Finding value in “VALU”

What you need to know before investing in VALU shares.

By: Amr Hussein Elalfy, CFA & Mohamed Hosny

The Good

• VALU is a pioneer in the BNPL space, outgrowing the consumer finance industry
• VALU’s diversified approach resulted in a massive market share growth in a shrinking auto market
• VALU’s growth was reflected in its profitability ratios, mainly ROE
• AI-driven risk management to address surging growth, while maintaining a solid risk profile
• A well-recognized fintech player with a strong brand equity benefiting from the first-mover advantage
• A beneficiary of the networking effect, driven by its transaction volume leadership
• Access to finance through banks and non-banking financial institutions
• A proven track record by an innovative young management team disrupting the industry

The Bad

• A market with low barriers to entry with rising competition from new entrants
• No cash dividend plans in the foreseeable future
• Potentially a limited free float percentage
• The risk of any of the current pre-transaction shareholders selling off
• If interest rates reverse direction higher or rate cuts come in slower than expected
• If VALU approaches the maximum allowed leverage threshold
• If the market dries up with demand for securitization faltering

The Catalysts

• Regional expansion to drive growth
• Declining interest rates in Egypt to reduce funding cost
• Declining inflation rates in Egypt to drive demand
• Utilizing current leverage buffer to support further growth
• Any potential acquisition of VALU could drive growth further

Key Metrics

• IFA valuation: EGP 15.59 billion (EGP 7.4/share)
• 2024 / Q1-2025 Book value: EGP 1.64 billion (EGP 0.777/share) / EGP 1.76 billion (EGP 0.836/share)
• 2024 / 2025e P/E: 36.9x / 23.9x
• 2024 / 2025e P/BV: 9.5x / 6.8x
• 2024 / 2025e tangible P/BV: 13.4x / 8.5x
• 2024 / 2025e ROAE: 30% / 33%
• 2024 / 2025e ROATE: 45% / 43%

The Story

VALU [VALU] (officially named U Consumer Finance) is a leading financial technology (fintech) platform, offering a suite of financial services to individuals and businesses. Since its launch in 2017, VALU has continued to provide a wide range of consumer finance products.

As a pioneer of BNPL (Buy Now, Pay Later) solutions, VALU is the No. 1 player in that market segment, providing customizable financing plans for up to 60 months across more than 6,000 points of sale and over 1,500 online stores, covering a diverse array of categories.

In addition to its lending and payment services, VALU also offers investment products, an instant cash redemption program, savings solutions, and a financing solution to facilitate the purchase of big-ticket items up to EGP 15 million in the luxury space.

In 2024, VALU issued a total of EGP 14.8 billion in loans, partially financing a total gross merchandise value of EGP 16.5 billion through 4.1 million transactions. In 2025 so far, VALU’s market share stood at around 25%. If we exclude auto loans, that market share goes up to around 27%. More recently, VALU tapped the prepaid card business, ranking first in terms of card growth.

The Listing

What will happen?

Instead of going public through the normal initial public offering (IPO) that companies usually resort to, VALU will be trading on the Egyptian Exchange (EGX) following its direct listing.
However, direct listing alone does not make a stock tradable, which is why EFG Holding [HRHO], VALU’s parent company and the leading investment bank in the region, decided to distribute some of its profits to its shareholders in the form of an in-kind dividend distribution of a partial stake in VALU in lieu of a cash distribution. This marks a milestone in the Egyptian stock market and opens the door for other EGX-listed companies to follow suit the same route, which would create immediate trading liquidity in newly-listed companies.

Following are the details:

• In their ordinary general meeting held on 24 May 2025, HRHO’s shareholders approved the distribution of a portion of HRHO’s retained earnings as of 31 December 2024 amounting to EGP 335,322,346 representing EGP 0.2335 per HRHO share.
• Instead of a cash dividend distribution, a total of 431,546,918 VALU shares (representing 20.488% of VALU) will be distributed to HRHO’s shareholders.
• The distribution will be based on VALU’s book value of EGP 0.777 / VALU share as of 31 December 2024.
  • This follows the decisions of VALU’s extraordinary general meetings held on 16 February 2025 and 18 May 2025 to undergo a stock split and to increase the issue capital to 2,106,356,523 shares at a par value of EGP 0.10 / VALU share.
  • Eligibility date for the in-kind distribution: 12 June 2025.
  • Ex-dividend date for the in-kind distribution: 15 June 2025.
  • Allocation is based on the following ratios:
    • 3.3273 HRHO shares for each VALU share, which also means
    • 0.3005 VALU shares for each HRHO share.
• Trading on VALU shares is expected to commence during the week starting 22 June 2025.

