Blue Haven Initiative: The PEGAfrica Investment
Harvard Business School Case 318-003
Courseware 318-705
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Instructions:
This courseware was created to allow students to determine PEGs enterprise value (EV) in early 2017. Yellow cells indicate where students provide inputs. The other worksheets provide information to help students make decisions about their inputs.
PEG Africa Financial Statements and Blue Haven Projections
$ in US Dollars
2015A
2016A
2017 E
2018 E
2019 E
2020 E
2021 E
Income Statement
Revenue
Unit Sales
6000
9,200
20,000
40000
74000
127465
205744
Y/Y Growth
100%
85%
72%
61%
Rev/sale (USD)
209.90
250
$ 300
$ 425
$ 425
$ 425
$ 425
Total Revenue
1,259,376
2,300,000
6,000,000
17,000,000
31,450,000
54,172,625
87,441,388
Cost of Goods Sold
Total Cost of Goods Sold
818,594.40
1,610,000
3,600,000
8,500,000
15,725,000
27,086,313
43,720,694
% of Revenues
65%
70%
60%
50%
50%
50%
50%
Gross Profit
440,782
690,000
2,400,000
8,500,000
15,725,000
27,086,313
43,720,694
35%
30%
40%
50%
50%
50%
50%
Operating Expenses
Total Operating Expenses
881,563
1,700,000
2,900,000
4,387,182
5,329,647
6,557,149
8,202,226
% of Revenues
70%
74%
48%
26%
17%
12%
9%
Write-off expense
(200,000)
(575,000)
(1,500,000)
(1,700,000)
(3,145,000)
(5,417,263)
(8,744,139)
% of Revenues
25%
25%
10%
10%
10%
10%
EBITDA
(640,782)
(1,585,000)
(2,000,000)
2,412,818
7,250,353
15,111,901
26,774,329
Depreciation
(30,000)
(90,000)
(105,859)
(129,000)
(150,000)
(175,000)
EBIT
(640,782)
(1,615,000)
(2,090,000)
2,306,960
7,121,353
14,961,901
26,599,329
Cash Flow Statement
Net Working Capital
2150000
4,500,000
12,750,000
23,587,500
46,046,731
71,701,938
% of Sales
75%
75%
75%
85%
82%
PBT
–
(2,090,000)
2,007,055
6,195,577
13,016,854
23,141,417
Depreciation
–
90,000
105,859
129,000
150,000
175,000
Increase In Net Working Capital
–
2,350,000
8,250,000
10,837,500
22,459,231
25,655,207
Cash flow from Operating activities
(4,350,000)
(6,137,086)
(4,512,923)
(9,292,378)
(2,338,791)
Capex
(142,863)
(142,863)
(155,245)
(156,832)
(164,619)
(186,576)
% of Sales
2.38%
0.91%
0.50%
0.30%
0.21%
Net cash from investing activities
(142,863)
(142,863)
(155,245)
(156,832)
(164,619)
(186,576)
PEG Ghana Estimated Series B Returns – Multiples Exit Analysis
$ in US Dollars
4/15/16
6/1/17
12/31/19
12/31/21
EBITDA Multiples Analysis
Forecasted EBITDA
Year 2021
Multiple
4.5x
Enterprise Value
Less net debt*
0
Equity Value
– 0
Blue Haven ownership at exit *
12%
Blue Haven Cash Flows*
-1000000
-1000000
-2500000
0
IRR
Revenue Multiples Analysis
Forecasted Revenue
year 2021
Multiple
2x
Enterprise Value
Less net debt*
0
Equity Value
Blue Haven ownership at exit *
12%
Blue Haven Cash Flows*
IRR
*Key Assumptions: BH invests an additional $2.5M in a series C resulting in 12% ownership at exit (See “BH Cap Table”); assumes zero net debt as all cashflow requirements funded by equity
PEG Ghana Estimated Series B Returns – DCF Analysis
Dicount rate (WACC)
30%
Exit EBIT Multiple
4.5x
Period
0
1
2
3
4
5
Terminal value
Year
4/15/16
6/1/17
12/1/18
12/1/19
12/1/20
12/21/21
exit multiple x 2021 ebit
Discount Factor
EBIT
Less taxes (@13%)
Plus depreciation
Less Increase in net working capital
Less capex
FCF
