STRICTLY PRIVATE AND CONFIDENTIAL

VALUATION OF SAMPLECO LTD

TABLE OF CONTENTS
DISCLAIMER 3
EXECUTIVE SUMMARY 4
VALUATION PROCESS 5
FINANCIAL INFORMATION 6
VALUATION METHODOLOGY 8
VALUATION SUMMARY 10
ANNEXURE 1 - ILLUSTRATIVE EXAMPLES 12
ANNEXURE 2 - DETAILED VALUATION ASSUMPTIONS 18
ANNEXURE 3 - INDUSTRY BENCHMARKING 28
ANNEXURE 4 - GLOSSARY 32

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DISCLAIMER

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The valuations and estimations presented on the Website and in any Report are an automated estimation of the fair value of the business only and are not nal and are
provided as general estimates only. Valuation methods from the income and market approach have been utilised to determine the valuation results for the business. Reports
should be considered as a frame of reference and not an o cial appraisal of the business to which it relates. Reports are not certi ed business valuations and should be
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EXECUTIVE SUMMARY
COMPANY NAME CURRENCY - ALL AMOUNTS IN THIS PRESENTATION ARE STATED IN
SampleCo Ltd USD - US Dollar
INDUSTRY ( THOMPSON REUTERS BUSINESS CLASSIFICATION) LAST FINANCIAL YEAR-END
Household Products (NEC) 28 February 2019
COUNTRY WHERE MAJORITY OF OPERATIONS TAKE PLACE YEAR OF COMMENCING BUSINESS OPERATIONS
United States 2017
NUMBER OF EMPLOYEES VALUATION REPORT DATE
65 30 November 2019
IN CO M E S TATEM EN T A CTU A L Ba la n ce S h eet
US D 2 8 Febr u a ry 1 9 US D 2 8 Febru a ry 1 9
TO TA L A S S ETS EQ U ITY A N D LIA BILITIES
Revenue 47 046 000 Current Assets 15 991 550 Current Liabilities 1 630 289
Cost of Goods Sold 4 259 303 Accounts Receivable 10 893 856 Accounts Payable 1 459 918
Gross Profit 42 786 697 Inventory 1 567 987 Other current liabilities 45 371
Operating expenses (excluding depreciation & amortisation) 36 166 865 Other current assets 180 367 Short-term debt 125 000
Earnings before interest, tax, depreciation, amortisation ("EBITDA") 6 619 832 Cash and cash equivalents 3 349 340 Long-term debt 850 000
Depreciation and amortisation expense 676 333 Intangible Assets 141 244 Other long-term liabilities 13 000 000
Earnings before interest and tax ("EBIT") 5 943 499 Fixed Assets 1 186 298 Shareholder loans 159 555
Interest expense 70 000 Total Liabilities 15 639 844
Earnings before tax 5 873 499
Total Assets 17 319 092 Shareholders' equity 1 679 248

Income statement analysis Analysis of working capital and leverage

Revenue growth rate 36.3% Accounts Receivable Days (ave) 66
Gross profit margin 90.9% Inventory Days (ave) 129
EBITDA margin 14.1% Accounts Payable Days (ave) 116
Current ratio 9.8x
TotalDebt/EBITDA 0.1x

VALUATION: EQUITY VALUE (100% SHAREHOLDING IN COMPANY) = USD 65 320 589

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VALUATION PROCESS
Overview

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FINANCIAL INFORMATION
INCOME STATEMENT
INCOME STATEMENT ACTUAL ACTUAL BUDGET FORECAST FORECAST
USD - US Dollar February 2018 February 2019 February 2020 February 2021 February 2022
Revenue 34 518 067 47 046 000 52 691 520 59 541 418 66 984 095
Cost of Goods Sold 2 847 943 4 259 303 27 399 590 29 770 709 33 492 047
Gross profit 31 670 124 42 786 697 25 291 930 29 770 709 33 492 047
Operating expenses (excluding depreciation & amortization) 28 907 135 36 166 865 19 495 862 22 030 325 24 114 274
Earnings before interest, tax, depreciation, amortisation ("EBITDA") 2 762 989 6 619 832 5 796 067 7 740 384 9 377 773
Depreciation and amortisation expense 550 700 676 333 948 447 893 121 803 809
Earnings before interest and tax ("EBIT") 2 212 289 5 943 499 4 847 620 6 847 263 8 573 964
Interest expense 50 000 70 000 70 000 70 000 70 000
Earnings before tax 2 162 289 5 873 499 4 777 620 6 777 263 8 503 964

Income statement analysis

Revenue growth rate 36.3% 12.0% 13.0% 12.5%
Gross profit margin 91.7% 90.9% 48.0% 50.0% 50.0%
Operating expenses (excluding depreciation & amortisation) as % of Revenue 83.7% 76.9% 37.0% 37.0% 36.0%
EBITDA margin 8.0% 14.1% 11.0% 13.0% 14.0%
Depreciation and amortisation as % of Revenue 1.6% 1.4% 1.8% 1.5% 1.2%
EBIT margin 6.4% 12.6% 9.2% 11.5% 12.8%
Interest cover 44.2x 84.9x

Note: Interest expense is assumed to be equal to budget for the forecast years. This is for illustrative purposes only and has no impact on the valuation.

