Funding Circle Holdings Plc – Offering Sophisticated Data Analytics

Funding Circle Holdings Plc (LON: FCH) is an FTSE All-Share listed Online Lending Platform Company which connects medium and small-scale businesses (in the UK, US, Germany, and Netherlands) to government-backed entities, retail investors, banks, and asset management Companies.

The Company will release H1 FY2020 results on 24 September 2020.

Government Schemes Update (8 July 2020)

The Group provides an update on accreditation to BBB (British Business Bank's), CBILS (Coronavirus Business Interruption Loans Scheme) in the UK and SBA (Small Business Administration) and PPP (Paycheck Protection Program) in the US. Since the joining of Funding Circle Holdings to the CBILS programme, 16% loans were approved, and UK business reached the highest origination levels. In the US, the Group through PPP loans helped in the protection of thousands of jobs. The Company is focused on the long-term priority of delivering profitable growth, and the UK business is operating profitably in the second half of the financial year 2019 and continues to make decent progress. Due to the impact of a covid-19 pandemic, Funding Circle Holdings is looking to make changes in the US business to improve the path to achieve profitability.

Share Price Performance


Daily Chart as of August 20, 2020, before the market close (Source: Refinitiv,Thomson Reuters)

Funding Circle Holdings Plc shares were trading at GBX 82.30 at the time of writing before the market close (at 9:01 AM GMT+1) on 20 August 2020 and down by 3.18% versus the previous day closing price. Stock 52 week High and Low were GBX 153.80 and GBX 21.95, respectively.

From the technical standpoint, shares were trading below the support level of 20-day simple moving average prices, which reflects a downtrend in the stock and can move down further.

Key Risks

Due to economic turbulence, Company’s performance is subject to various kinds of risks, such as Liquidity risk, market risk and credit risk. Being a Technology Company, the FCH needs to invest heavily in innovation and system maintenance and, any failure to do so will impact the brand royalty and may affect the Company’s financial performance. The Company operates in multiple geographies, and profits can be impacted negatively due to foreign exchange rate fluctuations.

Valuation Methodology



Conclusion

The Company, through its platform, is helping small businesses during uncertain times. In the UK, the Company reached the highest ever origination levels. The Company’s aim is to deliver profitability growth for the long-term period. However, considering the emerging nature of the pandemic and unprecedented uncertainties, the Company has withdrawn its guidance for FY20. Meanwhile, the Company implemented several actions to protect investor returns and managing the operations virtually to minimize the financial impact. The Company is also making some changes to US operations to achieve profitability.

Based on the above rationale, we have given a “Watch” recommendation for Funding Circle Holdings Plcat the current price of GBX 82.30 (as on 20 August 2020, before the market close at 9:01 AM GMT+1), while we look for any upcoming catalysts in the near term such as the outcome of changes made to the US business.
 
*All forecasted figures and Industry Information have been taken from Refinitiv, Thomson Reuters.

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