Flatex - Waiting for the regulatory go-ahead
Flatex reported FY19 of earnings €14.9m (-15% y-o-y) and a ROE of 8.6%. Lower market volatility affected the results, as did the costs of expansion into the Dutch market before the decision to acquire 100% of DEGIRO in December 2019 for €60m cash plus €190m in shares. The EBITDA margin was 28.5%, down 16.8% y-o-y. The friendly acquisition of DEGIRO is transformational, with greater scale and breath of products. Management has identified €30m in annual synergies. The deal will make Flatex Europe’s largest retail online broker, present in 18 countries, although it is still awaiting regulatory approval. Although the share price has almost doubled since the announcement of the DEGIRO acquisition, the shares trade at a discount to peers on both P/E and EV/EBIT despite consensus forecasts of above-average growth.Flatex AG, formerly known as Fintech Group AG, is a Germany-based company engaged in the financial technology sector. The Company divides its business into two operational segments: Securities Trading and Financial Services (ST & FS) and Transaction Processing and White-Label Banking Services (TP & WLBS). The ST & FS segment includes online brokerage in the business-to-consumer (B2C) sector in Germany (on trading platforms such as flatex.de, vitrade.de) and Austria (flatex.at). The operations are conducted by the subsidiaries flatex GmbH and ViTrade GmbH. The TP & WLBS segment includes the business-to-business (B2B) activities of subsidiaries XCOM AG and FinTech Group Bank AG that focus on research and development in the area of financial technology and provide back-end execution of securities transactions for the Company's own platforms and for other banks, as well as offer business process outsourcing services.
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