First Berlin – Deutsche Effecten- und Wechsel- Beteiligungsgesellschaft AG Research Update (16/12/2021)

First Berlin Equity Research has published a research update on Deutsche Effecten- und Wechsel- Beteiligungsgesellschaft AG (ISIN: DE0008041005). Analyst Christian Orquera reiterated his BUY rating and increased the price target from EUR 2.50 to EUR 2.90.

Abstract
In the first half of December 2021, DEWB successfully completed the last two holding investments planned for this year. I) DEWB took a position in the Frankfurt-based securities tokenisation fintech startup Cashlink Technologies GmbH. Cashlink has developed a technology platform that enables the legally compliant issuance and management of digital tokenised securities for institutional clients as an all-in-one solution. The new German bill ?Gesetz für elektronische Wertpapiere - eWpG? effective 1 June 2021, regulates and enables the trading of digital and blockchain securities. This legislation represents a key catalyst because it brings the assurance of a regulatory framework for players willing to participate in the emerging capital market 2.0. Cashlink is now one of the first fintechs to have obtained a permit according to the new legislation to operate with tokenised securities in Germany. II) DEWB invested an undisclosed amount in the German listed social trading neo-broker Naga Group at an attractive price of ~€5.40 p/s (current price: €7.10 p/s) in connection with a capital increase of €22.7m and a secondary transaction. The well-known investors Christian Angermayer and Peter Thiel both participated in the transactions. Naga has >1m users, a market cap of ~€300m, has guided to a doubling of sales in 2021 and 2022, and plans to conduct an IPO on the US NASDAQ during 2022. Overall, DEWB has built up an attractive portfolio comprised of seven fintechs with excellent prospects. In November, DEWB's largest holding, Lloyd Fonds AG (LFAG), acquired a ~50% stake (and made an offer for >90%) in the leading German asset management firm BV Holding AG through which it will roughly double its assets under management to ~€5.0bn. This transaction will position LFAG among the top 5 asset managers in Germany. LFAG also secured a ~17.75% stake (with the option to increase it to 100%) in the fast-growing robo-advisory startup growney GmbH. LFAG has delivered a superb financial performance, and its stock price has nearly doubled since the beginning of the year, increasing DEWB's NAV substantially. Our updated NAV-based valuation model for DEWB leads to a higher price target of €2.90 (previously €2.50). We believe DEWB's stock is significantly undervalued. We reiterate our Buy rating.