bamburi financial model - enhancements

Historical Statement

Income Statement

Balance Sheet

Cash Flow Statement

Debt Schedule

Interest Schedule

Discounted Cash Flow Analysis

Weighted Average Cost Of Capital

Comparative Analysis

Credit and Leverage Statistics

Illustrative Reference Range

Football Field

Illustrative Graphs

Bamburi Cement Limited Financial Model

Muthengi Mike

[email protected]

TABLE OF CONTENTS

DISCLAIMER:The content provided on this document is provided as general information on research and does not constitute advice or recommendation by Muthengi Mike and should not be relied upon for investment decisions or any other matter and that this document does not constitute a distribution recommending the purchase or sale of any security or portfolio. Please note that past performance is no indication of future results. The ideas expressed in the document are solely the opinions of the author at the time of publication and are subject to change without notice.Although the author has made every effort to provide accurate information at the date of publication all information available in this report is provided without any express or implied warranty of any kind as to its correctness. You should consult your own independent financial adviser to obtain professional advice before exercising any decisions based on the information present in this document. Any action that you take as a result of this information, analysis, or advertisement is ultimately your responsibility.

DRAFT VERSIO

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MUTHENGI M

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Bamburi Financial Model - Enhancements.xlsx: Historicals 8/5/2016

Bamburi Cement Limited

Historical Statement

(All figures in millions, except per share data)

Notes Actual CAGR/

Fiscal 2011 2012 2013 2014 2015 Avg

Revenue 4 KES 28,075 KES 35,884 KES 37,491 KES 33,928 KES 36,029 KES 39,200 2.2%

Cost of sales 5 (25,920) (27,635) (25,411) (26,683) (26,670) 0.7%

Gross profit KES 9,964 KES 9,856 KES 8,517 KES 9,346 KES 12,530 5.9%

Investment income 6 342 657 473 349 374 2.3%

Other gains and losses 7 544 (71) (78) 253 997 16.4%

Distribution costs (213) (115) (73) (223) (1,115) 51.3%

Marketing expenses (94) (154) (168) (190) (205) 21.5%

Administration expenses 8 (1,151) (1,363) (1,435) (1,721) (2,287) 18.7%

Other expenses 9(a) (552) (1,383) (1,599) (1,937) (1,644) 31.4%

Restructuring costs 9(b) - (192)

Finance costs 10 (374) (251) (121) (76) -

Profit before tax 11(a) KES 8,466 KES 7,176 KES 5,516 KES 5,801 KES 8,458

Tax expense 12(a) (2,607) (2,294) (1,843) (1,898) (2,586)

Profit for the year KES 5,859 KES 4,882 KES 3,673 KES 3,903 KES 5,872 0.1%

Earnings per share – basic and diluted 13 KES 14.02 KES 14.44 KES 12.17 KES 9.55 KES 9.80 KES 14.49 0.1%

Dividends 8.50 10.00 11.00 11.00 12.00 13.00 6.8%

Dividend Growth 17.6% 10.0% - 9.1% 8.3%

Dividend Payout Rate 69.3% 90.4% 115.2% 122.4% 89.7%

Net Sales Growth 27.8% 4.5% (9.5)% 6.2% 8.8%

EPS Growth 3.0% (15.7)% (21.5)% 2.6% 47.9%

ASSETS

NON-CURRENT ASSETS

Property, plant and equipment 15(a) KES 25,572 KES 25,651 KES 24,263 KES 22,897

Prepaid operating lease rentals 16 175 206 186 164

Intangible assets 17 160 118 118 84

Other equity investments 19(a) 452 787 662 535

Goodwill 20 217 217 217 217

KES 26,576 KES 26,979 KES 25,446 KES 23,897

CURRENT ASSETS

Inventories 21 5,606 5357 5,585 6,604

Trade and other receivables 22(a) 1,712 1,487 2,209 2,945

Corporate tax recoverable 12(c) 375 317 107 131

Cash and cash equivalents 23(a) 8,769 8876 7,644 8,453

KES 16,462 KES 16,037 KES 15,545 KES 18,133

TOTAL ASSETS KES 43,038 KES 43,016 KES 40,991 KES 42,030

EQUITY AND LIABILITIES

EQUITY

Share capital 24 1,815 1.815 1,815 1,815

Asset revaluation reserve 25(a) 8,307 7.963 7,683 7,424

Available-for-sale reserve 25(b) 249 584 459 332

Translation reserve 25(c) (860) ,3116, (449) (1,030)

Retained earnings 18,875 18,874 17,220 18,348

Equity attributable to owners of the Company KES 28,386 KES 28,930 KES 26,728 KES 26,889

