Welcome to the Vostok Emerging Finance Q3 2020. For the first part of this call, all participants will be in listen-only mode, and afterwards there will be a question-and-answer session. Today, I'm pleased to present Dave Nangle. Please begin your meeting.
Super. Thank you very much, Operator. And good morning, good afternoon, everybody, and welcome to our Q3 2020 results call. And thank you for your time and attention today. Clearly, it's a busy world, lots of big events going on, so we really appreciate your time with us in this window. New name, we've changed our name officially to VEF, and a strong set of numbers to present to you today in the short presentation that I have that is both online and live via the webcast as we talk flick through. What I'd say the highlight of the quarter, and highlight in general, is what we've seen over the last nine months of living in EM FinTech through COVID is that COVID, actually EM FinTech is a positive from the COVID world. COVID continues to drive positive momentum and a real shift to digital financial services by all.
We said this in many of our calls previously where there has been a step change in digital adoption in financial services, and we continue to see that through the prism of our portfolio companies during Q3, which has kind of accelerated off the base of Q2. Second point I'd say is heightened sector M&A activity. EM, emerging markets, FinTech has been a very busy M&A and IPO space, hence lots of exits and lots of sector liquidity. This is obviously good for us and our portfolio for eventual exits and also just good for all the valuation marks out there, which gives you more transparency into the inherent value that exists in our portfolio that we've been talking about over the last few years.
From a NAV point of view, the highlight of this quarter is a new record NAV at $268.2 million, up 20% quarter on quarter on a dollar basis. Just as a reminder, we started this company back in 2015 with sub-$100 million NAV and market cap, and have organically grown to this level as of today, both combination of mark-to-market and realized exits en route. It's been a gradual 20%-30% CAGR growth of our underlying NAV and market cap over that period. That's always been the story here at VEF, long-term, gradual, sustainable growth of value. Creditas, our biggest and our North Star portfolio asset, continues to compound in value, but most importantly for us and for you, the investor, is its compounding off a larger base. We increased our value, mark-to-model, quarter on quarter by 26% to now over $100 million.
That holding is valued at and accounts now for nearly 40% of our NAV. We'll get more into this in the presentation, but we don't mind concentration risk at VEF once it's the right kind of concentration risk. And we've had it in the past at iyzico in Turkey and Tinkoff in Russia. And when you're in a good asset, you tend to back it as hard as you can because it wins for you and for the investors. And it's also an asset that's opening up in terms of its numbers, its portfolio, its growth, which I'll get into, which is giving you more transparency into our biggest and best asset, which obviously gives you transparency into our overall NAV and where it could be going. And final point, the pipeline.
Obviously, initially in the first half of 2020, we were very much focused on our current portfolio needs, but the pipeline really has built out in the last few months, and we've got a couple of exciting opportunities at the top end of our pipeline funnel that we're hoping to convert over the coming months. Moving into the Q3 2020 kind of highlight numbers themselves. As I said, NAV up 20% quarter on quarter for the second quarter in a row to $268.2 million. From a SEK point of view, on a per-share basis, which is obviously how our share trades, our NAV per share is at SEK 363. At the end of the quarter, our cash position was $20.2 million at the end of September.
Looking at the evolution of NAV and the narrative of our NAV, I guess going back to December 2015, it was a gradual uplift, as I said before, in our NAV with the evolution of the growth in our portfolio and the underlying assets within, combined with the exits that we saw through 2019. Initially, in the COVID window, in Q1, we effectively went conservative with our forecasts, our valuations, our outlooks, as was natural back in March when the outlook was very unclear for the world, for health, for macro and for micro level positions.
Very clearly, as we lived through COVID in each of our countries, Brazil, India, Pakistan, to name a few, and through the companies themselves, all based in digital financial services, after that initial March and April shock or moving on the back foot and defensive mode, we saw traction in April, May into June, and then very much that Q2 growth feeding into Q3. We've gone from a conservative footing in Q1. I would say recovery or initial recovery from that conservative footing in Q2, which was 20% quarter on quarter, and now growth into, I'd say, more of a pure growth footing in Q3. We're not saying we don't think about COVID, but we've now lived with it, and we see the net benefits to the majority of our portfolio from the upside impacts from COVID, which has been a digital-first environment for financial services.