Note: the income statement assumptions for the last forecast year above, as well as the working capital and capital expenditure assumptions for the last forecast year on the following
page, are assumed to continue for a further 7 years before the Terminal Value is calculated. It is therefore important that these assumptions are sustainable for the business.

THE REASONABILITY AND ACCURACY OF THE FINANCIAL FORECASTS PROVIDED TO EQUITYMAVEN IS THE MOST CRITICAL COMPONENT IN
DETERMINING THE VALUATION. THE VALUATION IS DEPENDENT ON THESE FORECASTS BEING MET.
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FINANCIAL INFORMATION
WORKING CAPITAL, LEVERAGE AND CAPITAL EXPENDITURE
WORKING CAPITAL AND LEVERAGE ACTUAL ACTUAL BUDGET FORECAST FORECAST
USD - US Dollar February 2018 February 2019 February 2020 February 2021 February 2022
Accounts Receivable 6 073 731 10 893 856 12 224 433 13 813 609 15 540 310
Inventory 1 450 600 1 567 987 9 589 857 8 931 213 10 717 455
Other current assets 462 102 180 367 1 150 783 1 488 535 1 339 682
Accounts Payable 1 241 237 1 459 918 9 589 857 8 931 213 12 726 978
Other current liabilities 101 202 45 371 273 996 595 414 1 004 761

Analysis of working capital and leverage

Accounts Receivable (as % Revenue) 17.6% 23.2% 23.2% 23.2% 23.2%
Inventory (as % Cost of Goods Sold) 50.9% 36.8% 35.0% 30.0% 32.0%
Other current assets (as % Cost of Goods Sold) 16.2% 4.2% 4.2% 5.0% 4.0%
Accounts Payable (as % Cost of Goods Sold) 43.6% 34.3% 35.0% 30.0% 38.0%
Other current liabilities (as % Cost of Goods Sold) 3.6% 1.1% 1.0% 2.0% 3.0%

Accounts Receiveable Days (average) 66 80 80 80

Inventory Days (average) 129 74 114 107
Accounts Payable Days (average) 116 74 114 118

Current ratio 6.3 9.8

Total Debt / EBITDA 0.3x 0.1x

CAPITAL EXPENDITURE February 2018 February 2019 February 2020 February 2021 February 2022
Capital expenditure - 550 000 526 915 893 121 1 004 761
Capital expenditure (as % Revenue) - 1.2% 1.0% 1.5% 1.5%

THE REASONABILITY AND ACCURACY OF THE FINANCIAL FORECASTS PROVIDED TO EQUITYMAVEN IS THE MOST CRITICAL COMPONENT IN
DETERMINING THE VALUATION. THE VALUATION IS DEPENDANT ON THESE FORECASTS BEING MET.
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PRIMARY APPROACH SECONDARY APPROACHES
DISCOUNTED CASH FLOW MULTIPLES VENTURE CAPITAL METHOD
The premise of the income approach to The most common market approach This method is mostly used as a quick,
valuation is that the value of a company is makes use of the prices at which indicative valuation only. It is most often
derived from the future cash flows comparable public companies are trading used to calculate the “post-money”
expected to be produced by that relative to their earnings to imply valuation of seed/start-up companies
company. comparable valuation multiples. which are often pre-revenue and where it
This is considered the most theoretically EquityMaven uses Enterprise Value is easier to estimate a potential exit value
robust method and most often takes the relative to EBITDA ("EV/EBITDA") for at a future point in time rather than
form of a discounted cash flow ("DCF") comparable companies. These valuation estimating the cash flows prior to that
valuation. multiples are then applied to the point.
Forecast cash flows are discounted to Sustainable EBITDA of company being A Terminal Value is calculated at the
present value using a discount rate which valued to derive a valuation. future date when a venture capital
takes into account the riskiness of a This valuation methodology is well investor assumes it will be able to exit the
company’s estimated cash flows. understood by the public and relies on investment.
The Terminal Value is then calculated the market ratings of comparable The Terminal Value is then discounted by
which is the estimated present value of all companies which have similar business the rate of return (over the period to exit)
of the cash flows (in perpetuity) beyond activities and risks. required by a potential venture capital
the forecasts provided by the user. EquityMaven uses the market approach investor. The rates of return typically
Free cash flows are calculated after as the secondary methodology to required by venture capital investors vary
deducting cash required for working corroborate the findings of the primary with the stage of development of the
capital and capital expenditure from income approach. company being valued.
operational cash flow. Differences in valuation between the DCF The discount rate (rate of return required)
EquityMaven uses a discounted cash flow and EV/EBITDA valuations will be used in the Venture Capital Method
as the primary valuation methodology. attributable to difficulty in finding already incorporates the fact that the
comparable companies with identical company being valued is illiquid and has a
business drivers, growth prospects and risk relatively high risk of failure (non-survival).
factors to the Company being valued. The Further illiquidity discounts and survival
multiples approach also captures current probability weightings are therefore not
market sentiment which may not reflect true required.
intrinsic value (like the DCF does).