Present value of FCF
Present value of Terminal Value
Present Enterprise Value of PEG*
Less net debt (plus)
Equity value
Blue Haven onwership, post Series B
10%
NPV of Blue Haven equity
Blue Haven ownership at exit*
12%
Blue Haven Cash Flows
IRR
*Key Assumptions: BH invests an additional $2.5M in a series C resulting in 12% ownership at exit (See “BH Cap Table”); Present value estimated as of January 2017 for simplicity
SENSITIVITY ANALYSIS – Present Enterprise Value of PEG, USD Millions
Student Input
Terminal Value Exit Multiple
Discount Rate
– 0
25%
30%
35%
40%
3.50x
4.00x
4.50x
PV of the FCF+PV of (EBIT x 4.5)/(1+.30)^5
5.00x
5.50x
Series A-2
Current Series B
Assumed Series C
Exit
Pre Money Valuation
8,500,000
20,000,000
60,000,000
Total Equity Investment
4,336,332
5,000,000
15,000,000
Post Money Valuation
12,836,332
25,000,000
75,000,000
Pre-Money Shares Outstanding
36,648,223
46,192,031
Shares Issued
9,543,808
11,929,760
Post Money Shares Outstanding
36,648,223
46,192,031
58,121,791
Fully diluted Prior Round Price / Share
0.3503
0.5239
Post Money Price / Share (prior to post money stock options)
0.5239
1.2574
Premium to Prior Round
50%
140%
BH Investment, $
1000000
1000000
2500000
BH Ownership
8%
10%
12%
BH Shares
2855039
4763800
6752094
Estimated ownership at exit, assuming subsequent rounds
12%
12%
$ in US Dollars
4/15/16
6/1/17
12/31/19
Blue Haven Investment per round
1000000
1000000
2500000
Balance Sheet
ASSETS
Non-current assets
Property, plant and equipment
300,000
352,863
Goodwill
3,300,000
3,300,000
Current Assets
Receivables
1,500,000
4,200,000
% of Sales
ERROR:#REF!
70%
Inventory
800,000
900,000
% of Sales
ERROR:#REF!
15%
Cash
2,900,000
6,200,000
Total current assets
5,200,000
11,300,000
TOTAL ASSETS
8,800,000
14,952,863
Equity
Stated capital
9,500,000
14,500,000
Retained earnings
-1,600,000
-4,190,000
Total shareholder’s fund
7,900,000
10,310,000
Liability
Debt
750,000
3,625,000
Total non-current liabilities
750,000
3,625,000
Payables
150,000
600,000
Other liabilities
417,863
Total liabilities
900,000
4,642,863
TOTAL EQUITY AND LIABILITIES
8,800,000
14,952,863
Blue Haven Initaitive Select Comparables
Company Name
Headquarters
Industry Code
Description
Revenue (TTM) – $M
Net Income (TTM) – $M
EBITDA (TTM) – $M
Enterprise Value
EV/Revenue
EV/EBITDA
KCB Group (KCB)
Nairobi, Kenya
Banks
Provider of banking services. The company provides current accounts, fixed deposits, overdrafts, loans, mortgage finance and treasury services to its clients in Kenya.
797.0
193.0
462.9
1,195.8
1.5
2.6
CAL Bank (CAL)
Accra, Ghana
Banks
Provider of investment banking services. The company is involved primarily in meeting the banking needs of small, medium and large corporations. It provides retail banking, investment banking, corporate and institutional banking and other private banking services.
111.5
2.4
77.4
231.4
2.1
3.0
Equity Group Holdings (Kenya) (EQTY)
Nairobi, Kenya
Banks
Provider of mortgage financing financial services. The company offers retail banking, microfinance and related services such as fixed deposit, custody investment, asset finance, money transfer, remittance processing, cheque clearing, banker’s cheque, share trading, money transfer and mobile banking services.