Everybody needs financial services. They just don't need physical financial services in branch, cash, and old world. And that's been a step change growth. And we've seen that through our portfolio companies, and that's been reflected in the evolution of our NAV through this period. And what you're seeing from an individual portfolio point of view, what drove that NAV 20% increase quarter on quarter? From a quantum point of view, it was broadly across the bigger names in our portfolio, which is what you would expect, and Creditas, in particular, saw an increase in approximately $21 million. And from a percentage point of view, the biggest increase across the portfolio was Konfío, our second biggest asset in Mexico focused on small businesses. And that's one where we went from a very conservative footing from a valuation approach in Q1 and Q2.
And then as we saw the asset quality stabilize, recover, we saw the underlying growth in the business pick up. It allowed us to get back on the front foot from a valuation and outlook point of view. And our valuation and forecast very much feed off the delivery and the outlook that we see in our underlying assets. And Creditas, it's worth spending a few minutes on Creditas, as it's now nearly 40% of our NAV. And as such, and it's still one of our fastest growing assets, even though it's got relative size versus the rest of the portfolio. They have started to open up as a company, released a press release back in August highlighting for the first half of 2020. For the previous 12 months, their top-line revenues delivered BRL 260 million. That was a 2.4% increase year on year.
What I'd say is, as we move through 2020 and into Q4, that's $260 million historic revenue number. They're now looking at delivering close to $400 million on an ARR, or average run rate revenue basis, as we move into Q4 of 2020. Just translating that into some simplistic numbers, we're talking about $70 million of top-line run rate from Creditas at the moment. This is a company which is comfortably growing 2X year on year into a very scale opportunity, and it is a leader in the space of secured consumer lending. If you have a $70 million top line compounding 2X, 70 to 150 to 300 in a space where Brazilian listed best-in-class FinTech assets trade at 10-15 times revenues, you can kind of see where Creditas can go and why we, as investors, have stuck with this company, have backed it harder.
We led the Series C investment back in 2017, and that was an investment of $25 million and a valuation of $275 million post-money. We took our rights in the Series B investments. This was back in 2019, and that was a significant uplift to $800 million plus-minus post-money, and then through COVID, obviously, we got conservative with our forecast before seeing the delivery in this company, and this is a company that has had an excellent crisis in terms of managing its cost basis, very low cost base, down initially during the crisis, getting to cash flow break-even just in case in March and April, but seeing its asset quality hold up, seeing the funding markets hold up, and then getting very much a back-on-a-growth footing into Q2 and Q3, as is reflected in our valuation numbers coming through.
It's a company that's on the record saying it is looking to do an IPO in 2022 or 2023, and that's the path of this company. And it probably will have one more capital raise prior to that. And given the trend in the company and how the high spending we hold that company in, it's probably a fundraise we will look to take part in as and when it does happen. It's also worth talking about the corporate action or corporate activity in the EM FinTech space. Generally, it's a general positive to see IPOs, whether it is the likes of Kaspi in Kazakhstan on the FinTech side. For us, there's a lot in Brazil over the recent years and PAGS and Stone and XP, multi-sector payments, investments, multi-billion dollar IPOs. On the M&A front, it's coming thick and fast.
One that we like actually is the Stripe one when they bought Paystack in Nigeria. It shows that M&A for FinTech is everywhere in frontier and emerging markets. But realistically, for us, we love to invest in the best FinTech companies in emerging markets, but we also love to exit at significant valuations. And we've proven in the recent past in 2019 with our exits from Tinkoff Bank and our exits from iyzico in Turkey. Both exits were 60% plus-minus IRRs when we hold a 30% IRR threshold for each of our investments. And what I'd also say from a portfolio point of view, we've had of the 12 holdings we've had, four of those companies have had approaches, not offers, but approaches for purchase in the last 12 months. And it shows how busy the space is.