Non-controlling interests 2,475 2580 2,391 2,817

Total equity KES 30,861 KES 31,510 KES 29,119 KES 29,706

NON-CURRENT LIABILITIES

Deferred tax liability 26 4,033 4,191 3,955 3,365

Provisions 27 556 1,025 457 620

Employees' benefit liabilities 28 692 646

Term loan 577 309

CURRENT LIABILITIES KES 5,166 KES 5,525 KES 5,104 KES 4,631

Unclaimed dividends 14(a) 23 37 25 6

Dividend payable 14(d) - 91

Provisions 27 505 410 316 284

Employees’ benefit liabilities 28 13 37

Trade and other payables 30 6,195 5236 6,414 6,803

Corporate tax payable 12(c) - 472

Term loan 28(a) 288 309

KES 7,011 KES 5,981 KES 6,768 KES 7,693

TOTAL EQUITY AND LIABILITIES KES 43,038 KES 43,016 KES 40,991 KES 42,030

Note: Fiscal year ends December 31 of each year.

[email protected] 1 of 13 Muthengi Mike

DRAFT VERSIO

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MUTHENGI M

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Bamburi Financial Model - Enhancements.xlsx: IS 8/5/2016

Bamburi Cement Limited Base Case

Income Statement


Actual Estimated Projected

Fiscal 2013 2014 2015 2016 2017 2018 2019 2020

Net Revenue 28,075 KES 33,928 KES 36,029 KES 39,200 KES 42,162 KES 45,348 KES 48,775 KES 52,461 KES 56,425

Cost of Sales (25,411) (26,683) (26,670) (28,601) (30,672) (32,892) (35,272) (37,825)

Gross Profit 8,517 9,346 12,530 13,561 14,677 15,883 17,188 18,600

Investment Income 473 349 374 402 433 465 501 538

SG&A Expenses (3,353) (3,818) (4,302) (4,796) (5,340) (5,938) (6,597) (7,321)

Operating Income 5,637 5,877 8,602 9,168 9,770 10,410 11,092 11,818

Net Interest Expense (121) (76) - 888 1,067 1,292 1,567 1,899

Pre-Tax Income 5,516 5,801 8,602 10,055 10,837 11,702 12,659 13,716

Income Taxes (1,843) (1,898) (2,629) (3,017) (3,251) (3,511) (3,798) (4,115)

Minority Interest (210) (205) (345) (612) (643) (675) (708) (744) (781)

Net Income 3,468 3,558 5,361 6,396 6,911 7,483 8,117 8,820

Diluted Shares Outstanding 363.0 363.0 363.0 363.0 363.0 363.0 363.0 363.0

Basic & Diluted Earnings per Share KES 9.55 KES 9.80 KES 14.77 KES 17.62 KES 19.04 KES 20.62 KES 22.36 KES 24.30

EBITDA 7,172 7,511 10,242 10,932 11,667 12,451 13,287 14,178

EBITDA Margin 21.1% 20.8% 26.1% 25.9% 25.7% 25.5% 25.3% 25.1%

Income Statement Assumptions

SCENARIO Base Case

Net Revenue Growth (9.5)% 6.2% 8.8% 7.6% 7.6% 7.6% 7.6% 7.6%

Best Case 8.8% 8.8% 8.8% 8.8% 8.8%

Base Case 7.6% 7.6% 7.6% 7.6% 7.6%

Weak Case 6.9% 6.9% 6.9% 6.9% 6.9%

COGS, % of Revenue -0.20% 74.9% 74.1% 68.0% 67.8% 67.6% 67.4% 67.2% 67.0%

Investment Income, % of Revenue 1.4% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0%

SG&A Expenses, % of Revenue 0.40% 9.9% 10.6% 11.0% 11.4% 11.8% 12.2% 12.6% 13.0%

Minority Interest Growth (56.0)% 68.3% 77.4% 5.0% 5.0% 5.0% 5.0% 5.0%

Effective Tax Rate 33.4% 32.7% 30.6% 30.0% 30.0% 30.0% 30.0% 30.0%

Depreciation & Amortization 1,535 1,634 1,640 1,764 1,897 2,041 2,195 2,361

D&A, % of Revenue 4.5% 4.5% 4.2% 4.2% 4.2% 4.2% 4.2% 4.2%



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Bamburi Financial Model - Enhancements.xlsx: BS 8/5/2016


Balance Sheet

(Kes. in millions)


