Transcript Agenda - Fuqua School of Business

A roaring Zimbabwe
lion goes to London
Patterson Chiweshe
Karen Frisch
Sergio Penchas
Denis Rappaport
1
Zimbabwe Main Facts

Zimbabwe nation was created in 1980.

Single political party dominance since
1980 with relative political stability.

One of the most diversified African
economies-25 % GDP from
Manufacturing.

Economy has been previously closed to
foreign investment.
2
Meikles Africa Limited

More than a 100 years of established
operations.

4 divisions: supermarkets,hotels,
department stores and corporate.

Revenues of U$170 Million in 1996(3.8
% of GDP).

Revenues CAGR (93-96) of 7% in real
terms
3
Private Placement

International private placement of US$
75 Million (33% of company capital)

Why a private deal
– Size of the transaction
– Sovereign risk
– Easier placement to sophisticated investors
4
Discount Factor - Risk Considered

Characteristics of the company

Domestic costs and revenues structure

Low domestic competitive environment

Entry barriers
– Strong alliances with South African companies
– Proceeds of private placement to highly
internally invest
5
Discussion’s Topics

Discount Rate
– Risk considered
– Time varying discount rates
– Terminal discount rates

How to mitigate risks

Additional information required to invest
6
Valuation
PV of Cash Flows (1997 - 2006)
PV of Terminal Value (from 2008 on)
Debt
Cash
Total Value of the Firm
Share Price
104,927
131,533
14,476
9,362
231,346
1.57
7