EQUITYMAVEN USES THE DCF AS ITS PRIMARY METHODOLOGY

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LIQUIDATION VALUE SURVIVAL APPROACH
LIQUIDATION VALUE PROBABILITY OF SURVIVAL
Liquidation Value assumes that the value The DCF and Multiples valuation approaches by themselves assume that the company
of a company is equal to the price that being valued will survive and operate in perpetuity. This assumption is not always correct,
would be received if a company’s assets particularly for young and start-up companies.
were to be sold on auction, less the 3rd- EquityMaven therefore performs a weighted average valuation between each of the DCF
party liabilities of the company. and Multiples valuation methods and the Liquidation Value.
For this estimate, EquityMaven assumes A company’s probability of survival, based on how many years a company has already
that: been operating, is used to calculate the weighted average valuation.
Accounts Receivable and Inventory Probabilities of survival and failure are drawn from academic studies.
could be sold for 80% of the For example:
respective book values;
Cash is assumed to be sold at 100% Valuation = (DCF Equity Value * Probability of Survival) + (Liquidation Value * Probability of
of book value; Failure)
Fixed Assets are assumed to be sold or
at 50% of book value; Valuation = (Multiples Equity Value * Probability of Survival) + (Liquidation Value * Probability
Other Current Assets and Intangible of Failure)
Assets are assumed to have zero
value in an auction scenario; The VC Method already automatically takes survival probabilities into account through the
All 3rd-party debt and liabilities are discount rate used and does not need to be probability-weighted in the same way.
assumed at 100% the respective
book values.
This methodology is most appropriate
for liquidation scenarios.

EQUITYMAVEN WEIGHTS THE DCF AND MULTIPLES VALUATIONS BASED ON PROBABILITY OF SURVIVAL
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VALUATION SUMMARY
EQUITY VALUE - ADJUSTED FOR PROBABILITY OF SURVIVAL
The Equity Value is the Enterprise Value plus excess cash balances
minus interest-bearing debt, adjusted for an illiquidity discount. It is
DISCOUNTED CASH FLOW 65 320 589 the value of the Company if it were to be sold as is along with the cash
on balance sheet and with its interest-bearing debt obligations. This is
the value of 100% of the shareholding / equity of the Company.

THE DISCOUNTED CASH FLOW VALUATION (ADJUSTED FOR

MULTIPLES 42 927 462 PROBABILITY OF SURVIVAL) IS THE ESTIMATED VALUATION OF THE
COMPANY.

THE MULTIPLES VALUATION (ADJUSTED FOR PROBABILITY OF

VENTURE CAPITAL METHOD 75 090 649 SURVIVAL) IS USED ONLY TO CORROBORATE THE FINDINGS OF
THE DISCOUNTED CASH FLOW VALUATION.
THE VENTURE CAPITAL METHOD IS SHOWN FOR ILLUSTRATIVE
AND INDICATIVE PURPOSES ONLY

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Thank You

“However good our futures research may be, we shall never be able to escape from the ultimate dilemma that
all our knowledge is about the past, and all our decisions are about the future” - Ian Wilson, American scenario
planning expert and strategy consultant

You have been provided with an estimate of the fair value of the Company which will
assist you in making any decisions in this regard. It is, however, important to note that a
valuation is as at a particular point in time and will be subject to change as the
assumptions and forecasts for the Company evolve and are amended.

We wish you and your company all of the best and every success in the
future!

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 Illustrative examples

Annexure 1
This annexure provides illustrative examples of the financial theory which is used to derive the valuation. What follows are worked
theoretical examples in order to provide the user with a better understanding of the valuation mechanics.

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TIME VALUE OF MONEY AND DISCOUNTED CASH FLOW
TIME VALUE OF MONEY
The premise of Time Value of Money (”TVM”) is that a dollar today is worth more than a dollar at some time in the future.
This is because the dollar today has earning potential and could be invested to earn a return.
For example, if $1.00 was invested at 10% then one year from today it would be worth $1.10.
TVM is therefore based on the concept that money can be invested to earn a return at a rate which is called the ”Discount Rate”.
The Discount Rate is the rate of return that that you would expect to make on an investment, given how risky that particular investment is.
The value of an investment today would therefore be equal to the expected future value of that investment, discounted to the present
value using the Discount Rate. For example, if the expected value of the investment is $1.00 one year from now and the Discount Rate is
10%, then the present value of the investment would be $0.91.