Fiscal 2014 2015 2016 2017 2018 2019 2020

ASSETS

Current Assets

Cash & Equivalents KES 7,644 KES 8,453 KES 10,165 KES 12,302 KES 14,920 KES 18,081 KES 21,853

Trade & other Receivables, net 2,209 2,945 3,168 3,407 3,664 3,941 4,239

Inventories 5,585 6,604 7,082 7,595 8,145 8,734 9,366

Corporate Tax Recoverable 107 131 131 131 131 131 131

Total Current Assets 15,545 18,133 20,545 23,435 26,860 30,888 35,590

Net PPE 24,263 22,897 23,133 23,236 23,195 23,000 22,640

Goodwill 217 217 217 217 217 217 217

Prepaid Operating Lease Rentals 186 164 164 164 164 164 164

Intangible Assets 118 84 84 84 84 84 84

Other Equity Investments 662 535 535 535 535 535 535

TOTAL ASSETS KES 40,991 KES 42,030 KES 44,678 KES 47,671 KES 51,056 KES 54,888 KES 59,229

LIABILITIES

Current Liabilities

Trade & Other Payable KES 6,414 KES 6,803 KES 7,336 KES 7,910 KES 8,529 KES 9,197 KES 9,916

Accrued Liabilities & Others 354 418 450 484 520 559 602

Corporate Tax Payable - 472 472 472 472 472 472

Revolver - - - - - - -

Short Term & Current Portion of Long-Term Debt - - - - - - -

Total Current Liabilities 6,768 7,693 8,257 8,865 9,521 10,228 10,990

Long-Term Debt KES 0 KES 0 - - - - -

Deferred Tax Liability 3,955 3,365 3,365 3,365 3,365 3,365 3,365

Provisions 457 620 620 620 620 620 620

Employee's Benefit Liabilities 692 646 646 646 646 646 646

TOTAL LIABILITIES KES 11,872 KES 12,324 KES 12,888 KES 13,496 KES 14,152 KES 14,859 KES 15,621

SHAREHOLDERS' EQUITY

Minority Interest KES 2,391 KES 2,817 KES 3,460 KES 4,134 KES 4,843 KES 5,587 KES 6,368

Share Capital 1,815 1,815 1,815 1,815 1,815 1,815 1,815

Retained Earnings 17,220 18,348 19,790 21,499 23,520 25,902 28,700

Accumulated Other Comp. Income 7,693 6,726 6,726 6,726 6,726 6,726 6,726

TOTAL SHAREHOLDERS' EQUITY KES 29,119 KES 29,706 KES 31,790 KES 34,174 KES 36,903 KES 40,029 KES 43,609

TOTAL LIABILITIES & SHAREHOLDERS' EQUITY KES 40,991 KES 42,030 KES 44,678 KES 47,671 KES 51,056 KES 54,888 KES 59,229

Check o.k o.k o.k o.k o.k o.k o.k

Net Revenue KES 36,029 KES 39,200 KES 42,162 KES 45,348 KES 48,775 KES 52,461 KES 56,425

Cost of Sales 26,683 26,670 28,601 30,672 32,892 35,272 37,825

SG&A Expenses 3,818 4,302 4,796 5,340 5,938 6,597 7,321

Days Receivable Outstanding 22.4 27.4 27.4 27.4 27.4 27.4 27.4

Days Inventories Outstanding 76.4 90.4 90.4 90.4 90.4 90.4 90.4

Days Payable Outstanding 76.8 80.2 80.2 80.2 80.2 80.2 80.2

Accrued Liabilities & Others, % of Revenue 1.0% 1.1% 1.1% 1.1% 1.1% 1.1% 1.1%



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Bamburi Financial Model - Enhancements.xlsx: CF 8/5/2016


Cash Flow Statement

(Kes. in millions)

Estimated Projected

Fiscal 2016 2017 2018 2019 2020

Cash From Operating Activities:

Net Income KES 7,039 KES 7,586 KES 8,192 KES 8,861 KES 9,601

Plus: Depreciation & Amortization 1,764 1,897 2,041 2,195 2,361

Changes in Working Capital:

(Increase)/Decrease in Trade & other Receivables, net (223) (239) (257) (277) (298)

(Increase)/Decrease in Inventories (478) (513) (550) (589) (632)

Increase/(Decrease) in Trade & Other Payable 533 574 619 668 720

Increase/(Decrease) in Accrued Liabilities & Others 32 34 37 39 42

Total Change in Working Capital (137) (144) (152) (160) (168)

Total Cash From Operating Activities KES 8,666 KES 9,339 KES 10,081 KES 10,896 KES 11,794

Cash From Investing Activities:

