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Leadership Instability as CFO Linus Lönnroth is acting as interim CEO. We believe that a company in such early stages requires defined leadership presence, which the company falls short on here.

Lack of confidence among CLO, who sold 20% of his shares in Q2 2014. We believe this might be due to insight about regulations impacting the lender/borrower rela-tionship in P2P lending.

Volatile multiples largely due to the nature of being a new company, and also a number of “one-time” events. Accounting reporting methodology was changed in 2012, which skews numbers during that year.

New acquisitions of companies in Italy and the Neth-erlands create opportunity to capitalize on P2P Lend-ing industry by improving product and geographic di-versity

Strong Revenue growth has still resulted in low or negative profit margins among TrustBuddy and peers

New online platform developed in 2014

License requirement in Sweden as of June 2015

Trend towards greater whole ownership from lenders

Decreased ROIC due to greater competition

Lower expected growth of fixed costs

Insider Transactions Date Insider Shares No. of Shares

14-10-08 N: Jens Glasø +50,000 30,127,552 14-07-18 N: Sebastian Hagman +50,000 50,000 14-07-18 N: Linus Lönnroth +26,000 1,161,848 14-05-26 N: Bård Bjerkås -400,000 2,000,000 14-01-16 N: Samuel Tawadros +10,000 10,000

-40

-20

0

20

40

dec-13 mar-14 jun-14 sep-14 dec-14

TBDY Income Statement (MSEK)

Revenue

Net Income

Analyst

Cameron Andrews cameron.andrews@analystgroup.se Nyckeldata

Share price 0,60 52wk high / low 2,68/0,489 Shares outstanding 405 550 000 Market cap (MSEK) 243,33 Net debt (MSEK) 85 EV (MSEK) 328,33 Sector P2P Lending List / Ticker TBDY Next report 2015-06-30 Performance

1 month -31,8% 3 month -51,6% 1 year -76,9% YTD -44,72%

Major owners Ownership (%)

River and Mercantile Asset Management 4,33 BlackRock Advisors LLC 2,32 TCW Investment Management, Co. 1,03 BlackRock Investment Mgmt (AUS) Ltd. 1,12

Management

Linus Lönnroth CFO/Interim CEO Simon Nathanson Chairman

TrustBuddy AB

Value Drivers

Risk Profile Quality of Management Quality of Earnings

Bull or Bear Independent Analysis

Value Drivers

2015-04-09

Please refer to important disclosures at the end of this document

Revenue growth is expected to remain between 40-60% annually in the medium term, as global profitability is not yet certain. Taking into con-sideration the current platform capacity and trend observations of both revenues and expens-es it is expected that TrustBuddy will see positive earnings in the midterm. Low entry barriers will attract a number of new entrants, leading to a diminished annual revenue growth rate, and higher competition for market share. At the mo-ment this is not a big concern, as revenue growth is consistently above 100% annually, across all listed P2P lenders. While business volume in-creases the profit margin per transaction will face continued pressure against profit margins. Expected positive earnings in 2017-2018 Fixed costs are expected to increase gradually throughout the business phases above, with rates less than the revenue growth. Using relative his-torical average growth rates of operating expens-es and revenues, it is my estimated forecasted that TrustBuddy will make positive earnings in 2-3 years. Expected profit margin improvement through acquisitions of Dutch P2B lender Geldvoorelkaar and Italian lender Prestiamoci during Q4 of the 2014 fiscal year are be expected to increase TrustBuddy’s margins in the medium term. EV/Sales increased to 2.6, and EV/EBITDA im-proved to its highest level in years, indicating positive strides in company fundamentals. This should benefit the company over the next 3-5 years due to product and geographical diversity has been improved from these acquisitions.