DISCOUNTED CASH FLOW VALUATION

The premise of a discounted cash flow (” DCF”) valuation is that the value of a company is derived from the future cash flows expected to
be produced by that company. This is considered the most theoretically robust valuation method.
Forecast cash flows are discounted to present value using a Discount Rate which takes into account the riskiness of the Company’s
estimated cash flows.
The Terminal Value is then calculated which is the estimated present value of all of the cash flows beyond the forecasts provided by the
user (into perpetuity).
Free cash flows are calculated after deducting changes in working capital and capital expenditure from operational cash flow.
Estimating the free cash flow projections for the company is therefore the cornerstone of a DCF valuation.
Once the future projections are estimated with the most reasonable degree of accuracy possible, they can then be discounted to the
present value using a Discount Rate.
Estimating an appropriate Discount Rate is the next crucial step. A higher Discount Rate will be required for higher risk free cash flow
projections. The Discount Rate is the rate of return that that an investor would expect to make on an investment, given how risky that
particular investment is. This would equate to how much an investor could expect to earn by investing funds elsewhere in equally as risky
assets. The Discount Rate used when calculating the Enterprise Value (see definition) is the weighted average cost of capital (“WACC”).
A results of a DCF valuation will therefore be determined by the assumptions underlying the calculation of the projected free cash flow as
well as the Discount Rate. Changes in these assumptions can significantly alter the end result so due care must be made to ensure
accuracy.

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DISCOUNTED CASH FLOW EXAMPLE
SIMPLIFIED ILLUSTRATION
The illustrative example alongside shows a usual income statement forecast up to the EBIT line.
From EBIT, taxes (excluding taxes on net interest income/expense) are deducted to arrive at Net Operating Profit After Tax (“NOPLAT”).
NOPLAT plus depreciation, amortisation and any other non-cash expenses; less changes in working capital; less capital expenditure results in free cash flow.
The assumptions in this example are a WACC / Discount Rate of 10% and a Terminal Growth Rate of 3% (the rate at which it is assumed that free cash flows will
grow forever in the terminal year and beyond).
The Terminal Value is then calculated by dividing the free cash flow in the terminal year by WACC minus the Terminal Growth Rate (10% - 3%).
All of the free cash flows (including the Terminal Value) are then discounted to present value using the WACC / Discount Rate of 10%.
The aggregate of all of the discounted free cash flows is then equal to the “Enterprise Value”. This is how much the business in the example would be worth if it
had no excess cash or interest-bearing debt on balance sheet.
From the Enterprise Value, excess cash is then added and interest-bearing debt subtracted to arrive at the “Equity Value” which is the value of the company
including its excess cash and debt.
An illiquidity discount should then be applied to the Equity Value if the shares of the company are not listed on a stock exchange and freely tradeable.
The Equity Value after the illiquidity discount is applied is what 100% of the shareholding in the example company would be worth.

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MULTIPLES
EV/EBITDA MULTIPLE VALUATION
The first step is to calculate the sustainable EBITDA for the
trailing (last) twelve months for the company being valued.
Assume this is $20,000 as per the financial information in the
DCF example.
Sustainable EBITDA is the EBITDA after subtracting any
earnings and adding back any expenses that are once-off in
nature and are not expected to recur. This will give a more
normalised picture of what the company EBITDA is expected to
be going forward.
Next, an appropriate valuation multiple must then be applied
to the Sustainable EBITDA to result in an Enterprise Value for
the company being valued.
An appropriate valuation multiple is calculated by looking at
other firms that are comparable to the company being valued
and that are listed on public stock exchanges. The comparable
company Enterprise Values are divided by their respective
trailing twelve month EBITDAs (EBITDA over the last 12-month
period) to arrive at Enterprise Value to EBITDA (“EV/EBITDA”)
ratios for each comparable company.
A median of these comparable EV/ EBITDA ratios is then
calculated and applied to the trailing twelve month sustainable
EBITDA of the company being valued to result in the Enterprise
Value.
Excess cash is then added and interest-bearing debt
subtracted from the Enterprise Value to calculate the Equity
Value and an illiquidity discount is then applied if the company
is privately held (as was done with the DCF valuation).
This type of valuation can only be performed if the EBITDA for
the company being valued is positive.

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VENTURE CAPITAL METHOD
VENTURE CAPITAL METHOD VALUATION
The first step is to calculate the EBITDA for the last year of forecasts (year 5 in this example).
Assume this is $40,301 as per the financial information in the DCF example on page 14.
Next, an appropriate valuation multiple must then be applied to the EBITDA to result in an Enterprise Value for the company being valued.
An appropriate valuation multiple is calculated by looking at other firms that are comparable to the company being valued and that are listed on
public stock exchanges. The comparable company Enterprise Values are divided by their respective trailing twelve month EBITDAs (EBITDA for the
last 12-month period) to arrive at Enterprise Value to EBITDA (“EV/EBITDA”) ratios for each comparable company.
A median of these comparable EV/ EBITDA ratios is then calculated and applied to the forecast EBITDA of the company being valued to result in
the Enterprise Value.
Assume this is 8.9x as per the Multiples Example on page 15
The resultant Enterprise Value is then discounted at the rate of return required by the potential venture capital investor.
The required rate of return will depend on the stage of life of the company being valued e.g. start-up vs early development vs expansion vs
bridge/IPO stages.
Excess cash is then added and interest-bearing debt subtracted from the Discounted Enterprise Value to calculate the Equity Value.
Note: no illiquidity discount or survival probability is applied in this method. The rate of return required by the potential venture capital
investor already takes these factors into account.