(Increase)/Decrease in Capital Expenditures (2,010) (1,647) (2,000) (2,000) (2,000) (2,000) (2,000)

Total Cash From Investing Activities (KES 2,000) (KES 2,000) (KES 2,000) (KES 2,000) (KES 2,000)

Net D in PPE

Cash From Financing Activities:

Issuance of Common Stock KES 0 KES 0 KES 0 KES 0 KES 0

Common Stock Dividends (4,954) (5,202) (5,462) (5,735) (6,022)

Cash Available / (Required) Before Debt KES 1,712 KES 2,137 KES 2,618 KES 3,161 KES 3,772

Debt Borrowing / (Repayment) - - - - -

Total Cash From Financing Activities (KES 4,954) (KES 5,202) (KES 5,462) (KES 5,735) (KES 6,022)

Beginning Cash Balance KES 8,453 KES 10,165 KES 12,302 KES 14,920 KES 18,081

Change in Cash 1,712 2,137 2,618 3,161 3,772

Ending Cash Balance KES 10,165 KES 12,302 KES 14,920 KES 18,081 KES 21,853

Average Cash Balance 9,309 11,233 13,611 16,501 19,967

Dividends Estimate

Dividends per Share KES 13.00 KES 13.65 KES 14.33 KES 15.05 KES 15.80 KES 16.59

Dividends per Share Growth 5.0% 5.0% 5.0% 5.0% 5.0%

Basic Shares Outstanding 363.0 363.0 363.0 363.0 363.0 363.0

Total Dividends KES 4,954 KES 5,202 KES 5,462 KES 5,735 KES 6,022



DRAFT VERSIO

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Bamburi Financial Model - Enhancements.xlsx: Debt Sweep 8/5/2016


Debt Schedule

(Kes. in millions)

Estimated Projected

Fiscal 2016 2017 2018 2019 2020

Cash Available/(Required) Before Debt KES 1,712 KES 2,137 KES 2,618 KES 3,161 KES 3,772

Plus: Beginning Cash on Balance Sheet 8,453 10,165 12,302 14,920 18,081

Less: Minimum Cash Balance (8,000) (8,000) (8,000) (8,000) (8,000)

Mandatory Debt Repayment - - - - -

Cash Before Discretionary Debt Repayment / (Borrowing) KES 2,165 KES 4,302 KES 6,920 KES 10,081 KES 13,853

Tranche 1

Beginning Balance KES 0 KES 0 KES 0 KES 0 KES 0


Ending Balance KES 0 KES 0 KES 0 KES 0 KES 0 KES 0

Average Balance KES 0 KES 0 KES 0 KES 0 KES 0

Tranche 2





Commercial Paper





Revolver


Discretionary Sweep - - - - -



Total Debt, Beginning Balance KES 0 KES 0 KES 0 KES 0 KES 0

Less: Mandatory Debt Repayment - - - - -

Revolver Debt Borrowing / (Repayment) - - - - -

Total Debt, Ending Balance KES 0 KES 0 KES 0 KES 0 KES 0

Less: Current Portion - - - - -

Less: Commercial Paper - - - - -

Less: Revolver - - - - -

Total Debt, less Current Portion KES 0 KES 0 KES 0 KES 0 KES 0

Beginning Cash Balance KES 8,453 KES 10,165 KES 12,302 KES 14,920 KES 18,081

Ending Cash Balance 10,165 12,302 14,920 18,081 21,853

Average Cash Balance 9,309 11,233 13,611 16,501 19,967



DRAFT VERSIO

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Bamburi Financial Model - Enhancements.xlsx: Debt Sweep 8/5/2016


Interest Schedule

(Kes. in millions)

Estimated Projected

Fiscal Year Ending December 31, 2016 2017 2018 2019 2020

Interest Rates

Cash & Cash Equivalents 10.5% 10.5% 10.5% 10.5% 10.5%

Tranche 1 15.5% 15.5% 15.5% 15.5% 15.5%

Tranche 2 16.0% 16.0% 16.0% 16.0% 16.0%

Commercial Paper 12.0% 12.0% 12.0% 12.0% 12.0%

Revolver 17.0% 17.0% 17.0% 17.0% 17.0%

Interest Income 1 (1 = Beginning balance

Cash & Cash Equivalents 2 = Average Balance) KES 888 KES 1,067 KES 1,292 KES 1,567 KES 1,899

Interest Expense

Tranche 1 KES 0 KES 0 KES 0 KES 0 KES 0

Tranche 2 - - - - -

Commercial Paper - - - - -

Revolver - - - - -

Total Interest Expense 0 KES 0 KES 0 KES 0 KES 0 KES 0

Net Interest Expense (KES 888) (KES 1,067) (KES 1,292) (KES 1,567) (KES 1,899)