659.8
162.0
351.7
1,564.9
2.4
4.4
Mauritius Commercial Bank (MCBG)
Port Louis, Mauritius
Banks
Provider of commercial banking services. The company provides banking products like current account, savings accounts, fixed deposits, loans and advances and other allied services in Mauritius.
450.6
164.1
316.0
2,592.1
5.8
8.2
Capitec Bank Holdings (CPI)
Stellenbosch, South Africa
Banks
Operator of a holding company in the banking sector. The company through its subsidiary is a retail bank focused on providing accessible banking services to its clients by the use of technology.
1,126.5
288.3
755.3
6,952.5
6.2
9.2
ACI Worldwide, Inc. (NasdaqGS:ACIW)
Fintech
3,281.3
3.2
17.0
OneMain Holdings, Inc. (NYSE:OMF)
Fintech
17,256.1
9.1
On Deck Capital, Inc. (NYSE:ONDK)
Fintech
1,041.0
6.1
Nets A/S (CPSE:NETS)
Fintech
6,302.4
5.2
18.5
Average
4.6
9.0
Median
5.2
8.2
See below for additional comparables
Comparables Data – African Financial Institutions
Date Sourced:
5/24/17
Source: PitchBook, Capital IQ
Company Name
Headquarters
Industry Code
Description
Revenue (TTM) – $M
Net Income (TTM) – $M
EBITDA (TTM) – $M
Enterprise Value
EV/Revenue
EV/EBITDA
National Bank of Kenya (NBK)
Nairobi, Kenya
National Banks
Provider of banking services. The company offers personal banking, business banking, corporate banking, agent banking and bank assurance services for individuals, small-to-medium companies and businesses and large corporations.
124
2
52
20
0.16x
0.39x
CBZ Holdings (CBZ)
Harare, Zimbabwe
Asset Management
Operator of a holding company. The company through its subsidiaries engages in providing banking services and insurance products along with asset management services to its clients in Zimbabwe.
234
24
136
97
0.42x
0.71x
Trust Bank Gambia Company (TBL)
Banjul, Gambia
National Banks
Provider of commercial banking services. The company provides commercial banking services to the general public in the form of receiving deposits, provision of loans, system of payments and clearing, dealing in financial instruments of the money market in Gambia.
20
4
12
20
0.98x
1.69x
GCB Bank (GCB)
Accra, Ghana
National Banks
Provider of commercial banking services. The company provides commercial and retail banking services and products to the Ghanaian traders, business people and farmers.
230
67
132
314
1.37x
2.38x
KCB Group (KCB)
Nairobi, Kenya
Regional Banks
Provider of banking services. The company provides current accounts, fixed deposits, overdrafts, loans, mortgage finance and treasury services to its clients in Kenya.
797
193
463
1,196
1.50x
2.58x
Access Bank (ACCE)
Lagos, Nigeria
International Banks
Provider of international banking services in Nigeria.
1,369
274
819
2,108
1.54x
2.58x
Diamond Trust Bank Kenya (DTK)
Nairobi, Kenya
Regional Banks
Operator of a regional bank. The company operates as a regional bank that provides various banking services which include corporate, retail and commercial banking services.
330
64
244
666
2.02x
2.73x
Standard Chartered Bank Kenya (SCBK)
Nairobi, Kenya
International Banks
Provider of commercial banking services. The company is engaged in providing banking services such as accepting deposits, originating loans, offering deposit instruments and other related banking services.
314
89
204
635
2.02x
3.11x
CAL Bank (CAL)
Accra, Ghana
International Banks
Provider of investment banking services. The company is involved primarily in meeting the banking needs of small, medium and large corporations. It provides retail banking, investment banking, corporate and institutional banking and other private banking services.