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PROBABILITY OF SURVIVAL
PROBABILITY-WEIGHTING OF THE DCF AND MULTIPLES VALUATIONS
First, the Equity Values from the DCF and Multiples valuations are weighted according to the probability of the Company surviving into perpetuity.
Survival probability rates used are based on academic studies.
A probability-weighted Equity Value is the result.
Similarly, the Liquidation Value is also then probability-weighted according to the probability of the Company failing (and being liquidated)
These two probability weighted values are then added together to determine the Equity Value, adjusted for probability of survival

Valuation = (DCF Equity Value * Probability of Survival) + (Liquidation Value * Probability of Failure)
or
Valuation = (Multiples Equity Value * Probability of Survival) + (Liquidation Value * Probability of Failure)

The VC Method already takes survival probabilities into account through the discount rate and does not need to be probability-weighted in the
same way.

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 Detailed valuation assumptions

Annexure 2
This annexure provides the actual detailed assumptions used to derive the valuation performed in this report.

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PRIMARY APPROACH – DCF - WACC
FORECAST FREE CASH FLOWS ARE DISCOUNTED TO PRESENT VALUE AT A DISCOUNT RATE - THE WEIGHTED AVERAGE COST OF CAPITAL (“WACC”). WACC IS
THE COMPANY’S COST OF EQUITY & AFTER-TAX COST OF DEBT, WEIGHTED BY TARGET MARKET CAPITAL STRUCTURE

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PRIMARY APPROACH – DCF – COST OF EQUITY
THE COMPANY’S COST OF EQUITY IS CALCULATED USING THE CAPITAL ASSET PRICING MODEL (“CAPM”)

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PRIMARY APPROACH – DCF – COST OF DEBT
THE COMPANY’S COST OF DEBT IS CALCULATED USING SYNTHETIC DEBT RATINGS

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PRIMARY APPROACH – DCF – WACC CALCULATION
Risk-free rates are estimated using 10-year local currency
government bond yields. This is then reduced by an estimated
default spread implied in the yield of those bonds (if the 1.8 % 6.1 %
country issuing the bond has a Moody’s rating of less than
Aaa) to arrive at a true risk-free rate.
COST A Beta is calculated by finding the median of the Company’s
comparable sector peer group Betas and taking out the effect 0.81 88.4 %
OF of the individual peer firms’ capital structures.
The Company-specific Beta is then calculated based on its own
4.3 %
Target Market Capital Structure.
EQUITY EquityMaven calculates the ERP as the ERP for USA (being the 5.4 %
best proxy for a mature equity market with sufficient data) 5.7 %
and then adds a country risk premium based on a particular
country’s credit default spread and general equity volatility
relative to government bonds.
11.6 %
1.8 %
Risk-free rates are estimated using 10-year local currency
government bond yields. This is then reduced by an estimated
default spread implied in the yield of those bonds (if the
country issuing the bond has a Moody’s rating of less than 1.6 % 3.3 %
COST Aaa) to arrive at a true risk-free rate.
2.4 %
Based on the assumed credit rating, a corporate default
OF spread can be calculated by analyzing the spread of the yields
of listed corporate bonds with the same credit rating over the 0.0 %
DEBT risk-free rate.
A country default spread over the risk-free rate is estimated by
using CDS and bond spreads.
Marginal tax rate.
27.0 %

Note: the calculation (on the right) details the WACC used for the forecast period of the valuation. The
WACC used for the Terminal Value calculation differs in that it assumes a beta of 1. / 22
PRIMARY APPROACH – DCF VALUATION
FREE CASH FLOWS EQUITY VALUE