DRAFT VERSIO

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Bamburi Financial Model - Enhancements.xlsx: DCF 8/5/2016



DATE: 8/1/2016(All figures in millions, except per share data)

Estimated Projected

Fiscal 2016 2017 2018 2019 2020

EBITDA KES 10,932 KES 11,667 KES 12,451 KES 13,287 KES 14,178

EBIT 9,168 9,770 10,410 11,092 11,818

Less: Cash Taxes @ 30.0% (2,750) (2,931) (3,123) (3,328) (3,545)

Tax-effected EBIT KES 6,417 KES 6,839 KES 7,287 KES 7,765 KES 8,272

Plus: Depreciation & Amortization 1,764 1,897 2,041 2,195 2,361

Less: Capital expenditures (2,000) (2,000) (2,000) (2,000) (2,000)

Plus / (Less): Change in net working capital (137) (144) (152) (160) (168)

Unlevered free cash flow KES 6,045 KES 6,592 KES 7,176 KES 7,800 KES 8,465

WACC @ 18.0%

NPV of Unlevered free cash flow @ 18.0% KES 21,948

EBITDA MULTIPLE METHOD

Terminal Value Undiscounted Discounted Implied Perpetual Growth Rate

EBITDA Multiple 5.5x KES 77,980 KES 34,086 6.7%

6.0x 85,069 37,185 7.5%

DCF Range (Implied Enterprise Value) KES 56,034 KES 59,133

Equity Value (a)

KES 61,670 KES 64,769

Implied Price per Share (b)

KES 170 KES 178

PERPETUITY GROWTH METHOD

Terminal Value Undiscounted Discounted Implied EBITDA Multiple

Perpetuity Growth Rate 7.0% KES 80,467 KES 35,173 567.5%

8.0% 89,341 39,052 630.1%

DCF Range (Implied Enterprise Value) KES 57,121 KES 61,000

Equity Value (a)

KES 62,757 KES 66,636

Implied Price per Share (b)

KES 173 KES 184


Terminal EBITDA Multiple

169.91 4.5x 5.5x 6.5x 7.5x 8.5x

14.0% KES 173.59 KES 193.88 KES 214.17 KES 234.45 KES 254.74

15.0% 168.02 187.44 206.86 226.28 245.71

16.0% 162.71 181.31 199.91 218.51 237.11

17.0% 157.66 175.47 193.29 211.11 228.93

18.0% 152.83 169.91 186.98 204.06 221.13

19.0% 148.23 164.60 180.97 197.34 213.71

20.0% 143.84 159.54 175.24 190.94 206.63

21.0% 139.65 154.71 169.77 184.83 199.89

PERPETUITY GROWTH METHOD

Perpetuity Growth Rate

172.90 4.0% 5.0% 6.0% 7.0% 8.0%

14.0% KES 205.40 KES 220.39 KES 239.14 KES 263.23 KES 295.36

15.0% 187.76 199.60 214.08 232.18 255.45

16.0% 173.07 182.60 194.05 208.03 225.51

17.0% 160.64 168.44 177.65 188.71 202.23

18.0% 150.00 156.46 164.00 172.90 183.59

19.0% 140.79 146.20 152.45 159.73 168.34

20.0% 132.73 137.31 142.55 148.59 155.63

21.0% 125.63 129.54 133.97 139.03 144.87


Note: Present Values as of December 31, 2015.

(a) Assumes KES -5,636M of net debt.

(b) Assumes 363.0MM shares outstanding.

WA

CC

WA

CC

–

–

–

–

–

–

––

–

–

–

––


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Bamburi Financial Model - Enhancements.xlsx: DCF 8/5/2016


Bamburi Cement Limited Weighted Average Cost Of Capital


WACC CALCULATION

I. Cost of Debt (Kd):

Estimated All-In Cost for Company 15.1%

Tax Rate (T) 30.0%

Kd = Cost of Debt * (1-T) = 10.6%

II. Cost of Preferred (Kp):

Estimated All-In Cost for Company 0.0%

Tax Rate (T), if applicable 30.0%

Kp = Cost of Preferred * (1-T) = 0.0%

II. Cost of Equity (Ke):

Risk Free Rate (10-year T-Note) (rf) (a)

14.56%

Target Beta (b)

0.75

Market Risk Premium (rm) (c)

