Centurion Motor Exchange Business Plan — Investment Case and Valuation
The return profile, valuation basis and exit assumptions, and what the numbers do and do not support.
Section 22 of 28
Investment Case and Valuation
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- 1. Executive Summary
- 2. Investment Thesis
- 3. Company Overview
- 4. Problem, Customer Need and Value Proposition
- 5. Products and Services
- 6. Industry Analysis
- 7. Market Analysis
- 8. Customer Analysis
- 9. Competitive Landscape
- 10. Business Model
- 11. Go-to-Market Strategy
- 12. Operating Model
- 13. Management and Organisation
- 14. Strategic Plan
- 15. SWOT Analysis
- 16. Risk Analysis
- 17. ESG and Sustainability
- 18. Implementation Roadmap
- 19. Financial Plan
- 20. Funding Requirement and Structure
- 21. Debt Serviceability
- 22. Investment Case and Valuation
- 23. Sensitivity and Scenario Analysis
- 24. KPIs and Management Dashboard
- 25. Conclusion
- A. Appendix A: Scenario Parameters
- B. Appendix B: Year-1 Monthly Projections
- C. Appendix C: Sources and Glossary
The Investor earns 1.99x and 18.0%, adequate for patient capital, short of a buy-out hurdle
Table 22.1: Investor returns, base case
|
Measure |
Value |
|---|---|
|
Investor ownership |
40% after Tranche A; 50% after Tranche B |
|
Entry valuation (post-money) |
Tranche A R30m; Tranche B R72m; blended R48m for 50% |
|
Total invested by the Investor |
R24m |
|
FY32 EBITDA |
R15.4m |
|
Exit multiple (EV / EBITDA) |
5.0x |
|
Enterprise value at exit |
R77.0m |
|
Add: net cash (excluding floor-plan) |
R18.6m |
|
Equity value at exit |
R95.6m |
|
Investor proceeds (50%) |
R47.8m |
|
Investor MOIC / IRR |
1.99x / 18.0% |
|
Founder proceeds, MOIC and IRR |
R47.8m; 8.0x; 51.4% |
|
Payback |
At exit (no distributions in the plan period); c. 5 years from close |
|
Return on invested capital, FY32 |
34.8% |
IRR measured monthly from financial close (month 0) to exit at the end of FY32 (month 60).
A DCF supports the entry price: the project’s NPV of R16.5m roughly equals the value the Founders bring
Table 22.2: Discounted cash-flow valuation (free cash flow to the firm, R million)
|
FY28 |
FY29 |
FY30 |
FY31 |
FY32 |
|
|---|---|---|---|---|---|
|
EBITDA |
(2.5) |
2.7 |
7.4 |
13.3 |
15.4 |
|
Tax on EBIT (unlevered, no loss shield) |
– |
(0.3) |
(1.0) |
(2.7) |
(3.2) |
|
Capital expenditure |
(11.1) |
(11.2) |
(0.4) |
(0.5) |
(0.5) |
|
Increase in net working capital |
(21.8) |
(10.9) |
(16.5) |
(5.7) |
(4.5) |
|
Floor-plan funding (operating) |
15.1 |
8.4 |
10.7 |
3.9 |
3.1 |
|
Free cash flow to the firm |
(20.3) |
(11.3) |
0.1 |
8.3 |
10.3 |
|
Discount factor (mid-year) |
0.918 |
0.774 |
0.652 |
0.550 |
0.464 |
|
Present value |
(18.7) |
(8.8) |
0.1 |
4.6 |
4.8 |
|
Valuation input / output |
Value |
|---|---|
|
Cost of equity: risk-free 9.5% + beta 1.2 × ERP 6.0% + size and specific risk 6.0% |
22.7% |
|
After-tax cost of debt (12.5% pre-tax); 30% debt weighting |
9.1% |
|
WACC |
18.6% |
|
Terminal growth |
5.0% |
|
PV of FY28–FY32 free cash flow |
(R18.0m) |
|
Terminal value (FY32), implied EV/EBITDA |
R81.2m (5.3x) |
|
PV of terminal value |
R34.6m |
|
Enterprise value at close (= project NPV, as all investment is inside the forecast) |
R16.5m |
|
Indicative equity value once all equity is invested (NPV + R30m) |
R46.5m |
|
Investor’s R24m as a share of that value |
51.6% |
The DCF indicates that, once all R30m of equity is invested, the business is worth about R47m; the Investor’s R24m would buy 52% at that value against the 50% it receives. The ownership terms are therefore approximately fair. The terminal value’s implied 5.3x multiple is consistent with the 5.0x exit assumption.
Table 22.3: Multiple-based valuation and structuring alternatives
|
Exit EV/EBITDA |
4.0x |
4.5x |
5.0x |
5.5x |
6.0x |
|---|---|---|---|---|---|
|
Investor IRR |
13.2% |
15.7% |
18.0% |
20.2% |
22.3% |
|
Investor MOIC |
1.67x |
1.83x |
1.99x |
2.15x |
2.31x |
|
Investor shareholding for R24m |
50% |
55% |
60% |
65% |
|---|---|---|---|---|
|
Investor IRR |
18.0% |
20.7% |
23.2% |
25.6% |
|
Investor MOIC |
1.99x |
2.19x |
2.39x |
2.59x |
|
Founder IRR on R6m |
51.4% |
48.3% |
44.8% |
41.0% |
Market evidence versus model assumptions
JSE-listed vehicle retailers provide a reference point for exit pricing, but a two-site private business would trade at a substantial discount to them for size, liquidity and concentration. We have not identified reliable public precedent-transaction data for sub-R100m independent dealerships, so the 5.0x exit multiple is a Company assumption rather than a market observation; the sensitivity range of 4.0x–6.0x brackets it. Market growth, used-car pricing and competitor data in this memorandum are drawn from published sources; volumes, margins, costs, discount rates and multiples are assumptions.