implying it uses accurate and not overly conservative reported NAV calculations; and 5) VEF completed its redomiciling to Sweden (from Bermuda), enabling a more modern and ESG-compatible governance structure.

Creditas (c42% of NAV) on track for potential equity offering in 2022e, which could represent a material NAV uplift for VEF. As Brazil’s leading digital-first secured consumer lending platform for home, auto, and payroll, Creditas is one of the few companies in Brazil that expanded origination and revenues at a 2x CAGR in 2017–2020. Given its ambitions to maintain this execution and compounding growth rates in 2021–2022 (it showed record new quarterly loan origination in Q2), we see a fair valuation c35% above VEF’s reported NAV. Creditas has accelerated its M&A agenda, having closed three strategic acquisitions in Q2 to build a complete ecosystem for fintech, insurtech, and consumer solutions, which could offer additional upside.

Latest portfolio addition, BlackBuck, India’s leading online trucking platform. VEF invested USD10m at a USD1bn+ valuation for a minority stake in BlackBuck, which is digitising India’s freight and logistics by operating a marketplace that connects businesses with truck owners and freight operators, with a 90%+ market share in online trucking. Its solutions measure output and productivity growth, which helps streamline many of the logistical challenges in India’s trucking system. This marks VEF’s third investment in India (one of the largest fintech emerging markets), tapping into a fast-growing innovative payments company with attractive unit economics and a large TAM.

Fair value raised to SEK4.6–6.2 based on our four equally weighted valuation methodologies. In our own valuation assessment of VEF’s portfolio by 2022e, we have calculated 30%+ potential NAV growth. VEF offers excellent VC exposure to the wealth catch-up from financial inclusion in emerging markets and we see good prospects for it to repeat its value-creation track record (NAV IRR of 30% since 2016).

Best regards 


Joachim Gunell | DNB Markets | Equity Research
DNB Bank ASA, Filial Sverige
Visiting address: Regeringsgatan 59, Stockholm
Postal address: 105 88 Stockholm
E-mail: joachim.gunell@dnb.se | www.dnb.no