The expansion drive should be, however, be guarded in the same manner as before to avoid shocks.
It is not enough to conclude an investment move without considering the price shareholders have to pay in order to acquire the asset in question.
There is no doubt that FFI is a jewel and a promising business in the mid to long term: its ability to innovate, create coupled with its ability to have organically exponential growth over the years are a rarity that cannot be easily matched. But it is the right price that matters to the existing shareholder, for any such acquisition.
Simbisa is expected to part away with shares valued at $40 million at full consummation of the deal which is subject to beating targeted profit levels.
At an expected profit of $4.2 million in 2021, the implied Price Earnings Ratio at year 4 (PER+4) for FFI is 10 times which compares more favourably to a price earnings ratio of 16 times at which Simbisa was trading at, around the time the offer was tabled.
However to achieve this profit level by 2021, FFI has to grow its bottom line at a compounded average growth rate of 14% per annum over the next 4 years which we also believe is beatable, making a strong case for acquisition.
The multiples valuation used is the closest to fair value given that no much detail is given with regards to FFI’s historical financial performance.
By Respect Gwenzi for The Source.
(83 VIEWS)
This post was last modified on February 19, 2018 12:12 pm
President Emmerson Mnangagwa’s spokesman George Charamba says there is nothing to celebrate about the United…
Over drinks back in 2019, two British tycoons, Algy Cluff and Michael Spencer, agreed to…
Former Citizens Coalition for Change leader Nelson Chamisa has been accused of destroying the opposition…
Zimbabwe central bank governor John Mushayavanhu says people will soon be scrambling for the country’s…
Exiled former Higher Education Minister Jonathan Moyo has raised an interesting question. Why is Canada…
The Reserve Bank of Zimbabwe has published 23 questions and answers about its newly introduced…