1 566 899

111 335 909

1 341 216
-28 384 213

113 762 534

85 152 638

10 302 839
9 158 079
8 238 746

8 140 515
7 236 013
6 432 012
5 717 344
5 082 083
4 881 527
3 396 556

EXCESS CASH
ENTERPRISE VALUE

INTEREST BEARING DEBT

ILLIQUIDITY DISCOUNT

EQUITY VALUE
YEAR 1

YEAR 2

YEAR 3

YEAR 4

YEAR 5

YEAR 6

YEAR 7

YEAR 8

YEAR 9

YEAR 10

TERMINAL
The free cash flows in the chart above represent the operational cash flows of the Company (for the budget as well as first two forecast years)
after taking into account changes in working capital, taxation and capital expenditure.
The Terminal Value is then calculated which is the estimated present value of all of the cash flows beyond the forecasts provided by the user
(into perpetuity) using a terminal growth rate equal to the risk-free rate.
These free cash flows are all discounted at the WACC of the Company.
The result is the Enterprise Value (see blue bar in “Equity Value” graph above) which is the valuation of the Company before taking into account
excess cash balances and interest-bearing debt.
Once excess cash is added and interest-bearing debt subtracted, the result is the Equity Value prior to any discounts.
The Equity Value then needs to be discounted to take into account the fact that the shareholding in the Company is not as liquid as a publically
traded firm. A private sale of shares would generally take longer and would most likely be more costly than selling publically traded shares. An
illiquidity discount of 35% has been applied based on empirical evidence.
The result is the Equity Value, and this is the value of 100% of the shareholding in the Company.

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SECONDARY APPROACH - MULTIPLES VALUATION
EV / EBITDA MULTIPLES EQUITY VALUE
IMPLIED DCF EV/EBITDA MULTIPLE 26.0X
1 341 216 1 566 899
MIDDLE EAST 8.1X -18 653 571

WESTERN EUROPE 9.7X

SOUTHERN EUROPE 6.5X

74 839 965
EASTERN EUROPE & RUSSIA 7.4X
55 960 712
AUSTRALIA & NEW ZEALAND 14.5X

ASIA 17.1X

SOUTH & CENTRAL AMERICA 6.6X

EXCESS CASH
ENTERPRISE VALUE

INTEREST BEARING DEBT

ILLIQUIDITY DISCOUNT

EQUITY VALUE
NORTH AMERICA 19.1X

AFRICA 14.5X

WORLD 17.1X

The median Enterprise Value relative to EBITDA multiples (“EV / EBITDA”) of comparable companies in the same Thomson Reuters Business
Classification category for various geographic regions were sourced.
The World median EV/EBITDA earnings multiple was then applied to the Company’s EBITDA for the last twelve months, normalised to exclude
non-recurring income/expenses. The result is the Enterprise Value which is the valuation of the Company before taking into account excess cash
balances, interest-bearing debt or any illiquidity discounts.
Once excess cash is added and interest-bearing debt subtracted, the result is the Equity Value prior to any discounts.
The Equity Value then needs to be discounted to take into account the fact that the shareholding in the Company is not as liquid as a publically
traded firm. A private sale of shares would generally take longer and would most likely be more costly than selling publically traded shares. An
illiquidity discount of 25% has been applied based on empirical evidence.
The result is the Equity Value, and this is the value of 100% of the shareholding in the Company.

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SECONDARY APPROACH - VENTURE CAPITAL VALUATION
EV / EBITDA MULTIPLES EQUITY VALUE
IMPLIED DCF EV/EBITDA MULTIPLE 26.0X

MIDDLE EAST 8.1X

WESTERN EUROPE 9.7X -85 221 411

SOUTHERN EUROPE 6.5X

160 537 743
EASTERN EUROPE & RUSSIA 7.4X 1 341 216 1 566 899
AUSTRALIA & NEW ZEALAND 14.5X
75 090 649
ASIA 17.1X

SOUTH & CENTRAL AMERICA 6.6X

EXCESS CASH
ENTERPRISE VALUE

VC DISCOUNT

INTEREST BEARING DEBT

EQUITY VALUE
NORTH AMERICA 19.1X

AFRICA 14.5X

WORLD 17.1X

The first step is to calculate the EBITDA for the last year of forecasts (see page 6)
Next, an appropriate valuation multiple must then be applied to the EBITDA to result in an Enterprise Value for the Company.
An appropriate valuation multiple is calculated by looking at other firms that are comparable to the company being valued and that are listed on
public stock exchanges. The comparable company Enterprise Values are divided by their respective trailing twelve month EBITDAs (EBITDA for the
last 12-month period) to arrive at Enterprise Value to EBITDA (“EV/EBITDA”) ratios for each comparable company.
A world median of these comparable EV/ EBITDA ratios is then calculated (see “EV / EBITDA Multiples” graph above) and applied to the forecast
EBITDA of the Company to result in the Enterprise Value (see blue bar in “Equity Value” graph above).
The resultant Enterprise Value is then discounted at the assumed rate of return required by a potential venture capital investor.
The required rate of return will depend on the stage of life of the company being valued e.g. start-up vs early development vs expansion vs
bridge/IPO stages.
Excess cash is then added and interest-bearing debt subtracted from the Discounted Enterprise Value to calculate the Equity Value.
Note: no illiquidity discount or survival probability is applied in this method. The assumed rate of return required by a potential venture
capital investor already takes these factors into account.
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ADJUSTMENTS TO VALUATIONS FOR PROBABILITY OF SURVIVAL
PROBABILITY OF SURVIVAL / FAILURE EQUITY VALUE - SURVIVAL ADJUSTED
70,000,000