I guess given the activity, the low-rate environment, the liquidity in the space, I probably will be disappointed if we don't see an appropriate exit from the portfolio over the next 12 months. On the pipeline side, with everything I have said so far, it's probably not surprising that the pipeline is heating up. It is the kind of environment that does throw out opportunities. I guess historically, we've been very gradual in taking our time with opportunities. We've added one this year, Juspay in India. We did one last year, Xerpa in Brazil, and one the year before, Konfío, so in Mexico. So we don't rush out. We take our time. We get to know countries, companies, founders well before we make any moves, but the pipeline is starting to heat up.
Our focus scale markets in the emerging world, as you said before, Brazil, Mexico, and India. And then in the frontier space, there's more Pakistan and Egypt. But the work we've been doing of late, or what is towards the top end of the funnel, is more in the Indian subcontinent. We're finding some very interesting assets in India come to the top of the funnel. And also Pakistan is a market where we're building some early roots and looking to build on our initial investment in Finja. And we're seeing more there as we're well placed to be one of the first movers in that market as it opens up. And pulling back and just reflecting for a couple of slides, our portfolio, as I said, nearly $270 million. You can see from the pie representation that Creditas is a big part of that at 38%.
The top two assets with Konfío now is 53%. And I say we're big fans of concentration once it's the right kind of concentration. And even if you move to our top five assets, it's about 72% of our NAV. So there is a concentration level growing. But what I will say is going through those top five assets from Creditas, Konfío, TransferGo, and Juspay, both in digital payments, and Nibo in accounting SaaS, this is a massively overlooked space and probably is the rough diamond within our portfolio with lots of upside from here when we look at peers like Fortnox in Sweden and where Nibo can go. So we're in a good position from a portfolio construct point of view, and our key assets are doing very well. Cash position, we're sitting on $20 million of cash as of end of Q3.
The pipeline, as I say, is probably as exciting as it's been in many a year for us at this stage. Geographically, it's always just good to show LATAM is where we are very much in focus, and Brazil is a big part of that, albeit incremental investments, probably more likely in the short term, more in the Indian subcontinent. LATAM, given Creditas's compounding nature, will continue to be big for us as we look ahead. Share price and discounts. This is something we've been working very hard on building the company, building the portfolio, the asset base, make sure we had the right processes, the right investments, the right team to bring to the market.
And I think over the last five, six years, we've done a decent job or a good job, maybe I can say, of delivering upon that, both the assets, the mark-to-market, the realizations. But interacting with the market is something we've really stepped up our game with. We've increased our coverage from a research point of view, from initially Pareto Securities, also now DNB Markets and Nau Securities, and we should be adding one more in the near future. A lot more investor engagement, especially given how in focus emerging market FinTech is. There's a lot of investors coming at us for a change. And our investor base, we probably do bat above our weight with the quality. We're very lucky with the quality of our shareholder base with names like FMR, FIL, Wellington, Ruane, Cunniff & Goldfarb, Wasatch in Sweden, Handelsbanken Fonder and Swedbank Robur, to name but a few.
So very quality sticky support of shareholder base. With the move, obviously, in our NAV this quarter, we were trading close to NAV. Obviously, there's a step change in the NAV and the share price. We would like to see it catching up logically, given how we can defend the NAV, A, but B, probably more importantly, where we see NAV going over the next three to 12 months. Finally, just some guidance outlook, and then I'll pass back to the operator for questions. But this is just a repetition. I think digital finance is a COVID winner. I'm very comfortable with that statement at this stage. Clearly, there's macro effects. There's asset quality effects. Some of our portfolio has been, but the majority of our portfolio is balance sheet light and benefiting overall. I think the M&A, the corporate action activity IPOs is very welcome.
That's obviously it's a busy space, but it just gives us so much more opportunity to show value and create value for you, the investor. Our NAV has been a gradual build-up over time. Yes, COVID was a natural setback, and we've reflected, and I think we have a strong track record of a very clear and transparent process for our NAV, especially when things go right and/or wrong, and I think shareholders are building trust in that as we go, but given where we are at Q3 off the back of Q2, two quarter on quarter, 20% growth in our NAV, we're feeling quite good about where our NAV is at and where our NAV is going, which obviously feeds off the underlying assets which sit below that. For Creditas, for any investment company, you want, as an investor, to grab onto one asset.