12.7%

Ke = rf + beta * rm = 24.2%

III. Weighted Average Cost of Capital (WACC): D/E Ratio

Target Debt to Cap. Ratio 20.0 16.7% 20.0%

Target Preferred to Cap. Ratio - 0.0%

Implicit Equity to Cap. Ratio 100.0 83.3%

WACC = (Kd * wd) + (Ke * we) 120.0 21.9%

CALCULATION OF BETA

Companies Ticker Total Debt Preferred

Equity

Value

Debt to

Equity

Preferred

to Equity

Marginal Tax

Rate

Levered Beta (d)

Unlevered

Beta (e)

Adjusted

Beta (f)

Athi River Mining ARM 24,381 - 15,849 153.8% 0.0% 30.0% 1.62 0.78 0.85

East African Portland CementPORT 5,592 - 2,925 191.2% 0.0% 30.0% 0.48 0.21 0.47

- - - NA NA 30.0% NA NA

- - - NA NA 30.0% NA NA

- - - NA NA 30.0% NA NA

Average 1.05 0.49 0.66

Median 1.05 0.49 0.66

- -

Bamburi Cement Limited BAMB KES 0 KES 0 KES 60,251 0.0% 0.0% 30.0% 0.52 0.52 0.68

(a) 10 year Kenya Government Bond as of August 1, 2016.

(b) Target beta equals average unlevered beta for comparable group * [1+(1- tax rate) * (target debt to equity ratio) + target preferred to equity ratio].

Assumes any preferred stock is not tax-deductible.

(c) Source: Moodys.com. Long-horizon expected equity risk premium of 12.71% (.i.e 6.71% + CRP of 6%).

(d) Two year weekly beta vs. Nairobi All Share Index, as of August 1, 2016.

(e) Unlevered beta equals [levered beta / [1+(1-tax rate) x (debt to equity ratio) + (preferred to equity ratio)].

(f) All beta should gravitate towards 1.


DRAFT VERSIO

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Bamburi Financial Model - Enhancements.xlsx: RV 8/5/2016


Comparative Analysis (Relative Valuation)


Estimated Projected

Fiscal 2016 2017 2018 2019 2020

WACC @ 18.0%

P/E MULTIPLE METHOD

Net Income KES 6,396 KES 6,911 KES 7,483 KES 8,117 KES 8,820

P/E Multiple 13.0x– 13.0x– 13.0x– 13.0x– 13.0x–

Implied Equity Value KES 83,149 KES 89,846 KES 97,280 KES 105,525 KES 114,663

Basic & Diluted Shares Outstanding 363.0 363.0 363.0 363.0 363.0

Implied Price Per Share KES 229 KES 248 KES 268 KES 291 KES 316

Present Value of Implied Price Per Share KES 194 KES 178 KES 163 KES 150 KES 138


EBITDA KES 10,932 KES 11,667 KES 12,451 KES 13,287 KES 14,178

EV/EBITDA Multiple – 7.0x – 7.0x – 7.0x – 7.0x – 7.0x

Implied Enterprise Value KES 76,521 KES 81,669 KES 87,158 KES 93,009 KES 99,248

Add: Cash & Equivalents 10,165 12,302 14,920 18,081 21,853

Less: Total Debt, Ending Balance - - - - -

Minority Interest (3,460) (4,134) (4,843) (5,587) (6,368)

Implied Equity Value KES 83,226 KES 89,837 KES 97,235 KES 105,504 KES 114,733

Basic & Diluted Shares Outstanding 363.0 363.0 363.0 363.0 363.0

Implied Price Per Share KES 229 KES 248 KES 268 KES 291 KES 316

Present Value of Implied Price Per Share KES 194 KES 178 KES 163 KES 150 KES 138


DRAFT VERSIO

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Bamburi Financial Model - Enhancements.xlsx: Ratios 8/5/2016


Credit and Leverage Statistics

(Kes. in millions)


Fiscal 2015 2016 2017 2018 2019 2020

Tranche 1 KES 0 KES 0 KES 0 KES 0 KES 0 KES 0

Tranche 2 - - - - - -

Commercial Paper - - - - - -

Revolver - - - - - -

Total Debt - - - - - -

Less: Cash (8,453) (10,165) (12,302) (14,920) (18,081) (21,853)

Total Net Debt (8,453) (10,165) (12,302) (14,920) (18,081) (21,853)

Preferred Debt - - - - - -

Total S/H Equity 29,706 31,790 34,174 36,903 40,029 43,609

Total Net Capital 21,253 21,626 21,872 21,983 21,948 21,755

Total Capital 29,706 31,790 34,174 36,903 40,029 43,609

EBITDA 10,242 10,932 11,667 12,451 13,287 14,178

EBIT 8,602 9,168 9,770 10,410 11,092 11,818

Total Capex 1,647 2,000 2,000 2,000 2,000 2,000

Total Interest Expense - - - - - -

Net Interest Expense - (888) (1,067) (1,292) (1,567) (1,899)