What does this mean for HRHO shareholders?

By the conclusion of this transaction, each HRHO shareholder will eventually own a piece of VALU directly. This would technically lead to a lower market value for HRHO, which is the fourth largest constituent of the EGX 30 index.

In other words, think of it as carving out 20.5% of VALU from HRHO’s market capitalization, while having HRHO through its wholly-owned entity EFG Finance Holding retain at least 67% of VALU.

According to our calculation, we estimate that VALU’s free float will eventually be 12%.
Below is VALU’s shareholder structure pre and post transaction, based on our estimates.

Egypt’s Consumer Finance Segment

The size of financing within Egypt’s non-banking financial services (NBFS) industry grew 2% YoY in 2024 to EGP 911.5 billion. However, consumer finance has been a steadily expanding segment within the NBFS industry. In 2024, consumer finance recorded a YoY financing growth of 29.6%. Also, its share of the overall NBFS market also increased, rising from 5.3% in 2023 to 6.7% in 2024.

Non-banking financials financing(EGPbn)	2023	2024	YoY growth
Capital Market	601.7	535.5	-11.0%
Leasing	117.5	118.9	1.2%
MSM Enterprises*	72.6	95.8	32.0%
Factoring	44	74.6	69.5%
Consumer Finance	47.3	61.3	29.6%
Mortgage	10.4	25.5	145.2%
Total	893.5	911.5	2.0%

The number of clients within Egypt’s consumer finance segment grew nearly sixteenfold between 2020 and 2024, rising from over 250,000 to more than 4 million. This rapid expansion was driven by growing demand for credit given a growing financial awareness and in view of rising inflation which negatively impacted the purchasing power of Egyptians. As a result, according to our calculation, the penetration rate—as measured by the number of consumer finance clients relative to the total population—rose significantly from 0.3% in 2020 to 3.9% in 2024.

Currently, there are 45 companies licensed to provide consumer finance services in Egypt. According to the FRA’s latest monthly report, consumers primarily seek financing for three key categories: cars, electronics, and home appliances—together accounting for nearly half of total consumer finance demand.

In Q1-2025, the consumer finance segment saw remarkable growth, with the number of clients surging by 188% YoY to 2.3 million (a quarterly figure). Meanwhile, the total value of financing increased by nearly 45%, amounting to EGP 17.5 billion, noting that Q1-2025 is usually the lowest of all quarters.

Consumer finance KPIs	Q1-2024	Q1-2025	YoY growth
Number of clients (million)	0.8	2.3	188%
Total value of financing (EGP billion)	12.1	17.5	45%

How VALU Makes Money?

As a consumer finance service provider, VALU generates its revenues primarily by extending credit to individual and business customers. Its core income streams include interest income from consumer finance as well as gains from securitization activities—both in the form of upfront profits and residual surpluses.

Additionally, VALU benefits from discounts earned through supplier arrangements and other revenue sources tied to the nature of its financing operations, such as late fees, prepaid cards, and early repayment fees.

The nature of the consumer finance segment, combined with VALU’s strong brand positioning and equity, led to a robust financial performance and rapid growth. This is evident in the substantial increases in transaction volume, Gross Merchandise Value (GMV), and loan issuances, which have achieved impressive 5-year CAGRs of 137%, 118%, and 116%, respectively.

The Good

VALU is a pioneer in the BNPL space, outgrowing the consumer finance industry

Being a key player in the segment, VALU has been growing robustly, doubling its market share—as measured by the total value of loan issuances—from 11.9% in 2020 to 23.9% in 2024. Moreover, VALU’s 4-year CAGR of loan issuances is around 1.5x the overall consumer finance segment’s.

VALU’s diversified approach resulted in a massive market share growth in a shrinking auto market

VALU tapped into new financing and payments markets, grabbing a considerable market share by offering consumer-friendly and easy financing and payment solutions. In Q1-2025, VALU commanded market shares of 37.5% market share in the prepaid card market as well as 15.2% in the auto market share (vs 2.4% in Q1-2024).

VALU’s growth was reflected in its profitability ratios, mainly ROE

The overall growth in VALU’s metrics, such as the volume of transactions, the total Gross Merchandise Value (GMV), the loan issuances, and the number of merchants, all contributed to the increase in the company’s ROE which grew more than fivefold, rising from 5% in 2020 to 25.8% in 2024.  

AI-driven risk management to address surging growth, while maintaining a solid risk profile

Artificial intelligence (AI) tools can analyze vast amounts of data, improving credit assessments and fraud detection. This proactive approach helps VALU identify and mitigate potential risks, reducing default rates and enhancing overall portfolio quality.