60,000,000

23.3%
50,000,000

40,000,000

30,000,000

20,000,000
76.7%
10,000,000

0
Probability of Survival Probability of Failure DCF Multiples VC method

First, the Equity Values from the DCF and Multiples valuations are weighted according to the probability of the Company surviving into
perpetuity.
Survival probability rates used are based on academic studies.
A probability-weighted Equity value is the result.
Similarly, the Liquidation Value is also then probability-weighted according to the probability of the Company failing (and being liquidated)
These two probability weighted values are then added together to determine the Equity Value, adjusted for probability of survival
The VC Method already automatically takes survival probabilities into account through the discount rate used and does not need to be
probability-weighted in the same way.
EQUITYMAVEN USES THE DCF AS ITS PRIMARY METHODOLOGY
THE SURVIVAL-ADJUSTED VALUATION OF THE COMPANY IS THEREFORE USD 65 320 589 BASED ON THE DCF VALUATION
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SENSITIVITY ANALYSIS
DCF EQUITY VALUE - SURVIVAL ADJUSTED
Equity Value - Survival Adjusted DCF
Terminal Perpetuity Growth Rate
0.77% 1.27% 1.77% 2.27% 2.77%
4.68% 64 493 673 65 492 300 66 671 228 68 092 867 69 852 190
Discount 5.18% 63 806 597 64 805 225 65 984 152 67 405 792 69 165 115
Rate 5.68% 63 143 034 64 141 661 65 320 589 66 742 228 68 501 551
(WACC) 6.18% 62 502 003 63 500 630 64 679 558 66 101 197 67 860 520
6.68% 61 882 572 62 881 200 64 060 127 65 481 767 67 241 090

MULTIPLES EQUITY VALUE - SURVIVAL ADJUSTED

Equity Value - Survival Adjusted Multiples
EV/EBITDA Multiple
15.12X 16.12X 17.12X 18.12X 19.12X
3 497 407 30 291 710 32 303 856 34 316 001 36 328 147 38 340 292
3 934 583 34 094 404 36 358 068 38 621 732 40 885 395 43 149 059
EBITDA 4 371 758 37 897 098 40 412 280 42 927 462 45 442 644 47 957 826
(TTM) 4 808 934 41 699 792 44 466 492 47 233 192 49 999 892 52 766 592
5 246 110 45 502 486 48 520 704 51 538 923 54 557 141 57 575 359

The tables above provide a sensitivity analysis of both the DCF Equity Value (Survival Adjusted) as well as the Multiples Equity Value (Survival
Adjusted).
The sensitivity tables show the various valuations should certain of the underlying assumptions change.
The first sensitivity table above illustrates the effect on valuation of changing the WACC used for the forecast period (not the WACC used to
calculate the Terminal Value).

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 Industry benchmarking
Annexure 3
This annexure provides benchmarking of the Company against companies operating globally in the same industry. The purpose is
to provide feedback where the Company is either performing better (green tick) or worse (red cross) than industry averages. Metrics
that are indicated to be worse than industry averages may be potential areas for improvement which, if improved upon, could
potentially increase the Company valuation.

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INDUSTRY BENCHMARKING
Gross profit margin GROSS PROFIT MARGIN
28.7%
90.9%
Revenue − Cost of Goods Sold
Gross Profit Margin = 8.4%
Revenue EBITDA MARGIN
14.1%
It measures what percentage of Revenue remains after paying
for the Cost of Goods Sold. 6.0%
EBIT MARGIN
A higher percentage means that more sales profit is available to 12.6%
pay for operating and other expenses.
Higher Gross Profit Margins are better than lower Gross Profit
Margins.
INDUSTRY COMPANY

EBITDA margin EBIT margin

EBIT DA EBIT
EBITDA Margin = EBIT Margin =
Revenue Revenue
It measures what percentage of Revenue remains after It measures what percentage of Revenue remains after
deducting Cost of Goods Sold and all other operating expenses, deducting Cost of Goods Sold and all other operating expenses,
but before deducting Interest, Tax, Depreciation and but before deducting Interest and Tax.
Amortisation. EBIT Margin is therefore useful to gauge the operating efficiency
EBITDA Margin is therefore useful to gauge the operating of a company before the non-operating effects of financing and
efficiency of a company before the non-operating effects of tax.
financing, tax and accounting policies. Higher EBIT Margins are better than lower EBIT Margins.
Higher EBITDA Margins are better than lower EBITDA Margins.

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INDUSTRY BENCHMARKING
TOTAL DEBT / EBITDA
2.1X
TOTAL DEBT / EBITDA
(Total interest bearing debt) 0.1X
Total Debt/EBITDA =
EBITDA
6.0X
It measures a company’s leverage by determining how INTEREST COVER
84.9X
much Total Debt a company has relative to its EBITDA.
EBITDA is a proxy for operating cash flow (before capital 1.7X
expenditure and working capital changes). CURRENT RATIO
9.8X
This measure therefore provides a good indication of a
company’s ability to service and repay its debt
obligations.
Company’s with lower Total Debt / EBITDA ratios typically INDUSTRY COMPANY
have less financial risk than those with higher ratios.

