Yesterday, Multitude published Q3´23 figures. While current trading remained solid, the ongoing tight cost control is bearing fruit, visible in the ongoing strong bottom line:

• Sales came in at € 57.9m

  (4% qoq, 7% yoy) is broadly in line with our estimates of € 58.9m, driven by the strong growth of the lending portfolio to 548m (5% qoq, 8% yoy). Importantly all three tribes contributed to the growth (ferratum tribe: € 46.8m, 4% qoq, 3% yoy; CapitalBox: € 5.5m, 5% qoq, 23% yoy; sweep: € 5.0m, 6% qoq, 30% yoy).

• EBIT increased by 27% yoy to € 11.6m

  (4% qoq), in line with our estimate of € 12.2m. The strength resulted from ongoing tight cost control (personnel: +6% yoy; other operating expenses:

  -6%

   yoy) and a further growing loan book at stable margins that is driving top line. As interest expenses came in as expected at € 6.4m (21% qoq, 79% yoy vs. eNuW: € 6.5m),

  EBT increased by 13% yoy to € 5.8m.

With another solid quarter in the books,

Multitude is still seen well on track to reach its FY23 EBIT guidance

of € 45m (vs eNuW: € 44.6m, 41% yoy). Further sequential growth of the net loan book in Q4 to € 560m until eoy, combined with ongoing tight cost control should allow to reach the goal with an implied EBIT margin of 19%. Expecting a further moderate sequential increase of interest expenses, we see EPS to stand at € 0.65 at YE.

In a nutshell, Multitude should remain a growing company with perspectively three profit centers within the Group (currently two: ferratum and CapitalBox). The strategic transition from a near prime loan provider to a prime loan provider bode well for the company and should continue to eliminate risks, further stabilizing operations and profits. More details should be provided during the CMD next Tuesday.

The stock is still heavily mispriced, trading at negative EV and a 3.3x PE´23, completely neglecting the promising guidance for 2023e and 2024e and the earnings potential.

Importantly, Union Investment announced earlier this week to have reduced its position to below 5% from >10%. This share overhang that burdened the stock over last quarters should now be rather off the table and should provide tailwind for the stock.

BUY with an unchanged € 11 PT, based on our residual income model.