Total Assets 42,030 44,678 47,671 51,056 54,888 59,229

RATIOS

Total Debt / EBITDA 0.0x 0.0x 0.0x 0.0x 0.0x 0.0x

Net Debt / EBITDA -0.8x -0.9x -1.1x -1.2x -1.4x -1.5x

Total Debt / (EBITDA - Total Capex) 0.0x 0.0x 0.0x 0.0x 0.0x 0.0x

(Total Debt + Preferred Stock) / EBITDA 0.0x 0.0x 0.0x 0.0x 0.0x 0.0x

(Total Debt + Preferred Stock) / (EBITDA-Total capex) 0.0x 0.0x 0.0x 0.0x 0.0x 0.0x

EBITDA / Total Interest Expense NA NA NA NA NA NA

(EBITDA-Total Capex) / Total Interest Expense NA NA NA NA NA NA

EBIT / Total Interest Expense NA NA NA NA NA NA

(EBIT-Total Capex) / Total Interest Expense NA NA NA NA NA NA

Total Debt / Total Capitalization 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

(Total Debt + Preferred) / Total Capitalization 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

EBITDA / Total Assets 24.4% 24.5% 24.5% 24.4% 24.2% 23.9%

Net Debt / Net Capitalization (39.8)% (47.0)% (56.2)% (67.9)% (82.4)% (100.5)%

(Net Debt + Preferred) / Net Capitalization (39.8)% (47.0)% (56.2)% (67.9)% (82.4)% (100.5)%

Note: Excludes future lease payments.


S&P Median Industrial Rating Statistics ('02-'04)

AAA AA A BBB BB B CCC

2016

EBIT Interest Coverage NA 23.8x 19.5x 8.0x 4.7x 2.5x 1.2x 0.4x

EBITDA Interest Coverage NA 25.5x 24.6x 10.2x 6.5x 3.5x 1.9x 0.9x

Total Debt / EBITDA 0.0x 0.4x 0.9x 1.6x 2.2x 3.5x 5.3x 7.9x

Total Debt / Total Capital 0.0% 12.4% 28.3% 37.5% 42.5% 53.7% 75.9% 113.5%

S&P Median Industrial Rating Statistics ('01-'03)

AAA AA A BBB BB B CCC

2016

EBIT Interest Coverage NA 23.8x 13.6x 6.9x 4.2x 2.3x 0.9x 0.4x

EBITDA Interest Coverage NA 25.3x 17.1x 9.4x 5.9x 3.1x 1.6x 0.9x

Total Debt / EBITDA 0.0x 0.2x 1.1x 1.7x 2.4x 3.8x 5.6x 7.4x

Total Debt / Total Capital 0.0% 6.2% 34.8% 39.8% 45.6% 57.2% 74.2% 101.2%


DRAFT VERSIO

N ONE

MUTHENGI M

IKE

Bamburi Financial Model - Enhancements.xlsx: Ref Range 8/5/2016




Relevant Multiple Implied Enterprise Implied Equity Implied Price per

Methodology Statistic Range Value Value Share

Analysis of Selected Publicly Traded Bamburi Cement Limited

Net Revenue 2015A KES 39,200 1.50x – 1.55x KES 58,800 – KES 60,760 KES 64,436 – KES 66,396 KES 177.53 – KES 182.93

2016E 42,162 1.45x – 1.50x 61,135 – 63,243 66,771 – 68,879 183.96 – 189.77

2017P 45,348 1.40x – 1.45x 63,488 – 65,755 69,124 – 71,391 190.44 – 196.69

EBITDA 2015A KES 10,242 5.5x – 6.0x KES 56,331 – KES 61,452 KES 61,967 – KES 67,088 KES 170.73 – KES 184.84

2016E 10,932 5.0x – 5.5x 54,658 – 60,124 60,294 – 65,760 166.12 – 181.18

2017P 11,667 4.5x – 5.0x 52,501 – 58,335 58,137 – 63,971 160.18 – 176.25

EBIT 2015A KES 8,602 7.0x – 7.5x KES 60,214 – KES 64,515 KES 65,850 – KES 70,151 KES 181.43 – KES 193.28

2016E 9,168 6.5x – 7.0x 59,590 – 64,174 65,226 – 69,810 179.71 – 192.34

2017P 9,770 6.0x – 6.5x 58,619 – 63,504 64,255 – 69,140 177.03 – 190.49

EPS 2015A KES 14.77 13.0x – 14.0x KES 64,054 – KES 69,415 KES 69,690 – KES 75,051 KES 192.01 – KES 206.78

2016E 17.62 12.0x – 13.0x 71,117 – 77,513 76,753 – 83,149 211.46 – 229.09

2017P 19.04 11.0x – 12.0x 70,387 – 77,299 76,023 – 82,935 209.45 – 228.50

Reference Range KES 60,000 – KES 65,000 KES 65,000 – KES 70,000 KES 180.00 – KES 200.00