112
2
77
231
2.07x
2.99x
African Bank Investments (AXL)
Midrand, South Africa
Other Commercial Banks
Operator of a holding company in the banking sector. The company operates businesses within the Republic of South Africa and in the neighboring countries of Zambia, Botswana, Lesotho, Namibia and Swaziland. It provides finance, banking and insurance services to individuals and corporations. The subsidiaries of the company include African Bank Limited, which provides unsecured personal loans to formally employed South African residents; Ellerine Holdings Limited, which engages in the business of retailing furniture and appliances for cash and credit to the markets spanning all living standards measure (LSMs); The Standard General Insurance Company Limited, which provides credit life products to clients of African Bank Limited; Theta Investments (Pty) Limited; and Relyant Insurance Company Limited, which engages in the sale of insurance to customers of Ellerines Group who purchase furniture and appliances on credit.
861
(420)
57
1,903
2.21x
33.15x
Bank Of Africa-Benin (BOAB)
Cotonou, Benin
Regional Banks
Provider of commercial banking services. The company provides various banking and financial services like loans, savings and insurances to its customers in Benin.
102
21
62
233
2.29x
3.73x
Equity Group Holdings (Kenya) (EQTY)
Nairobi, Kenya
National Banks
Provider of mortgage financing financial services. The company offers retail banking, microfinance and related services such as fixed deposit, custody investment, asset finance, money transfer, remittance processing, cheque clearing, banker’s cheque, share trading, money transfer and mobile banking services.
660
162
352
1,565
2.37x
4.45x
Co-operative Bank of Kenya (CBK)
Nairobi, Kenya
Asset Management
Provider of banking services. The company provides corporate banking services, retail banking services, investments and asset management services to its clients in Kenya.
513
124
322
1,433
2.79x
4.45x
Banque Marocaine pour le Commerce et l’Industrie (BMCI)
Casablanca, Morocco
National Banks
Provider of banking and financial services. The company provides retail and corporate banking services. It also provides investment, insurance, credit and other services.
319
51
168
1,804
5.66x
10.72x
Mauritius Commercial Bank (MCBG)
Port Louis, Mauritius
National Banks
Provider of commercial banking services. The company provides banking products like current account, savings accounts, fixed deposits, loans and advances and other allied services in Mauritius.
451
164
316
2,592
5.75x
8.20x
Capitec Bank Holdings (CPI)
Stellenbosch, South Africa
Other Commercial Banks
Operator of a holding company in the banking sector. The company through its subsidiary is a retail bank focused on providing accessible banking services to its clients by the use of technology.
1,126
288
755
6,953
6.17x
9.21x
BICI CI Banque Internationale pour le Commerce et l’Industrie de la Cote d’ivoire (BICC)
Abidjan, Ivory Coast
National Banks
Provider of commercial banking services. The company provides general banking, retail and wholesale banking to businesses and individuals in Ivory Coast.
93
15
52
702
7.56x
13.51x
Average
2.76x
6.27x
Median
2.07x
3.11x
Comparables Data – Emerging Markets Consumer Finance
Date Sourced:
5/24/17
Source: PitchBook, Capital IQ
Company Name
Headquarters
Industry Code
Description
Revenue (TTM) – $M
Net Income (TTM) – $M
EBITDA (TTM) – $M
Enterprise Value
EV/Revenue
EV/EBITDA
UT Bank (UTB)
Accra, Ghana
Regional Banks
Owner and operator of a universal bank. The company specializes in foreign accounts, investment products, loan products, electronic banking, consumer finance, corporate banking and international money transfers.
93
4
316
153
1.64x
0.48x
Mandala Multifinance (MFIN)
Jakarta, Indonesia
Consumer Finance
Provider of consumer finance services. The company is engaged in providing financial services such as consumer financing, factoring and credit card services to its clients in Java, Sumatera, Sulawesi and Kalimantan.
108
19
158
188
1.74x
1.19x
Macro Bank (BMA)
Buenos Aires, Argentina
Regional Banks
Provider of banking products and services to individuals, entrepreneurs, companies, and corporate customers in Argentina.
