Российская академия народного хозяйства и государственной службы при Президенте Российской Федерации (Институт бизнеса и делового администрирования, Ведущий научный сотрудник)
Москва, г. Москва и Московская область, Россия
ГРНТИ 06.81 Экономика и организация предприятия. Управление предприятием
ББК 65 Экономика. Экономические науки
ТБК 7834 Финансовый менеджмент
Финтех фирмы испытали феноменальный рост стоимости в течение последних нескольких лет. Многие специалисты хотели бы знать причины такого успеха. В данной статье на основе методологии VBM мы попытаемся проанализировать четыре кейса успешных инвестиционных проектов из лучших практик создания стоимости российских финтехов из разных кластеров рынка (платежные услуги, онлайн-сервисы, ИТ-аутсорсинг, банковское дело).Наконец, есть заключительный раздел о наиболее важных факторах стоимости финтех-фирм.
инвестиционный проект, оценка, стоимость, финансовые технологии, метод DCF, метод реальных опционов
Introduction
Investing in Fintech and subsequent increase in corporate value that DCF/FCFF model shows is possible due to impact on one of the four elements cardinal change of this model: increasing cash flows from companies’ assets, increasing rate of growth, period of vigorous growth and decreasing discount rate. Initiatives to influence the elements of the model may immediately lead to creation of additional value, or at the same time, they may lead to both positive and negative results. In such case, the net effect of the initiative should be valued. There are neutral actions in relation to the creation of value, which do not affect the value and do not deserve attention.
Methodology
In addition to understanding the factors of value creation in the DCF / FCFF model, a company can develop through investment projects a value tree where factors specific for the industry and a specific business will be identified and detalization of value factors will be made.
An important part of management based on VBM in fintech companies is understanding the variables which create value – key factors of value. This understanding is very critical, because a company can not directly affects its value, it works with what it can affect - customer satisfaction, costs, capital costs etc. Thus, value management occurs indirectly, through cost factors. However, to work effectively, value factors must be structured so that management understands what factors have the greatest impact on the company's value.
Fintech industry is new not only for Russia, it can start the cardinal structural changes in the economies of many countries. At the same time, there are very few serious academic studies of financial activities of the fintech companies. In general, there is a trend in the world in recent years: the practice "goes" ahead of the theory, which is manifested, in particular, in the absence of models for estimating the value of fintech companies, developed and accepted by all market participants. Therefore, before constructing the methodological foundations and developing a mathematical apparatus, it is necessary to understand the specifics of creating the value of fintech companies in practice, especially since there are many successful examples in Russia. In this article we will examine 4 successful cases.
Table 1 – QIWI and Yandex.Money financial performance
|
Financial performance for 2016 |
||
|
QIWI |
Yandex.Money |
|
|
ROE |
88.35% |
93.26% |
|
ROA |
22.00% |
28.86% |
|
Profit Margin |
13.92% |
9.60% |
|
Operating Margin |
23.08% |
25.60% |
|
Current ratio |
1.44 |
1.96 |
QIWI plc is an international payment service provider created in Russia in 2007. It is a public company which is listed on the MOEX and NASDAQ stock exchange. The company is/represents an electronic payment system that allows making payments by stationary or mobile devices and communication channels. QIWI allows clients to use cash, prepaid cards and other means of cashless payments for ordering and paying for goods and services both in stores and online. Cash and electronic payments are integrated into a single system. This system allows paying for various services and purchasing air and railway tickets. A multi-platform service of QIWI gives the opportunity to make payments through QIWI Terminals, via the Internet, and using mobile applications. Visa QIWI Wallet permits the client to put a time limit on deferred payments, to receive notifications of upcoming payments and details of the made ones, and to keep all the necessary requisites in the payment system.
Key highlights:
– Year 2012. Visa and QIWI signed an agreement on global partnership, as a result of which QIWI Wallet was transformed into Visa QIWI Wallet;
– Year 2013. IPO on the MOEX (valued as $500 million) in February. In April it was listed on NASDAQ, where the company's price rose to $884 million;
– Year 2016. In payment processing of Qiwi was introduced blockchain technology.
Yandex.Money is an electronic payment service that allows you to accept payment by electronic money and cash, as well as payment from bank cards using mobile applications for Android, iOS, Windows Phone. Owners of electronic wallets have the opportunity to issue a bank card. The service also offers a choice of tools for accepting payments via the Internet - for crowdfunding and charity, as well as a universal payment solution for business - Yandex.Kassa.