INTEREST COVER CURRENT RATIO

EBIT Current Assets
Interest Cover = Current Ratio =
Gross interest expense Current Liabilities
It measures how many times greater a company’s It measures a company’s solvency by determining the degree to which
operating profit is relative to its Gross Interest Expense Current Assets cover Current Liabilities.
obligations. This measure therefore provides a good indication of a company’s and
This measure therefore provides a good indication of a ability to pay it’s short-term financial obligations.
company’s ability to service its debt interest obligations Company’s with higher Current Ratios typically have a better ability to
and the margin of safety thereof. meet short-term financial obligations than those with lower ratios.
Company’s with higher Interest Cover Ratios typically
have less financial risk than those with lower ratios
(unless the Company has an Interest Cover Ratio of zero
due to it not having any interest-bearing debt). / 30
INDUSTRY BENCHMARKING
ACCOUNTS RECEIVABLE DAYS (AVERAGE) ACCOUNTS RECEIVABLE DAYS (AVE)
67
66
Average accounts receivable
AR Days (ave) = x 365
Revenue 72
INVENTORY DAYS (AVE)
129
Accounts Receivable Days (average) is also called “Accounts
Receivable Collection Period” or “Days Sales Outstanding”.
57
It measures how long customers are taking to pay a company. ACCOUNTS PAYABLE DAYS (AVE)
Lower Accounts Receivable Days is better than higher 116
Accounts Receivable Days. Lower Accounts Receivable Days
means that less of a company’s cash is tied up in Accounts
Receivables and therefore more cash is immediately available
to the Company. INDUSTRY COMPANY

Inventory days (Average) Accounts payable days (AVERAGE)

Average inventory Average accounts payable
Inv Days (ave) = x 365 AP Days (ave) = x 365
Cost of sales Cost of sales
It measures how long it takes a company to convert Inventory Accounts Payable Days is also called “Days Payable Outstanding”.
into Revenue. It measures how long a company is taking to pay its suppliers.
Lower Inventory Days is better than higher Inventory Days. Generally, higher Accounts Payable Days are better for a company. Higher
Lower Inventory Days means that less of a company’s cash is days means that less of a company’s cash is tied up in paying Accounts
tied up in Inventory and therefore more cash is immediately Payables, and therefore more cash is immediately available to the company
available. for other purposes.
Abnormally low Accounts Payable Days may, however, be a bad sign and
could mean that suppliers are demanding shorter payment terms because
they are not confident of a company’s credit worthiness.Abnormally low
Accounts Payable Days may, however, be a bad sign and could mean that
suppliers are demanding shorter payment terms because they are not
confident of a company’s credit worthiness.
/ 31
 Glossary
Annexure 4
This annexure provides definitions of technical valuation terms used in this report.

/ 32
GLOSSARY
CAPITALISATION OF EARNINGS Applying a valuation multiple to the Company’s earnings to derive the Company valuation

CDS Credit Default Swap which is an agreement by the seller of a CDS to compensate the buyer of a CDS in the event of a loan default

DCF / DISCOUNTED CASH FLOW Future forecast cash flows are discounted to present value using a discount rate which takes into account the riskiness of the estimated cash flows

EBIT Earnings before interest and tax

EBITDA Earnings before interest, tax, depreciation and amortisation. SUSTAINABLE EBITDA = EBITDA ADJUSTED FOR NON-RECURRING INCOME/EXPENSES

ENTERPRISE VALUE Valuation of the Company before taking into account EXCESS cash balances and interest-bearing debt on the balance sheet

EQUITY VALUE Enterprise Value plus EXCESS Cash minus Interest-Bearing Debt, adjusted for an illiquidity discount

EXCESS CASH Cash not required for the company’s operations

FREE CASH FLOW Operational cash flows of the Company after taking into account changes in working capital, taxation and capital expenditure

GROSS INTEREST EXPENSE Annual interest expense to be paid on the Company’s interest-bearing debt

LEVERAGE Amount of interest-bearing debt used by the Company

OPERATING CASH FLOW Amount of cash flow generated by the Company’s normal operations

OPERATING PROFIT Profit earned from the Company’s normal operations

PRESENT VALUE The current worth of a future income stream after discounting at a specified discount rate

TARGET MARKET CAPITAL

STRUCTURE Target weighting of THE market value of THE Company’s Equity and THE market value of Company’s interest-bearing debt

TERMINAL VALUE Estimated present value of all of the cash flows beyond the forecasts provided by the user (into perpetuity)

TOTAL MARKET VALUE OF COMPANY Market value of THE Company’s Equity plus THE market value of Company’s interest-bearing debt

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