We've got 12 assets in our portfolio, so there's a lot to work with on their private assets. But Creditas is now nearly 40% of our NAV. It's becoming more transparent, more open in the data. The CEO, Sergio Furio, is on a lot of investor calls. So the transparency is growing. The numbers are clearly growing with that transparency. We love a compounding asset. We love that word, compounding. Valuing at $100 million, close to $1 billion plus-minus as a company, we see a lot more in this asset in terms of its growth in Brazil, the early signs in Mexico, the broadening of its product base in Brazil and Mexico, and the fact that it's being stress tested through COVID, proved out cash flow break-even, asset quality funding stood tall. And the team just gets stronger and stronger as we go.
So we've got a very positive bias towards that asset and a very confident saying so. And then on the investment pipeline, that's obviously just continuous work from our end. But I think given our track record, our place in emerging market FinTech, we're quite unique in that we see a lot. We see nearly everything in the markets that we play in. And there's not a lot of us out there. We play with the local partners. At this point in the cycle, there's a lot of interesting things at the top of the funnel, which we'd like, hopefully, to see convert in the near future and be able to announce to you, the investor. From a risks point of view, there's always execution risks in what we do. But the bigger thing is uncertainty around macro and markets.
That's our ever-present risk, but it's probably the one that keeps us awake most at night. I think the controllables, and the micro-level stuff is in a good place at this point in the cycle. Let me stop there, operator, and then I can open up to questions from anybody who's on the call.
Thank you. Ladies and gentlemen, if you have a question for the speaker, please press zero one on your telephone keypad and you'll enter a queue. After you've been announced, please ask your question. Our first question comes from Hermann Wreford from Pareto Securities. Your line is open. Please go ahead.
All right. Great. Good afternoon, Dave, and congrats on a very strong report. So a couple of questions from my end. So starting with Creditas, obviously very impressive performance this quarter and seems like it's on a strong revenue growth path with no apparent slowdown in sight. But if you would just identify some of the key execution risks for the company going forward now in 2021 and 2022, what would you say regarding that?
Yeah. Hey, Hermann. No, thanks for that. Obviously, we're pointing out the positives because we believe in the positives and it's coming true in the numbers. And that's most important. The numbers don't lie for something like this, especially when you go through the mother of all crises or recent crises and you're watching asset quality, which obviously they're an asset-like business, but they pass it on to partners and their appetite needs to stand tall. It did during the crisis. Asset quality held up, funding held up, and the team and the execution held up. I think if I get onto the negative side of what keeps me awake at night with Creditas, I guess it's just flipping what I said around. It is a big part of our NAV, and we're making a big bet on that continuing.
I guess there is that concentration risk. The flip side of that obviously is we like concentration in the best assets. We had a board call with them last night. I'm just trying to think of what on a micro level would concern me. The move into Mexico was a concern because I love focus. Brazil is a big enough pie for anybody. Actually, they've had very good early signs in Mexico and 3% of loan distributions in Q3, I think it was, have been to Mexico from a standing start of total distribution. That's going well, but they're finding their feet in Mexico. I think a risk is just keeping the eye on the prize and being careful with that. Otherwise, it's obviously the risk of competition. Creditas is the standout FinTech in this space. There's no one really else of note.
But the bigger banks are opening their eyes to this in Brazil. Big banks really have focused on unsecured lending, high rates, overdrafts and credit cards. Creditas has undercut them with this more obvious and logical secure product. So the banks haven't really wanted to go there in size because it cannibalizes their profits. But they will eventually. They'll have to. And Creditas will have that competition on its own. So that's something that we keep an eye on.
All right. Great. And just to follow up on that, can you describe a little bit about Creditas' plans in Mexico? Where do you see that going in maybe five years' time?