These companies are the major players in the market of electronic payments in Russia. QIWI Bank company is an independent public organization, unlike Yandex.Money company, which is part of the Yandex group of companies.
Considering the key financial indicators of the companies studied, it may be concluded that both companies are comparable not only in their activity area, but also in multiples (Table 1).
Table 1 – QIWI and Yandex.Money financial performance
|
Financial performance for 2016 |
||
|
QIWI |
Yandex.Money |
|
|
ROE |
88.35% |
93.26% |
|
ROA |
22.00% |
28.86% |
|
Profit Margin |
13.92% |
9.60% |
|
Operating Margin |
23.08% |
25.60% |
|
Current ratio |
1.44 |
1.96 |
QIWI came out on the NASDAQ IPO with an estimate of $884 million (or 27,404,000,000 rubles) in 2013; as of April 1, 2017, market capitalization is 60,098,382,414.70 rubles.
Yandex.Money company sold 75% of its shares in 2013, the sum of the deal was $60 million (1,860,000,000 rubles). In early 2017, Yandex.Money bought the entire block of shares, and currently owns 100% of the shares. The amount of the transaction was not disclosed.
It is known that during the public offering of QIWI on NASDAQ the P/E ratio was 32,7 and the EV/EBITDA multiple was 27,6. Let’s calculate the current multiple for QIWI (Table 2).
Table 2 – The calculation for QIWI multiples
|
Financial results for 2016, millions of rubles |
||
|
QIWI |
Yandex.Money |
|
|
Total revenue & gains |
17,880.00 |
3,261.37 |
|
Expenses & losses |
13,026.00 |
2,522.87 |
|
Amortization & Depreciation |
796.00 |
35.76 |
|
Interest expense |
951.00 |
117.68 |
|
EBITDA |
4,854.00 |
738.51 |
|
EBT |
3,107.00 |
585.07 |
|
Net Income |
2,485.60 |
468.06 |
|
EV |
60,102.30 |
|
|
Multiples |
||
|
EV/Sales |
3.36 |
10,962.87 |
|
EV/EBITDA |
12.38 |
9,144.19 |
|
EV/Profit |
24.18 |
11,317.69 |
It is necessary to point out that QIWI multiples lowered their indicators in a predictable way. Using the market approach let’s calculate the Yandex.Money company’s value and the estimated transaction value. As a result we obtain a range from 9,144,190 to 11,317,690 million rubles. 75% of shares could be valued in the range from 6,400,933 to 8,488,268 million rubles.
2. Venture capital investing in the “Nalogia” fintech company.
“Nalogia” is a modern web-service for online preparation and submission of tax documents and declarations for individual tax refund. The web-application of the company helps in online submission of individual tax declarations and accompanied documentation, which includes documents for tax refund, to any tax office of Russia, without leaving your house or office. “Nalogia” also offers and instant tax refund – short term loan to private individual, cover of which is the documented right to return private individual’s income tax.
Key highlights:
- Year 2016. An instant tax refund was made. “Nalogia” became the first company to provide the new service for Russian market – personal loan, cover of which was the tax refund request.
- Year 2016. The FinSightVentures fund becomes an equity investor for “Nalogia”. FinSightVentures is an international investment fund, specializing in investing in emerging companies of finance industry. It was the first investment round for “Nalogia”, FinSight purchased about 26% of the company`s shares.
LLC company “Nalogia” is a small represenative of the FINTECH-industry.
Total assets of the company (incuding non-material assets) equals 199 000 rubles. The market, occupied by the company, is limited due to its specificity. The company is in the growth phase, it generates profit.
Using the combined valuation method, including DCF model and using market multiple, we calculate the company value and possible amount of investments, received by this FINTECH-project. The discount rate is high because of the specificity of the project, novelty of the market and vagueness of growth dynamics of the demands for the service of the company.
Table3 – “Nalogia” company value calculation
|
Financial results, thousands of rubles |
||
|
Year |
2016 |
2017 |
|
Period |
1 |
2 |
|
Number of days |
365 |
365 |
|
Income |
3,862 |
5,793 |
|
Service expenses |
2,524 |
5,364 |
|
Other expenses |
152 |
205 |
|
EBIT |
1,186 |
224 |
|
Tax rate |
0 |
0 |
|
Income tax |
-178 |
-34 |
|
Net income |
1,008 |
190 |
|
FCFF |
1,008 |
190 |
|
Discount rate |
50% |
50% |
|
Discounting factor |
0.67 |
0.44 |
|
Discounted cash flow |
672 |
85 |
|
Company valuation (NPV) |
757 |
|
|
Multiple |
3 |
|
|
TV |
17,379 |
|
|
PVTV |
7,724 |
|
|
Total company value |
8,481 |
|
Based on the valuation, it can be assumed that in 2016 the FinSightVentures company purchased the 26% of the “Nalogia” stock at the cost of 2,205,000 rubles.
