Experian’s cash generative business model and strong organic revenue performance allow it to invest in early-stage, innovative technologies that will, in our opinion, help to sustain above-market growth rates in the future.
We highlight a recent acceleration in Experian’s rate of investment activity in high potential technology businesses around the world. We believe that some of their technologies may ultimately become part of Experian’s core portfolio of products, following the example set by Runpath, an associate investment that was subsequently fully acquired and provided the group with its successful Verdus platform.
We think these minority and associate investments also point the way to the next sectoral waves of growth for Experian: open banking, healthcare, data and financial marketplaces. Our analysis sees us become more positive about Experian’s ability to sustain high levels of organic growth and have upgraded our long-run forecast from 5.3% to 6.1% (FY24-30E). This takes
our target price up to 2,750p (December 2020) and we reiterate our Overweight rating.
Open Banking: Experian identified that the new transactional data seen through open banking APIs could be used to ‘enrich insight’ and help its customers make better credit decisions. Its technologies use the data made available through open banking into decisioning tools that help lenders assess the affordability of their products.
Experian acquired a 25% stake in Runpath in 2017. It acquired the remaining 75% stake (for consideration of $66m) in 2018. Experian has a 20.0% stake in Finicity, a US fintech company specialising in secure financial data aggregation.
Healthcare: Underpinned by demographic trends and the increasing prevalence of chronic diseases, it is likely that US healthcare will be a long-term growth industry. Experian operates a capital-light, SaaS [software-as-a-service]-based business model that provides reporting and payment-related services. Experian entered the healthcare payments market in 2008 with the acquisition of SearchAmerica and consolidated its position with the acquisition of Medical Present Value in 2011, which was combined with SearchAmerica to create Experian Healthcare. Early investments in Madaket and AxiaMed may augment its payment security and processing capabilities.
Data: The collation, analysis and dissemination of data lies at the heart of Experian’s business model. The development of innovative ways to analyse and apply data is a major driving factor fuelling the group’s consistently strong organic growth. Building on the strength of its core credit bureaux, Experian has launched products such as the Ascend Sandbox to increase the efficacy of big data analysis, as well as new decisioning tools such as the PowerCurve Strategy Management solution or the CrossCore fraud prevention platform. Just as the Verdus cloud-based open data aggregation platform was developed from the foundation of an early investment in Runpath, we believe Experian’s investments in early-stage data innovators point the way to possible high potential growth areas that can help sustain above-market growth rates over the medium to long-term. Investments include Aire (credit score algorithms), Canopy (property rentals), Cheetah Digital (data management), PlaceIQ (location intelligence), TrueAccord (debt recovery optimisation) and TrueData (formerly known as Twine and which is a mobile data platform).
Financial marketplaces: Mobile technology is being used to provide consumers with easy access to credit data. It is also facilitating price and product comparison through marketplace apps that aggregate information and facilitate loan origination. Experian’s investments are focused in Asia, including Bankbazaar.com, Bonify, C88 Financial Technologies, Jirnexu, Nav Technologies and Grab.
Other investments
Financial advisory
Stackin’, mobile messaging financial advisory service
Mortgage digitisation
London & Country (“L&C”)
This is an edited version of a research note published on October 7.