Yeah. It's an increment. I guess when talking to Sergio about this, he's looking across LATAM as a continent. He knows he has the benchmark model that's now working in Brazil, and like anything in FinTech, when it works, you get copycats. When it works in Sweden, then you get copycats in Brazil. It works in Brazil, you get copycats in Mexico, and there's no natural order to these things. With Mexico being of size and scale and being relatively on their doorstep, Sergio obviously being Spanish and less Brazilian in nature, being open to the opportunity there, what he decided to do is just put down an early kind of roots in that market, not be too dramatic with it, test and learn around auto, around home, around payroll, and see what works, so it's early doors on all three products.
We'll see which works, and we'll back it harder. If it doesn't work, we'll go gradually until it does. The natural thing is that Mexico is similar but different to Brazil. It's not a very deep consumer credit market, so you're not trying to change high-rate, deep, unsecured loans for the secured product. It's just a very underpenetrated lending market across the board. I see Mexico being more gradual, but then a lot of these opportunities, it's gradual, gradual, and then suddenly it starts to happen. I think the Mexico plan is around. I think the story for Creditas will very much be Brazil today, tomorrow, the day after that. At some point, Mexico will start to make an impact.
Yeah. All right. Yeah. Makes sense. All right. And then, just coming back to this forecast for Creditas, I think we spoke about this a little bit in Q2. If you could just describe a little bit about how it has changed compared to Q1 and Q2. I think in Q2, you mentioned that you had kind of a low to mid scenario, quite a conservative forecast. Can you just describe if that has changed in any way? And I'm speaking about 2021, by the way.
Yeah. No, absolutely. So we moved everything to mark-to-model when COVID kicked in because the world had changed and all our assumptions had changed. So any basis of valuation on previous valuation rounds or investment rounds, while good to look at, weren't realistic. So across the board, mark-to-model, and obviously across the board, we took everything down with lower forecasts. And lower forecasts with something like Creditas and many of our companies, we kind of had a bear base and bull or low, medium, high set of forecasts for each of these companies. And the initial iteration of COVID, we were at the low end for most companies. We had short duration forecast or valuation where we did year-end 2020 or even less than that. So we weren't getting too far ahead of COVID.
So we were living in COVID on lower forecasts, and that fed through to valuations. In Q2, what we did with Creditas is we stayed in, we moved from low to mid from memory, so that kind of middle ground of low to mid. And we moved from year-end 2020 valuation to 12-month rolling. So our natural tendency is to have a 12-month rolling. So every quarter, the growth kind of feeds through, and we're rolling with that off the 12-month outlook multiple of a peer group. Moving into Q3, effectively, it was the growth coming through with the extra three months. I believe I'll double-check now. We're still in the mid-range between low and medium and not yet even on medium in terms of forecasts, albeit Creditas's performance is tracking medium. So there is probably a little bit of uplift there.
But there's also the other moving parts of peer group multiples and FX, which are an ever-moving feast. But by no means with Creditas, and I can say this for the top five, obviously the whole portfolio, but the top five assets, we sat around doing the multiples, the forecasting, the valuations, looking at peers, looking at exits, M&A. And there is a lot less on the table, I think, in our top five assets. As in, we wouldn't want to be selling any of those assets for the price we currently have marked to market as true and fair as they are from a valuation point of view.
Yeah. All right. Great. And then if we move to Konfío, the second largest asset, can you just describe a little bit about their growth outlook now going into 2021 and how the credit quality has held up through COVID so far, what you can see?
Yeah. No, I think this is one I'm going to be singing praises probably next year. I think when you have a company that primarily focuses on small businesses, unsecured, and loans in Mexico, when you go into a COVID window, the first strategy is defense. It's survive and then thrive. So we lived through that initial window with Konfío, and what they did from an asset quality point of view, Hermann, is effectively they got ahead of the curve. They took up to nearly 50% of their loan book or borrowers, and they restructured those loans. They gave them payment holidays for a period of one to maybe six months, and this was very similar to what the listed banks did, and then coming out of those six-month period, what we found was nearly 90% of borrowers came back to performing.