- Value creation through investment project of the Finguru company (valuation using the real options method)
Finguru (LLC “Business service center”) – accounting company, that is providing its services since 2012 remotely for organizations across the country with using modern technologies for business service: electronic document exchange, mobile application, accounting service and online report deliveries, support using messaging applications. Clients pay only for accounting outsourcing, the price of which doesn’t include hidden commission fee and additional services. The Finguru team consists of accountants with average length of employment of 11 years. All specialists are interchangeable, actions of every employee administered and come from the functional business-model of accounting outsourcing service. Outsourcing accountants also do consulting: such as answering questions from clients through free customer service and also paid extended customer consulting.
The company is in its developmental stage and now, based on the accessible accounting reports, doesn’t generate income.
To determine the project value of this company the following events were chosen:
- the company is planning to launch a project, which requires a development of new software. Development is planned to be carried on in 2 stages, with intervals for researching the demands for new services;
- The investment size for these stages equals: stage 1 – 2 million rubles, stage 2 – 1 million;
- Investment company tries to determine investment efficiency. 2 possible scenarios are developed. The real options method is used to determine investment efficiency for each stage.
Cash flows are expected to come in the second year of the project, after the first stage. But right now, there is no clarity in how popular the new product will be in the future. The optimistic outcome has a 70% possibility of happening, while for pessimistic one there is a 30% possibility.
We commence the valuation with regard to investments using a standard scenario approach.
Table 4 – Calculation of Finguru company value using a scenario approach
|
Investments without options |
|||||
|
Financial results, thousands of rubles |
|||||
|
70% |
30% |
||||
|
Optimistic |
Pessimistic |
||||
|
Year |
2017 |
2018 |
2019 |
2018 |
2019 |
|
Period |
1 |
2 |
3 |
2 |
3 |
|
Number of days |
365 |
365 |
365 |
365 |
365 |
|
|
|
|
|
|
|
|
Income |
14,011 |
21,017 |
33,626 |
21,017 |
31,525 |
|
Variable expenses |
12,764 |
13,559 |
21,694 |
21,229 |
35,028 |
|
Fixed expenses |
3,720 |
4,464 |
5,357 |
4,464 |
5,357 |
|
EBIT |
-2,473 |
2,993 |
6,575 |
-4,676 |
-8,860 |
|
Tax rate |
20% |
20% |
20% |
20% |
20% |
|
Income tax |
0 |
-599 |
-1,315 |
0 |
0 |
|
Net income |
-2,473 |
2,395 |
5,260 |
-4,676 |
-8,860 |
|
Investments |
2,000 |
0 |
1,000 |
0 |
1,000 |
|
|
|
|
|
|
|
|
WACC |
21% |
21% |
21% |
21% |
21% |
|
|
|
|
|
|
|
|
FCFF |
-4,473 |
2,395 |
4,260 |
-4,676 |
-9,860 |
|
DFCF |
-4,473 |
1,979 |
2,910 |
-3,865 |
-6,734 |
|
AFCF |
-4,473 |
-2,494 |
416 |
-8,338 |
-15,072 |
|
NPV |
-4,230 |
||||
As it can be seen from the data, net company value with regards to investments is less than zero. In this situation it makes sense to abandon the project and not make investments.
However, in a year after the first stage of the project it will be tested and by the end of this period the company and investors will be able to make conclusion on whether the introduction of the product was successful and decide if it is appropriate to continue developing the project and invest in it. If its introduction has a negative effect on the economic figures of the company, it will be more beneficial to abandon further development in this field.
Such a possibility to choose will be a real exit option. Valuation of the company considering this option is given in Table 5.