Despite growing on multiple fronts, VALU has a solid risk profile by maintaining its 90+ non-performing loan (NPL) ratio below 1%. In addition, VALU has a debt-to-equity ratio 4.7x (versus a maximum threshold of 9x as per Egypt’s regulations).

A well-recognized fintech player with a strong brand equity benefiting from the first-mover advantage

Early entry into the market allowed VALU to capture a loyal customer base. The company’s strong brand equity enhances customer trust, drives repeat usage, and reduces customer acquisition costs over time. 

A beneficiary of the networking effect, driven by its transaction volume leadership

As a beneficiary of the networking effect, driven by its leadership in transaction volumes, VALU stands to gain exponential value as more users join and interact within its ecosystem. For example, according to management, a typical VALU client completes around 7 transactions per year, while a client using VALU’s prepaid card averages 10-12 transactions per month.

Access to finance through banks and non-banking financial institutions

Access to finance through both banks and non-banking financial institutions (NBFIs) provides VALU with greater funding flexibility and resilience,  allowing it to optimize its capital structure, reduce reliance on any single funding source, and potentially secure more favorable financing terms. 

A proven track record by an innovative young management team disrupting the industry

The proven track record demonstrates the team’s ability to execute ambitious strategies, respond to market shifts, and create value through innovation.

Investment Catalysts

Regional expansion to drive growth

VALU’s expansion plans shall leverage its established products, services, and operational expertise to capture additional demand and diversify its revenue streams. VALU is currently in the process of penetrating the Jordanian market.

Declining interest rates in Egypt to reduce funding cost

Declining interest rates shall improve profitability and enable more competitive lending rates to customers. Lower borrowing costs can also encourage VALU to expand its loan portfolio and take on new growth opportunities with greater financial flexibility.

Declining inflation rates in Egypt to drive demand

As inflation cools, albeit still at elevated levels, consumers may feel more confident in taking on new credit, which could support VALU’s growth. This is especially true in view of low real wage growth rate.

Utilizing current leverage buffer to support further growth

VALU can utilize the buffer between its current debt-to-equity ratio of 4.7x and the threshold debt-to-equity ratio of 9x to support further growth.

Any potential acquisition of VALU could drive growth further

Being a target for acquisition enables VALU to expand its customer base and unlock operational synergies. Acquisitions can also provide access to new markets, technologies, or capabilities, strengthening the company’s competitive position and supporting long-term value creation.

Key Risks

A market with low barriers to entry with rising competition from new entrants

Egypt’s consumer finance market has low barriers to entry, which poses a risk that can lead to pricing pressure, shrinking profit margins, and potential erosion of market share. This can raise investor concerns about the sustainability of growth and profitability, potentially impacting VALU’s valuation. However, VALU can differentiate itself—through its brand equity, technology, or service quality.

No cash dividend plans in the foreseeable future 

The absence of cash dividend plans in the near future can be a concern for income-focused shareholders who rely on dividends as a source of return. So, from a market perception standpoint, withholding dividends can negatively affect investor sentiment. However, VALU’s plan is to reinvest retained earnings into the business, further fueling growth, which would be a sound long-term strategy if effectively executed.

Potentially a limited free float percentage

A potentially limited free float of 12% implied a total free float market capitalization of less than EGP 2 billion (based on the IFA valuation). This can lead to a relatively low trading activity on the stock. Such reduced trading liquidity may also make it harder for investors to trade the stock without impacting its price significantly. It also tends to discourage institutional investors who require sufficient float to build or exit positions efficiently. 

The risk of existing pre-transaction shareholders selling off

A significant sell-off by early investors can lead to a sharp decline in the stock price, especially if the float is already limited. This can negatively affect market sentiment and deter new investors who may fear continued downward pressure from this sell-off overhang.

If interest rates reverse direction higher or rate cuts come in slower than expected

Since the consumer finance segment relies heavily on borrowing, higher interest rates or slower- than-expected rate cuts mean a higher-than-expected cost of funding. This can compress VALU’s profit margins and reduce its ability to offer competitive lending terms. On the demand side, consumers may become more hesitant to take on credit, leading to slower loan growth.

If VALU approaches the maximum allowed leverage threshold

This could limit VALU’s ability to raise additional debt to support future growth or absorb financial shocks. Operating near the regulatory ceiling also signals elevated financial risk, which may concern investors.

If the market dries up with demand for securitization faltering

Faltering demand for securitization could significantly impact VALU’s liquidity and funding strategy. Securitization is often a key tool for converting outstanding receivables into immediate capital (cash), and a slowdown in demand would limit this avenue, potentially forcing the company to rely more heavily on costlier or less flexible funding sources.