Khanya Cold Chain Business Plan — Investment Analysis

An 18.2% project IRR, the equity return after gearing, and the assumptions the outcome depends on.

Investment Analysis

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11.1 Returns summary
11.2 Sensitivity of the return to the exit assumption
11.3 What would improve the return
11.4 What an infrastructure investor is actually buying

11.1 Returns summary

Measure	Base case	Comment
Total capital deployed	R108 390 000	Capital expenditure, pre-opening and working capital
Equity subscription	R56 390 000	52% of the requirement; the figure that closes it exactly
Senior debt and DFI tranche	R52 000 000	R34 000 000 senior and R18 000 000 DFI, with a twelve-month capital moratorium
Project internal rate of return	18.2%	Unlevered, five years plus terminal value at 7.0x EBITDA
Return to equity	24.0%	After debt service
Net present value at 12%	R31 623 118	Positive
Net present value at 15%	R15 152 510	Positive
Net present value at 18%	R1 006 443	Marginally positive
Payback period	7.5 years	On unlevered project cash flow, before terminal value
Terminal value	R187 738 705	7.0x Year 5 EBITDA
Cumulative free cash flow at Year 5	(R55 869 209)	Before terminal value

Figure 19. Cumulative project free cash flow before terminal value. The line is still negative at Year 5.

This is an infrastructure return, and it should be evaluated as one. An 18.2 per cent project return with a payback beyond the projection period is respectable for an asset-backed business with contracted revenue and a ten-year-plus asset life. It is not a venture return and it would not clear the hurdle of a growth equity investor. The natural funders of this business are infrastructure and impact investors, development finance institutions with an agro-processing or energy-efficiency mandate, and strategic industry partners, not venture capital.

11.2 Sensitivity of the return to the exit assumption

Figure 20. Project return under alternative exit assumptions.

Exit multiple of Year 5 EBITDA	Terminal value	Project IRR	NPV at 15%	Return to equity
5.0x	R134 099 075	12.3%	(R11 515 866)	15.7%
6.0x	R160 918 890	15.4%	R1 818 322	20.2%
7.0x	R187 738 705	18.2%	R15 152 510	24.0%
8.0x	R214 558 520	20.8%	R28 486 699	27.5%
9.0x	R241 378 335	23.2%	R41 820 887	30.6%

The return is materially dependent on the exit assumption, and readers should substitute their own. At a 6 times exit the project returns 15.1 per cent and net present value at a 15 per cent hurdle is barely positive; at 5 times it returns 11.7 per cent and turns negative. Cold storage assets have historically traded at firm multiples because the replacement cost is high and the cash flows are contracted, but a single-site operator with a leased building and a concentrated customer base will not command the multiple a portfolio does.

11.3 What would improve the return

Lever	Effect on Year 3 EBITDA	Assessment
Occupancy 8 points higher	+R8 498 791	The dominant lever. Achieved by anchor contracting, not by operational improvement
Storage tariffs 6% higher	+R7 509 175	Available only if the store is full; pricing power follows occupancy
Other operating costs 10% lower	+R2 813 056	Realistic through procurement discipline, but a modest lever
Electricity 20% lower	+R1 161 973	Already largely captured by the Section 4 strategy
Section 12B and 12BA allowances	Cash timing or exit value	Cash timing only. Would accelerate deductions on the solar and battery and improve early-year cash
Purchase option on the building	Cash timing or exit value	Exit value. Would materially improve terminal value and remove renewal risk

The ranking is instructive and it matches the sensitivity table exactly. Occupancy dominates, storage pricing follows, and electricity, the subject of the entire Section 4, sits near the bottom. That is not an argument against the energy strategy, which is what makes a 31.9 per cent margin achievable at all; it is an argument about where management attention goes once the plant is built.

11.4 What an infrastructure investor is actually buying

Asset at Year 5	Position	Why it has value to an acquirer
Refrigeration plant and envelope	R60 714 881 net book value	Replacement cost is high and rising; a buyer avoids an eighteen-month development programme
Contracted customer base	3 960 occupied positions at maturity	Multi-year contracts with take-or-pay floors are the cash flows a buyer underwrites
Energy infrastructure	700 kWp solar, 600 kWh battery, 1.2 MVA standby	Delivers a structural cost advantage that widens with every tariff increase
Certification and quality record	FSSC 22000 or BRCGS with five years of temperature logs	Retail-bound and export volume is unavailable without it; the record cannot be reconstructed
Ammonia MHI approvals	Risk assessment, emergency plan and inspection history current	A buyer inherits a compliant installation rather than a regulatory project
The lease	Ten years with renewal options	The specific weakness. A purchase option would convert it into the strongest line in this table

The list is worth reading against the exit multiple table in Section 11.2. Everything above except the lease supports a firm multiple; the lease is what pulls it down. A buyer acquiring plant fixed into premises they do not own is buying a shorter and more contingent asset than the same plant in a freehold building, and the discount shows up directly in the multiple they will pay.

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