KES 61,000 KES 66,000 KES 67,000 KES 71,000 KES 183.00 KES 196.00

Analysis of Selected Construction Acquisitions

LTM Net Revenue KES 39,200 1.70x – 1.80x KES 66,640 – KES 70,560 KES 72,276 – KES 76,196 KES 199 – KES 210

EBITDA 10,242 7.0x – 8.0x 71,694 – 81,936 77,330 – 87,572 213.05 – 241.27

EBIT 8,602 8.0x – 9.0x 68,816 – 77,418 74,452 – 83,054 205.12 – 228.82

EPS 14.77 14.0x – 15.0x 69,415 – 74,776 75,051 – 80,412 206.78 – 221.55



Analysis of Selected Premiums Paid

Stock Price 4 Weeks Prior KES 158.00 10.0% – 20.0% KES 57,446 – KES 63,181 KES 63,082 – KES 68,817 KES 173.80 – KES 189.60

1 Day Prior 166.00 5.0% – 15.0% 57,628 – 63,653 63,264 – 69,289 174.30 – 190.90




EBITDA Multiple Method 5.5x – 6.0x KES 56,067 – KES 59,334 KES 61,703 – KES 64,970 KES 170.00 – KES 179.00

Perpetuity Growth Method 7.0% – 8.0% 54,252 – 57,519 59,888 – 63,155 165.00 – 174.00




8/1/2016


DRAFT VERSIO

N ONE

MUTHENGI M

IKE

Bamburi Financial Model - Enhancements.xlsx: Football 8/5/2016



min Range max

52-week Trading Range KES 146.00 54.00 KES 200.00

Analysis of Selected Publicly Traded Bamburi Cement Limited KES 180.00 20.00 KES 200.00

Analysis of Selected Acquisitions KES 205.00 20.00 KES 225.00

Analysis of Selected Premiums Paid KES 175.00 15.00 KES 190.00

Discounted Cash Flow Analysis KES 170.00 10.00 KES 180.00

Reference Range KES 175.20 23.80 KES 199.00

Current Stock Price KES 166.00 0

KES 166.00 1

KES 146.00

KES 180.00

KES 205.00

KES 175.00

KES 170.00

KES 175.20

KES 200.00

KES 200.00

KES 225.00

KES 190.00

KES 180.00

KES 199.00

120 140 160 180 200 220 240 260

52-week Trading Range

Analysis of SelectedPublicly Traded


Analysis of SelectedAcquisitions

Analysis of SelectedPremiums Paid

Discounted Cash FlowAnalysis

Reference Range

Bamburi Price Per Share

METHODOLOGYBamburi Cement Limited


DRAFT VERSIO

N ONE

MUTHENGI M

IKE

Bamburi Financial Model - Enhancements.xlsx: Graphs 8/5/2016


Illustrative Graphs

KES 0.00

KES 5.00

KES 10.00

KES 15.00

KES 20.00

KES 25.00

2012 2013 2014 2015 2016 2017 2018 2019 2020

Am

ount

Per

Share

Year

Earnings / Dividends Per Share

Basic & Diluted Earnings per Share Dividends per Share

KES 3,000

KES 4,000

KES 5,000

KES 6,000

KES 7,000

KES 8,000

KES 9,000

KES 10,000

2012 2013 2014 2015 2016 2017 2018 2019 2020

Am

ount

in M

illions

Year

Profit (Loss) for the Year

Net Income % Change

KES 0

KES 10,000

KES 20,000

KES 30,000

KES 40,000

KES 50,000

KES 60,000

20122013201420152016 2017 2018 2019 2020

Am

ount

in M

illions

Year

REVENUE BREAKDOWN

Net Revenue EBITDA Operating Income Net Income

Net Revenue, KES 42,162 ,

62%EBITDA, KES 10,932 , 16%

Operating Income, KES 9,168 , 13%

Net Income, KES 6,396 , 9%

2016

Net Revenue EBITDA Operating Income Net Income

Estimated


bamburi financial model - enhancements

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