Investment Thesis

Company Description

TrustBuddy AB is the only Peer-to-Peer (P2P) lender

listed on the OMX: First North exchange. Headquar-

tered in Stockholm, Sweden, the company has been

providing short-term consumer loans of up to 10,000

SEK since 2011. TrustBuddy is active in 10 Europe-

an countries through 3 different names:

1) TrustBuddy: Consumer ST Loans up to 10,000SEK

2) Geldvoorelkaar (Netherlands): SME Loans up to

750,000 Euro; average loan is 48 months

3) Prestiamoci (Italy): Consumer LT Loans up to

30,000 Euro; average loan length: 34 months

Earnings volatility resulting from high operat-ing leverage, as well as an increase in expected competition, makes them highly uncertain at the moment. The business faces regulatory risk resulting from low contractual relations be-tween counterparties. Impending regulatory licenses in Sweden is expected to lower com-petitive barriers to entry, assuming TrustBuddy receives the license. The opera-tional efficiency of TrustBuddy AB lending team in maintaining low default rates of around 2% historically eliminates the indirect credit risk, which could switch lender clients from competitors. Other peers offer insurance products, which create higher costs for their suppliers of capital. The interest bearing LT liability of 38 million SEK, which represents 28% of Equity at YE14 is fully covered by Cash and Cash equivalents of 40 million SEK, making the default risk moder-ate. Summary Earnings volatility due to high leverage and in-fluence of regulation adds to the uncertainty of TrustBuddy’s short-term profitability. Recent acquisitions have boosted the company’s finan-cial picture, but sustained effects are yet to be seen. Strong revenue growth is expected to continue in the medium term, although at a lower rate than the past 3 years. Based on the above, we assume a required rate of return to be higher than average market.

2015-04-09

Please refer to important disclosures at the end of this document

Disclosure: Cameron Andrews – Does not own stocks in TBDY

Shant Sanossian – Does not own stocks in TBDY

Valuation

Strong Revenue Growth but Inconclusive P/B Valuation All three companies have incurred losses in recent years, so Price/Book ratios have been calculated in favour of the commonly used Price/Earnings. Currently, there are few publicly listed peers of TrustBuddy. Both OnDeck and LendingClub are based in the United States, and have market capitalizations of 13.2bn and 80.6bn SEK, respec-tively. This is in comparison to TrustBuddy’s market cap of 215mm SEK. TrustBuddy’s P/B has trended downwards since 2011, with a current ratio of just 0.2. In 2012, a better calculation of TrustBuddy’s P/B is 1.24 by eliminating effects of uncommonly high intangible assets. We see this as a signal of uncertain growth ex-pectations due to recent acquisitions, changes to reporting methods, and the merging of parent and group companies. All three companies have shown +100% revenue growth in recent years, yet still report low or negative margins. So, while TrustBuddy could be seen as an undervalued company based on P/B, all 3 firms are too new and speculative to make any deterministic conclusions.

2015-04-09

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Bull or Bear

Value Drivers

Enterprise value is expected to decrease in the short- to medium-term as the temporary positive effects of two acquisitions stabilizes. Earnings

have been volatile over the past three years, however this is expected to decrease with greater maturity.

Quality of Earnings

TrustBuddy has had consistently negative earnings since 2011. The indus-try is expected to benefit from macro trends in low deposit returns and

stricter lending standards at conventional FIs, as well as diversified offer-ings through acquisition.

Risk Profile 250 thousand loans were issued in 2014, signifying a diversification

across end users. Industry risk is increased due to low barriers to entry from competitors globally.

Quality of Management & Ownership

Although still a new company, management changes have been the norm over the past 4 years, including a complete overhaul of the Board of Direc-tors in 2014. The role of interim CEO is held by the existing CFO, with no

understanding for the situation of the CEO’s leave from TrustBuddy.

Overall View

Excessive volatility and uncertainty is expected for TrustBuddy in the short term, due to management changes and changing impact of recent

acquisitions. Recommendation is to reduce exposure to TrustBuddy in the short term, until more stability takes effect.

Industry Assessment

Industry Assessment Porter’s 5 Forces depicts TrustBuddy as an important player in an industry with high growth potential, as demonstrated by +100% annual growth since 2011. Other alternatives exist to TrustBuddy’s P2P lending service, however the current climate of interest rates favours this model. It is important that TrustBuddy capture these benefits and become profitable in the medium term.

2015-04-09

Please refer to important disclosures at the end of this document

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