PHA insists fintech price is cheap: RG Manabat/KPMG values Squidpay at P3B or 1,000 times its 2020 income
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PHA insists fintech price is cheap: RG Manabat/KPMG values Squidpay at P3B or 1,000 times its 2020 income

Premiere Horizon Alliance (PHA) is claiming that it is buying a minority stake in Squidpay Technology at a bargain price based on the valuation of the fledgling fintech startup.

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PHA said accounting firm R.G. Manabat & Co., the Philippine partner of KPMG, pegged the value of Squidpay at a maximum of P3 billion.

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“After discussions and negotiations between PHA and Mr. (Marvin) Dela Cruz, the parties agreed to a P1.7 billion valuation for Squidpay, representing a discount of over 40 percent of the top-end of KPMG’s valuation range,” said PHA..

READ: PHA chips in P600M to Squidpay’s digital bank venture with Regina Reyes’s AbaCore

PHA issued the statement to justify its purchase of 33 percent of Squidpay for P561 million. But it did not give any details on how RG Manabat/KPMG arrived at its valuation.

READ: Marvin Dela Cruz flexes on Twitter: Squidpay now part of BSP’s e-payment clearing system

Both companies are controlled by self-styled “visionary, inventor” Marvin dela Cruz – 55 percent of PHA and 62.5 percent in Squidpay. PHA chairman Augusto Cosio and chief financial officer and director Roberto Ortiz are also members of Squidpay’s board of advisors.

Based on documents submitted by PHA to the Philippine Stock Exchange, Squidpay earned a measly P2.958 million profit on P69 million revenues in 2020.

Squidpay started operations only in August 2020, the same month it obtained a license from the Bangko Sentral ng Pilipinas to operate an electronic payment system. Squidpay became an e-wallet issuer in January 2021.

Dela Cruz registered Squidpay with the Securities and Exchange Commission only in May 2020.

Five months later, Dela Cruz signed a deal to buy 55 percent of PHA for P925 million (33 centavos per share) – P300 in cash and the P625 million balance to be paid in cash or Squidpay stocks until 2022 “with the intent of making Squidpay a subsidiary of PHA.”

Part of Dela Cruz’s unpaid P625 million will be offset by PHA to acquire a minority stock in Squidpay which would make the fintech an affiliate and not a subsidiary as PHA had announced. “There are no immediate plans for an additional transaction or acquisition of Squidpay shares,” said PHA.

Despite the fintech’s meager income in 2020, PHA was firm in defending its decision to buy Squidpay: “Although the fintech industry is highly competitive and requires continuing source of financial resources, large network of customers and merchants and economies of scale to succeed, Squidpay has the system and licenses required to extend its market reach and achieve scale for sustainable profitability.”

“There are many identified attractive and high value opportunities that are yet to be captured by the current major industry players which Squidpay can take advantage of. PHA’s investment in Squidpay is in line with the focus of PHA in countryside development and financial inclusion especially for the unbanked,” it added.

PHA also revealed Squipday’s involvement in government projects:

* Rice Farmers Financial Assistance (RCEF-RFFA) Program where Squidpay was hired by the Development Bank of the Philippines (DBP) as its fintech partner for the disbursement of cash grants.

* Smart City Initiative projects with local governments, such as Baguio and Imus, to modernize payment systems and processes.

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