Premier Quality Kenya Dairy Business Plan — Investment Analysis
The project and equity returns, the payback profile, and the assumptions on which each depends.
Investment Analysis
Jump to section
- Overview & contents
- i. Important Notice and Basis of Preparation
- 1. Executive Summary
- 2. Market and Opportunity
- 3. Why the Fodder Block Is the Business
- 4. The Production Model
- 5. SWOT and Competitive Position
- 6. Housing, Water and Equipment
- 7. Regulatory and Compliance Framework
- 8. Management and Organisation
- 9. Financial Plan
- 10. Break-Even and Debt Service
- 11. Investment Analysis
- 12. Sensitivity and Scenario Analysis
- 13. Risk Analysis
- 14. Implementation Roadmap
- 15. Key Performance Indicators
- 16. Key Assumptions
- 17. Conclusion and Recommendation
- A. Appendix A: Consolidated Financial Summary
- B. Appendix B: Capital and Herd Schedules
- C. Appendix C: Funding and Debt Schedules
- D. Appendix D: Risk Register
- E. Appendix E: Glossary
- 11.1 Returns
- 11.2 What the terminal position is worth
- 11.3 What would improve the return
11.1 Returns
|
Measure |
Base case |
Comment |
|---|---|---|
|
Total project cost |
KES 27 345 000 |
Capital expenditure, the herd build and working capital |
|
Promoter equity |
KES 17 345 000 |
63% of the funding structure |
|
Term debt |
KES 10 000 000 |
37%; ten years at 15.5% with a three-year principal grace |
|
Project internal rate of return |
3.1% |
Five years plus the terminal asset value |
|
Return to equity |
2.5% |
No distributions in the projection period; value realised on the terminal position |
|
Money multiple on equity |
1.13x |
Terminal equity of KES 19 628 651 against KES 17 345 000 subscribed |
|
Terminal asset value |
KES 24 667 500 |
52 milking cows, 72 head of young stock and the fixed asset base |
|
Cumulative profit after tax, Years 1 to 5 |
(KES 2 987 587) |
The enterprise has not recovered its start-up losses by Year 5 |
|
Cumulative project cash flow before terminal value |
(KES 20 816 762) |
The return sits in the asset, not in five-year cash |
|
Year 5 EBITDA run rate |
KES 5 233 000 |
Growing, and the herd is still maturing at the end of the projection |
11.2 What the terminal position is worth
|
Component |
At Year 5 |
Basis |
|---|---|---|
|
Milking herd, 52 head |
KES 13 000 000 |
At KES 250 000 a productive milking cow, below the top of the market range |
|
Young stock, 72 head |
KES 6 480 000 |
At KES 90 000 a head, blended across ages from calf to bulling heifer |
|
Fixed assets, net of depreciation |
KES 5 187 500 |
Housing, water, milking, cooling, forage equipment and the developed fodder block |
|
Terminal asset value |
KES 24 667 500 |
|
|
Plus closing cash |
KES 3 043 716 |
|
|
Less debt outstanding |
(KES 8 082 565) |
Five years still to run on the facility |
|
Terminal equity value |
KES 19 628 651 |
Against KES 17 345 000 subscribed |
The terminal valuation is deliberately conservative. Milking cows are valued at KES 250 000 against a market that runs to KES 290 000 and above for high-producing animals, and the fixed assets are taken at net book value rather than at replacement cost, which for a developed fodder block with an established Napier stand and a producing borehole understates what a buyer would pay. No goodwill, no value for the cooperative supply agreement and no value for the milk recording history is included.
11.3 What would improve the return
|
Lever |
Effect on Year 5 profit after tax |
Assessment |
|---|---|---|
|
Yield of 26.5 litres rather than 23 |
+KES 2 140 602 |
The largest single lever. A management outcome, not a genetic given |
|
Dairy meal 20% cheaper through a cooperative feed mill |
+KES 1 866 280 |
The Meru Maziwa Millers facility supplies members below market price; membership is the route |
|
Farmgate at the announced KES 52 rather than KES 50 |
+KES 701 443 |
Available now if the announced price is realised in the chosen county |
|
Forage fully self-grown rather than 90% |
+KES 455 480 |
Requires fodder block yield above plan, or a slightly smaller herd |
|
Quality-based pricing premium |
Not modelled |
Cooperatives are adopting it. The cooling tank and hygiene discipline are already in the budget |
|
Holding beyond Year 5 |
Removes the terminal value dependency |
The herd is still maturing and the debt amortises for five further years |