Mitsubishi Corporation’s acquisition of an indirect 6.8 percent stake in Globe Fintech Innovations, Inc. (Mynt) is seen to boost investor interest in the planned initial public offering of the GCash owner and its shareholders.
Stock analysts said strategic investment by Mitsubishi will also open the doors for the expansion of Mynt’s services that will benefit consumers and Mynt’s earnings given the expertise and resources of the Mitsubishi group.
READ: Mitsubishi buying 6.5% of Mynt for P18.4 billion
Mitsubishi has just invested P18.4 billion to buy half of Ayala Corporation’s AC Ventures Holding Corporation (ACV) which owns about 13 percent of Mynt. Mynt has two fintech companies: G-Xchange Inc., the mobile wallet operator of GCash, and Fuse Lending, a tech-based micro-lender.
“Ayala's deal with Mitsubishi is poised to significantly benefit everyone involved. Consumers can look forward to improved services and easier access to GCash, while the industry will likely see heightened competition and innovation,” said Regina Capital Development Corporation Managing Director Luis Limlingan.
He added that, “For shareholders, the increased valuation of GCash boosts confidence in Ayala's stake and presents new growth opportunities from this strategic alliance.”
“GCASH can leverage Mitsubishi's its extensive expertise in retail and consumer finance. The company’s established presence in the retail sector can facilitate new merchant partnerships, expanding GCash's reach within the market.
“The financial knowledge and resources Mitsubishi brings could also pave the way for innovative products and services within GCash, such as credit offerings or loyalty programs, ultimately enriching the platform's value proposition,” Limlingan said.
Abacus Securities Corporation noted that Mitsubishi is not just buying into GCash “since ACV is saddled with a number of underperforming investments including GogoroPH (21 percent-owned), ZaloraPH (45 percent-owned), and others.”
“It appears Ayala wanted a partner not just for Mynt but also for its other businesses under AC Ventures,” said Chinabank Capital Corporation Managing Director Juan Paolo Colet.
He added that, “The biggest potential of this partnership is the expansion of AC Ventures’ investment universe in that Mitsubishi can open doors and introduce opportunities for growth outside the Philippines.
“Mitsubishi can also contribute expertise and resources to enhancing the value of those businesses that are already part of the AC Ventures platform.”
However, COL Financial Chief Equity Strategist April Lynn Tan said the entry of the Mitsubishi group my lessen the urgency for an initial public offering "because the original funders that needed liquidity were able to exit."
Meanwhile, Limlingan said “the recent deal is likely to have a positive influence on investor sentiment and overall valuation (for Mynt’s planned initial public offering).
“With GCash’s valuation rising due to Mitsubishi’s investment, potential investors may view the IPO more favorably, encouraged by the added credibility that comes from partnering with a reputable multinational corporation.
“Furthermore, any operational synergies resulting from the partnership may be attractive to investors during the IPO process.”
Colet said “The deal reinforces the value of Mynt for its future IPO. With key investors coming in at a valuation of around $5 billion, Mynt is poised for an IPO at a much higher valuation.”
Abacus said the Mitsubishi deal will be significantly positive for Ayala since it will reduce the conglomerate's exposure to the underperforming investments (GogoroPH, ZaloraPH). The cash will also be used by ACV to pay down debt incurred when it bought an additional 8 percent stake in Mynt.
Meanwhile, the increased valuation and profitability of Mynt is beneficial to Globe and it has led COL Financial to upgrade its fair value estimate for Globe after revising its forecast for Mynt following its strong performance and the recent entry of Mitsubishi UFJ Financial Group (MUFG) last August.
MUFG and Ayala had each acquired an 8 percent stake in Mynt for $393 million apiece.
“We are increasing our valuation assumption for Mynt from P196 billion to P304 billion given the more favorable earnings outlook.
“We believe that this is justified given its robust growth and leading market share in the fintech industry. In addition, the recent acquisition of MUFG and AC of a combined 16 percent stake in Mynt at a valuation of $5 billion or P293 billion also reaffirms our upgraded estimate. Globe’s 34.8 percent stake in Mynt (down slightly from 36 percent pre MUFG and Ayala acquisition), translates to a valuation of P105.8 billion,” COL Research Analyst Paolo Manansala said.
Globe’s second quarter 2024 core net income grew 23.0 percent year-on-year to P5.9 billion to bringfirst half profits to P11.7 billion, higher by 17.1 percent and ahead of both COL (54.5 percent) and consensus (56 percent) forecasts.
“The impressive growth in profits was mainly driven by the higher contribution of Mynt and lower costs, lifting the otherwise flattish growth in revenues from its core business,” Manansala said.
In particular, Globe’s share in Mynt earnings for the first half of 2024 amounted to P2.1 billion (up 120 percent yoy), ahead of COL’s full year estimates (62.2 percent).
However, revenues from Globe’s core businesses increased by only 2.3 percent to P82.2 billion in the first half of 2024, in line with estimates.