Table 5 – Finguru company valuation using the real options method
|
Investments with exit options |
|||||
|
Financial results, thousands of rubles |
|||||
|
70% |
30% |
||||
|
Optimistic |
Pessimistic |
||||
|
Year |
2017 |
2018 |
2019 |
2018 |
2019 |
|
Period |
1 |
2 |
3 |
2 |
3 |
|
Number of days |
365 |
365 |
365 |
365 |
365 |
|
|
|
|
|
|
|
|
Income |
14,011 |
21,017 |
33,626 |
21,017 |
33,626 |
|
Variable expenses |
12,764 |
13,559 |
21,694 |
21,229 |
37,363 |
|
Fixed expenses |
3,720 |
4,464 |
5,357 |
4,464 |
5,357 |
|
EBIT |
-2,473 |
2,993 |
6,575 |
-4,676 |
-9,093 |
|
Tax rate |
20% |
20% |
20% |
20% |
20% |
|
Income tax |
0 |
-599 |
-1,315 |
0 |
0 |
|
Net income |
-2,473 |
2,395 |
5,260 |
-4,676 |
-9,093 |
|
Investments |
2,000 |
0 |
1,000 |
0 |
1,000 |
|
|
|
|
|
|
|
|
WACC |
21% |
21% |
21% |
21% |
21% |
|
|
|
|
|
|
|
|
FCFF |
-4,473 |
2,395 |
4,560 |
-4,676 |
-10,093 |
|
DFCF |
-4,473 |
1,979 |
3,115 |
-3,865 |
-6,894 |
|
AFCF |
-4,473 |
-2,494 |
621 |
-8,338 |
-15,231 |
|
NPV |
435 |
||||
Overall, net value considering the real option is positive. So, the project may be recommended for examination for investing.
4. Tinkoff’s investment projects: specific aspects of value added creation.
In the modern conception Tinkoff bank is considered to be a neobank. It means that it provides digital services, without retail bank outlets and its own ATM machines.
Key highlights:
– Year 2015. Start of mortgage business with partner banks;
– Year 2016. Buy-out of 4% stock exchange shares and their assignment among corporate employees. Cooperation with Google allowed to release a new payment card with the function of accruing special bonus points for Google play. Start of “Tinkoff investment” service.
Now let’s compare financial measures of Tinkoff bank with the alternative bank, that has the same amount of assets, but which operates in the traditional bank system. (table 6, table 7).
Table 6 – Financial indicators, April of 2017, thousands of rubles
|
|
Tinkoff bank |
Vozrozhdenie |
||
|
Market capitalization |
131 660 000 |
17 620 000 |
||
|
Valuation of 100% of shares |
438 480 000 |
37 490 000 |
||
|
Equity capital |
31 790 000 |
30 326 087 |
||
|
Assets, April of 2017 Profitable Assets |
192 349 278 87.95% |
252 382 007 87.24% |
||
|
Assets, March of 2017 |
187 999 180 |
|
||
|
Assets, April of 2016 |
165 640 905 |
234 406 681 |
||
|
Change in Assets for the last month |
+4 350 098 or +2.31% |
|
||
|
Change in Assets for the last year |
+26 708 373 or +16.12% |
|
Table 7 – Financial multiples, April of 2017
|
ROE |
78.64% |
19.89% |
|
ROI |
12.06% |
2.29% |
|
Net interest margin |
21.05% |
4.80% |
|
Quick ratio |
2.07 |
0.29 |
|
Current ratio |
0.84 |
0.08 |
|
Net income |
4 697 404 thousand rubles |
1 429 727 thousand rubles |
The comparative analysis shows that each bank has the commeasurable extent of assets including the part of earning assets. Meanwhile the time period of assets increment differs twice, that points on the more prosperous growth of Tinkoff bank. Financial ratio shows the much more contrast scene. The net profit ratio of Tinkoff bank assets is 4 times higher, that means that the company’s shares are highly valuated. This depends on high expectations of this fintech market. The return of investment multiple is 6 times higher than bank “Vozrozhdenie” has. That means that Tinkoff bank is able to generate added value much more effectively. Tinkoff bank also shows higher ability to meet payments because of higher liquidity ratios.
Usually banks are valued a bit higher than their capital stock (e.g. – Bank “Vozrozhdenie”). The high market value of Tinkoff bank is the result of high market expectations of fintech branch, of the capacity of the neobank to reduce operational costs, high profit generation, effective investment of financial resources and the ability to offer innovative “convenient” products.
Results
According to the analysis we can come to the conclusion, that nowadays all fintech companies and projects show their best in the existing valuation methods. That’s why in future we can expect the further adaption of the discounted cash flow method and the real option method to be included in the fintech component, as the value driver, that affects the increase of income, the reduction in expenditure, the reduction of risks and in accordance the reduction of discount rates, and the most important feature, that states that market analysts are to expect stable and intense increase from fintech companies. That is the main reason, why at comparable scales fintech companies are valued much higher than their “usual” opponents.
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