JDC Group — Seeking higher levels of growth

JDC Group (SCALE: JDC)

Last close As at 27/03/2024

EUR22.20

0.20 (0.91%)

Market capitalisation

EUR301m

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Research: Financials

JDC Group — Seeking higher levels of growth

Bancassurance advisory and service platform JDC Group is quickly adding large new clients to its insurtech platform. The platform, which was originally developed for its independent financial advisory (IFA) activities, has attracted several clients ranging from Lufthansa and Volkswagen to large German insurers like Provinzial and most recently VKB. According to management, the pipeline of new contracts looks promising. As well as the platform business, JDC operates a smaller advisory activity (FINUM). Based on consensus EV/sales and EV/EBITDA in 2021/22e, the valuation does not seem demanding compared to other platform peers.

Edwin de Jong

Written by

Edwin De Jong

Analyst

Financials

JDC Group

Seeking higher levels of growth

Financials

Deutsches Eigenkapitalforum 2021

28 October 2021

Price

€24.7

Market cap

€338m

Share price graph

Share details

Code

JDC

Shares in issue

13.7m

Net debt at end H121

€5.9m

Business description

JDC Group is a leading German insurance platform, providing advice and financial services for professional intermediaries and banks, but also directly for end-customers. JDC’s digital platform, for end-clients and for the administration and processing of insurance products, is also provided as a white-label product.

Bull

Strong position to support digital transition, in insurance and investments.

New large client wins.

Profitable consolidation opportunities.

Bear

Capital market weakness affecting investment results in advisory.

Low interest rates and regulatory uncertainty affect the insurance industry.

Transfer of contracts to JDC platform could stall.

Analyst

Edwin De Jong

+44 (0)20 3077 5700

Bancassurance advisory and service platform JDC Group is quickly adding large new clients to its insurtech platform. The platform, which was originally developed for its independent financial advisory (IFA) activities, has attracted several clients ranging from Lufthansa and Volkswagen to large German insurers like Provinzial and most recently VKB. According to management, the pipeline of new contracts looks promising. As well as the platform business, JDC operates a smaller advisory activity (FINUM). Based on consensus EV/sales and EV/EBITDA in 2021/22e, the valuation does not seem demanding compared to other platform peers.

Strong results, achievable guidance

JDC will report Q3 results on 15 November, one week before the Eigenkapitalforum, but after the publication of this conference book. With the strong H121 results JDC raised its FY21 revenue guidance to €140–145m (13.5–17.6% y-o-y growth) and EBITDA of at least €8m. Given the H1 results of revenues of €68.5m and EBITDA of €4.3m and the fact that c 55% of revenues are usually earnt in H2, this guidance seems achievable.

Taking platform growth to the next level

Growing the platform is key for JDC group. After reporting the landmark deal with public insurer Provinzial last year, it recently announced a deal with VKB, the largest public insurer in Germany. Management expects that Provinzial and VKB should each gradually bring in more than €100m in annual revenues over the next five years. Following the deal with VKB, it could be expected that the remainder of the German public savings banks working with S-Versicherungsmanager will also convert to JDC’s platform, adding another significant revenue stream. The expected transfer of contracts to JDC’s platform based on winning Provinzial alone justifies the company’s longer-term guidance of doubling revenues by 2025 (€246m) and a multiple increase in EBITDA.

Valuation: Higher growth justifies a higher valuation

While we recognise that a peer comparison is not easy given its diversified profile, we note that JDC trades at a discount of 68% on consensus EV/sales in FY22e compared to platform peer Hypoport and 34% compared to financial brokers. Given the high growth profile and the catalyst from new potential contract wins in the pipeline, we believe JDC’s valuation remains undemanding despite the recent share price appreciation.

Consensus estimates

Year
end

Revenue
(€m)

EBITDA
(€m)

EPS
(c)

DPS
(c)

EV/EBITDA
(x)

Yield
(%)

12/19

111.5

4.2

-0.1

0.0

28.6

N/A

12/20

123.3

5.2

-0.1

0.0

18.7

N/A

12/21e

141.2

8.3

0.2

0.0

39.4

N/A

12/22e

163.5

11.5

0.3

0.0

28.4

N/A

Source: JDC Group, Refinitiv consensus

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been prepared and issued by Edison. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

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Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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