It was a very successful window to work with your borrowers and get them through the window of pain and back to performing status. From an asset quality point of view, we are in much better shape than we thought we would be. Those numbers started to come through in August and September and kind of steadied the ship. From there, what we've done on a growth footing, we're back to growing the loan book. We're not Creditas. Creditas is very clear, secured, off-balance sheet asset light. They could get back to double-digit percentage growth quite quickly. With Konfío, with Mexico, with the economy, we're slowly growing, but the early cohorts are looking good. We're back to single-digit percentage growth month on month.
Probably more exciting with Konfío is, not to keep being a private asset, they've used the crisis really to move on the front foot with their broader small business ecosystem. And they're looking at names like PAGS and Stone in Brazil and Square in the U.S. and other entities which obviously focus on one aspect of a small business, whether it's payments, credits, ERP, and then build a broader ecosystem underneath. So Konfío, both organic and inorganic, is looking at broadening its small business ecosystem and diversifying on top of the lending book.
What's working really well at the moment is Credit as a Service, where we sell our credit scoring to some of the big companies in Mexico, which lends to their big distributors, whether it's Coke or Procter & Gamble or entities like that, who basically lend to the mom-and-pop shops or their entities that distribute their products. Konfío is sitting now in the middle and providing credit scoring and credit collection as a service. So non-balance sheet fee-based. That is actually growing like wildfire. That's a great non-balance sheet revenue business that's growing, which fits our skill set, but obviously it has very little risk involved from us. It's a tech revenue play. At the same time, we're looking at ERP, the likes of what Nibo does in Brazil. We're looking at payments and how we can fit this into a broader small business ecosystem.
It's very exciting times on the broader product suite at Konfío. While on the asset quality front of the core, we've stabilized and we're back in the growth footing.
Yeah. All right. Great. And then just the last question from me. So you recently did a name change and just an overall facelift to your logo and your new website, etc. So are you currently planning something else in terms of further ESG communication, potential listing on the main board, or redoing affiliation to Sweden or UK or something else like that?
Yeah. No, I think you're taking the words out of my mouth, Hermann, and maybe we talk too much, but look, this story for us is a long-term story, and we're always looking to improve what we are, how we are, how we communicate, our structure, our listing, everything. I think from a structure point of view, we're looking at moving away from a Bermuda Hold structure and looking to a UK structure, albeit a lot of this, the lack of travel is kind of impeding our ability to move forward at the moment, but I'd say watch this space. From a listing point of view, as much as we respect Nasdaq First North, we have our eyes on the prize, which is the main board we always have, and that will come with the structure change. They'll probably go hand in hand.
I think the most important thing you probably touched upon is ESG. And this is just, it is the acronym for the next 10 years or beyond. And you're either on board or you're going to get left behind. And the beauty of a company like ours is the S part, the financial inclusion, the financial sustainability. Most of our companies are bringing financial service to a broader playing field of customers, small businesses, consumers in their market. They're bringing down the price of finance. And they're in that ethically good camp, which is positive. And we just haven't, we've been looking at them, obviously working with them in an ethical, sustainable way, but we haven't really put a formal ESG overlay. But that's starting. We're basically on a journey with that at this stage.
It's early days for us, but we're formalizing all the good work that our companies do and bringing that to the investor to show what we have. So there's a lot of formalization, I think, of good governance or good ESG policies at VEF that we just need to formalize and put, certainly put them on our website and put them more out to the market so that, and then get feedback from the market and improve as we go. We're not trying to be everything day one. We're not trying to overstretch our hand and pretend to be what we're not. But we think we've got a very strong card to play here.
Yeah. All right. Okay. Great. That's all for me. Thanks a lot, Dave.
Super. Cheers, Hermann.
I'll remind you that if you want to ask a question, you'll have to press zero one on your telephone keypad. There are no further questions at this time. Please go ahead, speaker.
Super. Thank you, operator. Thank you, everybody, for your time today. Much appreciated for the following that you have in our name and our stock. Any questions that you have from this point forward, always feel free to reach out to myself or Henrik Stenlund, our CFO and Head of Investor Relations. We're always available to speak. Talk soon and take care.