sino ag Investment Thesis

By: Mattias Carlsson

sino ag

• sino ag’s core business is a high-end trading platform catered to high-volume customers. With that said, this investment thesis will center around sino’s 2.3% share of the company Trade Republic, which carries the company’s market valuation
• sino has made other small investments in various fintech companies since 2020, including getquin, beatvest, Sub Capitals and Captiq

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https://www.getquin.com/, https://www.subcapitals.com/, https://www.beatvest.com/en/home, https://captiq.com/en

Trade Republic Timeline

Trade Republic Timeline

Investors in Trade Republic

Interesting info about Trade Republic

• Trade Republic is active in 17 countries (see map)
• TAM  ~ 340M people. Only the German market is 83.2M
• As of January 2024, Trade Republic has 4M customers out of which 2.5M are found in Germany
• Trade Republic’s average customer is in their mid-30’s and male

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Small percentage of individuals in Central, Western and South Europe invests in stocks

• In Sweden around 3.5M people have an ISK account (trading account), translating into a penetration rate of around 35 percent. Avanza is the largest trading platform with around 1.9M customers, followed by Nordnet with 465k customers. 2.45M people use trading platforms to buy/sell stocks, rather than traditional banks. This translates into a 70 percent market share for Avanza and Nordnet (combined) in terms of number of ISK accounts. Another way of putting it is that 23.7% of all Swedes use either Avanza or Nordnet.

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Trade Republic grows fast in Germany

sino ag’s share price as a function of the valuation of Trade Republic

Latest valuation round

Recent Insider Activity by the CEO Ingo Hillen�(Dec 23 – Feb 24)

6.7MSEK

Trade Republic peer comparison (Jan–2024)

Takeaways

• It makes sense that sino trades to a discount to Trade Republic, which it currently does by around 25% per the latest valuation round (assuming that the price is € 40/stock). However, as Trade Republic is a non-traded company the question is if Trade Republic is worth more or less than US$ 5.3B today, and if so by how much.
• Trade Republic has continued its growth journey as a trading platform, in addition to adding offerings such as a debit card (something I wished Avanza and Nordnet would have done a long time ago) and offering customers 4% interest rates on cash deposits up to € 50k.

Takeaways

• Trade Republic announced its first net profit in September 2023, showing that the company can grow while at the same time making money. Due to the large untapped market, I am not so concerned with profits (at this time) and more concerned with the growth of total number of active users.
• A red-flag is the use of Payment for Order Flow (PFOF) at Trade Republic. PFOF means in practice that Trade Republic sells orders to a “market-maker” which then executes the trade, often in a way which is suboptimal for the individual investor. Robinhood – a US-based brokerage – has received criticism for using PFOF. The practice is also banned in the UK. Worth noting is that around 5% of Robinhood’s revenue come from PFOF.

Takeaways

• Lastly, if Trade Republic can sustain their growth in the years to come, retaining current users while adding new ones – I believe that the company will be worth significantly more than € 5B.
• A not too improbable scenario is that the company does an IPO at a valuation between. € 8–12B. Sino will continue to trade at a discount to Trade Republic, (let’s assume that the IPO is at € 10B and sino will trade at a 20% discount). This future scenario represents an upside of more than 100% (stock price on 19^th of February, € 38.30).

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