The Latitude Group Holdings Ltd [ASX:LFS] share price is up today after acquiring Symple Loans for $200 million.
Source: TradingView.com
At the time of writing, LFS shares were trading at $2.40 per share, up 4.80%.
Latitude’s expansion plans
Latitude said acquiring Symple Loans, a Melbourne-based fintech company, will spur Latitude’s growth in segments like personal loans. This market has shown tremendous growth for brokerages in recent months.
Source: Company presentation
Symple will become the lending platform for all of Latitude’s personal and auto loans.
With approximately 160,000 customers backed by a $2.5 billion loan portfolio, Latitude will leverage Symple’s sophisticated platform to support its existing business and aim to launch and build partnerships with other lenders.
Latitude also plans to expand its auto loans business into New Zealand and personal loans into Canada through Symple’s established North American operations.
In short, Latitude’s move to acquire Symple was strategic.
The final transaction will be funded by the issue or delivery of 38.46 million Latitude shares at $2.60 per share and $100 million in cash.
Latitude Managing Director and CEO Ahmed Fahour expressed his positive views:
‘This is an exciting and important opportunity for Latitude that will accelerate our growth plans.
‘Symple’s scalable platform will enable Latitude to offer a wider range of products and product features in Australia and New Zealand, enter new geographies and significantly reduce costs while delivering superior customer and partner experiences.’
Latitude’s 1H21 trading update
Apart from today’s announced acquisition, Latitude also recently released its 1H21 trading update.
Latitude’s loan volumes for the six months ending 30 June are expected to come in at $3.7 billion.
This is an overall 7% increase, with personal loan volumes up 25% in Australia, and 50% in New Zealand compared to 1H20.
The company notes:
‘This growth in volume is despite the international and travel category being down 46% on 1H20 and 74% on 2019 due to border closures.’
On the other hand, Gross Loan Receivables are likely to remain stable relative to 2H20 levels at $6.5 billion.
The primary reason behind this was the early customer repayments in response to government cash stimulus measures and lower spending.
Costs are predicted to decline by 10% on the previous corresponding period (PCP), while the book credit quality continues to improve strongly with Net Charges Offs likely to reduce by 40% on PCP.
Due to these expectations and predictions, Latitude expects a net profit after tax (NPAT) of between $115 million and $120 million for the six months ending 30 June 2021.
Outlook for Latitude shares
With solid expansion plans backed by strong future projections, Latitude is aiming to carve out a competitive position in the fintech sector.
These expansion plans could also have contributed to the market bidding up LFS shares today.
Acquiring Symple Loans will give Latitude the opportunity to capture more of a growing market.
For instance, the global fintech market is expected to grow and reach a market value of approximately $324 billion by 2026.
Bullish investors will hope that today’s announced acquisition will position Latitude nicely in a sector only set to grow.
Now, if you want to read about more fintech stocks that have the potential to dominate the fintech industry, then I suggest you check out our free fintech report.
Regards,
Lachlann Tierney,
For Money Morning
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