Fish Master Premier Business Plan — Investment Analysis

The project and equity returns, the payback profile, and the assumptions on which each depends.

Investment Analysis

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11.1 Returns
11.2 Sensitivity of the return to the exit assumption

11.1 Returns

Measure	Base case	Comment
Total project cost	R25 600 000	Qualifying capital expenditure, pre-operating costs and working capital
Promoter and investor equity	R18 600 000	73% of project cost
Term debt	R7 000 000	Eight years at 13.5% with a three-year principal grace
Cost-sharing grant	R4 000 000	Claimed in arrears; upside rather than construction funding
Project internal rate of return	3.3%	Five years plus a terminal value at 6 times Year 5 EBITDA
Return to equity	5.9%	No distributions in the projection period; value realised on the terminal position
Money multiple on equity	1.33x	Terminal equity of R24 819 500 against R18 600 000 subscribed
Terminal value	R26 346 000	6x Year 5 EBITDA of R4 391 000
Cumulative profit after tax, Years 1 to 5	(R5 933 069)	The enterprise has not recovered its start-up losses by Year 5
Cumulative project cash flow before terminal value	(R22 345 888)	The return sits in the position, not in five-year cash
Year 5 EBITDA run rate	R4 391 000	Growing, with the hatchery still scaling at the end of the projection

Figure 20. Cumulative project cash flow before terminal value.

Read this as a position-building investment, not an income one

A project return of 3.3 per cent and an equity return of 5.9 per cent over five years are not attractive numbers on their own, and this document does not present them as such. They are the consequence of a three-year ramp in a sector where several ventures have failed outright. What the investor holds at the end of Year 5 is a hatchery producing 2.6 million traceable sexed fingerlings a year into a market where supply is short and quality is poor, an operating grow-out farm supplying premium channels weekly, and — in a sector where permitting has been slow and inconsistent — a facility with its NEMBA species permit, water use authorisation and environmental approvals in hand. That permit position is itself a scarce asset. The return that matters is the one from Year 6 onward, on a business whose establishment losses have already been absorbed.

11.2 Sensitivity of the return to the exit assumption

Figure 21. Returns against the exit assumption.

Exit multiple of Year 5 EBITDA	Terminal value (R)	Project IRR	Terminal equity (R)	Equity IRR
4x	17 564 000	-4.4%	16 037 500	-2.9%
5x	21 955 000	-0.3%	20 428 500	1.9%
6x	26 346 000	3.3%	24 819 500	5.9%
7x	30 737 000	6.5%	29 210 500	9.4%
8x	35 128 000	9.4%	33 601 500	12.6%

The return is materially dependent on the exit assumption, and readers should substitute their own. At four times the project returns 0.5 per cent; at eight times it returns 5.8 per cent. A hatchery with an established genetics position, a customer base buying every production cycle and permits in hand is not valued the same way a commodity grow-out farm is, and the multiple applied should reflect which of the two businesses is being bought.

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