FlatexDegiro: Competitively Advantaged Low-Cost Online Broker

John Woodman of Southeastern Asset Management presented his in-depth investment thesis on FlatexDegiro AG (Germany: FTK) at Wide-Moat Investing Summit 2022.

Thesis summary:

FlatexDegiro is a competitively advantaged lowest-cost online broker with owned in-house technology.

The business generates strong customer growth from underpenetrated European broking markets and offline legacy incumbents. It has a highly scalable model with strong incremental margins, generating impressive returns on customer acquisition costs. John sees opportunity for increased customer wallet penetration via joint ventures in adjacent products.

The shares recently traded at a P/E of 9x despite a high-growth, cash generative, competitively advantaged business. This represents a discount to the peer group of more than 50% and is well below John’s estimate of long-term intrinsic value.

Finally, FlatexDegiro represents a potentially attractive M&A asset for financial institutions or private equity buyers.

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About the instructor:

John Woodman joined Southeastern’s London office in 2016 and is a Senior Analyst and co-portfolio manager of our Concentrated European Strategy. He has 20 years of investment experience and previously held roles as Senior Vice President of the Certification and Business Enhancement division for SGS in New York, Executive Director at Goldman Sachs in the Global Research division in London, and Vice President at Citigroup in London. Mr. Woodman received his bachelor’s degree in Geography and Environmental Science from the University of Oxford.

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