2,404
457
244
5,435
2.26x
22.29x
Equity Group Holdings (Kenya) (EQTY)
Nairobi, Kenya
National Banks
Provider of mortgage financing financial services. The company offers retail banking, microfinance and related services such as fixed deposit, custody investment, asset finance, money transfer, remittance processing, cheque clearing, banker’s cheque, share trading, money transfer and mobile banking services.
660
162
168
1,565
2.37x
9.30x
Metro Development Bank (METRO)
Pokhara, Nepal
National Banks
Provider of financial support services. The company is engaged in providing loans and advances, home, auto, real estate, trading, commercial, retirement, social, term, hire purchase, consortium, foreign employment, education, travel, medical, contract, overdraft, share, staff, insurance, time, consumer, and deprive sector loans to its clients in Nepal.
2
0
50
5
2.38x
0.11x
Krungthai Card (KTC)
Bangkok, Thailand
Consumer Finance
Provider of financial services. The company is engaged in providing personal loan and credit card services and other allied services for its customers in Thailand.
430
74
322
2,358
5.49x
7.32x
Shriram City Union Finance (532498)
Chennai, India
Thrifts and Mortgage Finance
Provider of various consumer financing products and services. The company offers finance for used commercial vehicles to small road transport operators and consumer durables, two-wheelers, three-wheelers, tractors and commercial and non-commercial vehicles. It also provides personal and small business loans and loans against gold.
713
88
289
4,424
6.20x
15.28x
Boubyan Bank (BOUBYAN)
Kuwait City, Kuwait
Asset Management
Provider of commercial banking and financial services. The company provides a range of products and services, including consumer finance, credit cards, deposits, and other branch related services to individuals and institutional customers and also provides trade service, and other related services to business and corporate customers.
301
140
62
3,060
10.15x
49.04x
Average
4.03x
13.13x
Median
2.38x
8.31x
Comparables Data – Financial Technology Firms
Source: PitchBook, Capital IQ
Company Name
Headquarters
Industry Code
Description
Revenue (TTM) – $M
Net Income (TTM) – $M
EBITDA (TTM) – $M
Enterprise Value
EV/Revenue
EV/EBITDA
SS&C Technologies Holdings, Inc. (NasdaqGS:SSNC)
Fintech
$ 10,478
6.4x
17.2x
ACI Worldwide, Inc. (NasdaqGS:ACIW)
Fintech
$ 3,281
3.2x
17.0x
PayPal Holdings, Inc. (NasdaqGS:PYPL)
Fintech
$ 77,025
6.2x
32.9x
Fiserv, Inc. (NasdaqGS:FISV)
Fintech
$ 32,236
5.7x
18.3x
Fair Isaac Corporation (NYSE:FICO)
Fintech
$ 5,217
5.6x
24.7x
Jack Henry & Associates, Inc. (NasdaqGS:JKHY)
Fintech
$ 8,955
6.2x
20.0x
The Western Union Company (NYSE:WU)
Fintech
$ 11,247
2.1x
8.3x
OneMain Holdings, Inc. (NYSE:OMF)
Fintech
$ 17,256
9.1x
MoneyGram International, Inc. (NasdaqGS:MGI)
Fintech
$ 1,451
0.9x
6.4x
Fidelity National Information Services, Inc. (NYSE:FIS)
Fintech
$ 40,494
4.4x
16.0x
Xero Limited (NZSE:XRO)
Fintech
$ 2,822
11.8x
-106.5x
LendingClub Corporation (NYSE:LC)
Fintech
$ 1,072
1.9x
On Deck Capital, Inc. (NYSE:ONDK)
Fintech
$ 1,041
6.1x
Square, Inc. (NYSE:SQ)
Fintech
$ 14,286
7.0x
-578.4x
Nets A/S (CPSE:NETS)
Fintech
$ 6,302
5.2x
18.5x
Average
5.45x
-42.14x
Median
5.75x
17.07x
…
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