Fardan AlFardan Sajeda Salah Shaima AlAnsari Zainab Monfaredi

Fardan AlFardanSajeda Salah Shaima AlAnsariZainab Monfaredi

CFA GLOBAL INVESTMENT RESEARCH CHALLENGE

Company :Zain Bahrain Ticker symbol: ZAINBHPrimary Exchange Bahrain Bourse (BHB)

Basic information

12/4/2

014

12/7/2

014

12/10/2

014

12/13/2

014

12/16/2

014

12/19/2

014

12/22/2

014

12/25/2

014

12/28/2

014

12/31/2

014

1/3/2

015

1/6/2

015

1/9/2

015

1/12/2

015

1/15/2

015

1/18/2

0150.198

0.199

0.2

0.201

0.202

0.203

0.204

0.205

PriceC.P

Zain started operations in Bahrain

as MTC2003

Launch EDGE & 3G network

2003

The first nation-wide WIMAX network in

the world2007

Launch the 4G LTE network2013

Business Description

Industry Overview Valuation Financial

AnalysisRisk

Analysis Conclusion

Zain’s Revenue & Expenses

22%

33%9%

32%

3%

COGS DM&O GAD&A other

77%

10%

4%9%

Mobile Fixed Wireless InterconnectionOthers



AnalysisRisk

Analysis Conclusion

Click icon to add picture



AnalysisRisk

Analysis Conclusion

Q2,2013 Q3,2013 Q4,2013 Q1,2014 Q2,20140

5

10

15

20

25

30

35

40

4540.3 40.7 40.1 40.9

44

24.1 24 24.3 24.2 23.3

35.7 35.3 35.6 34.932.7

Batelco Viva

Zain

Bahrain Mobile Market Share



AnalysisRisk

Analysis Conclusion

Recommendation

BUYCurrent Share Price BD 0.202

Expected Share Price BD 0.262



AnalysisRisk

Analysis Conclusion

Porters Five Forces Analysis

Forces Impact Explaining

Bargaining power of buyer

High 1- low switching cost 2-substitutes

Bargaining power of supplier

Low 1-various telecom equipment suppliers 2-zain group is a big buyer.

Threat of new entrants Low 1-low population 2- 3 mobile companies are already existing.3- high capital and expenses

Threat of substitute High Customers have many choices to choose among the telecom companies

Intensity of competitive rivalry

High Heavy competition between 3 mobile & non-mobile tele. operators ..

0

1

2

3

4

5

Threat of New Entrants

Barginig Power of Suppliers

Barging Power of the Buyres

Threat of Subsitute Products

Intensity of Compatitive

Rivalry

Zain Industry

0 - No Threat to the Business5 - High Threat to the Business



AnalysisRisk

Analysis Conclusion



AnalysisRisk

Analysis Conclusion

Dividend Discount Model

DDM0.231

Current Price BHD 0.202


Discounted Cash Flow



AnalysisRisk

Analysis Conclusion

DCF0.295

Price Multiples


PM0.263



AnalysisRisk

Analysis Conclusion



AnalysisRisk

Analysis Conclusion

Weighting of Models


Valuation Method Weight

Fair Value

Weighted Avg.

DDM Method 40% 0.230 0.092 DCF Method 40% 0.295 0.118 RV Method 20% 0.263 0.0526 Target Price BD 0.262

DDM 0.231

DCF 0.295

P M0.2 63

Target Price BHD 0.262

Revenue Estimate



AnalysisRisk

Analysis Conclusion

DuPont Analysis



AnalysisRisk

Analysis Conclusion

Industry & Company specific Risk

Po

liti

cal

Ris

k

Regulation riskE

con

om

ic risk

Competition risk

Credit risk

Man

agem

ent

risk

Targ

et p

rice

risk

Company specific risk

Industry risk



AnalysisRisk

Analysis Conclusion

Terminal Growth Rate1.0% 1.5% 2.0% 2.5% 3.0%

WACC

5.32% 0.393 0.442 0.507 0.594 0.7206.32% 0.308 0.339 0.377 0.425 0.4877.32% 0.250 0.271 0.296 0.325 0.3628.32% 0.208 0.223 0.240 0.260 0.2849.32% 0.176 0.187 0.200 0.214 0.230

Target price risk:

DCF model

Terminal Growth Rate1.0% 1.5% 2.0% 2.5% 3.0%

Cost of Equity

10.06% 0.264 0.274 0.287 0.300 0.31611.06% 0.238 0.246 0.256 0.266 0.27812.06% 0.217 0.223 0.231 0.239 0.24813.06% 0.200 0.205 0.210 0.215 0.22514.06% 0.184 0.189 0.193 0.199 0.204

DDM model



AnalysisRisk

Analysis Conclusion

Conclusion



AnalysisRisk

Analysis Conclusion

Target Price : BD 0.262 Current Price : BD 0.202 Upside (%) : 29.7% Recommendation : BUY

BHD 0.202

+10%-10%

BHD 0.222BHD 0.182

Buy

BHD 0.262

+29.7%

APPENDIX

Income Statement

Balance Sheet

Cash Flow

Div. Cash Flow

Financial Ratios

Tele. of Bahrain

Tele. in GCC

Valuation Tables

Regression

income Statement 2009 2010 2011 2012 2013 E2014 E2015 E2016 E2017 E2018 E2019

Revenue

93,016.00

88,882.00

77,021.00

73,533.00

78,081.00

75,270.08

79,786.28

84,573.46

89,647.87

95,026.74

100,728.35

Cost of Revenue

(21,038.00)

(20,437.00)

(22,108.00)

(16,250.00)

(16,304.00)

(15,126.00)

(15,957.26)

(16,914.69)

(17,929.57)

(19,005.35)

(20,145.67)

Gross Profit

71,978.00

68,445.00

54,913.00

57,283.00

61,777.00

60,144.08

63,829.03

67,658.77

71,718.30

76,021.39

80,582.68

Distribution, marketing and operation expenses

(26,152.00)

(25,309.00)

(20,286.00)

(22,100.00)

(24,597.00)

(23,004.53)

(23,138.02)

(24,526.30)

(25,997.88)

(27,557.76)

(29,211.22)

General and administrative expenses

(7,312.00)

(7,255.00)

(4,601.00)

(6,492.00)

(6,225.00)

(6,083.38)

(6,382.90)

(6,765.88)

(7,171.83)

(7,602.14)

(8,058.27)

Depreciation and amortization

(10,450.00)

(14,175.00)

(15,770.00)

(20,877.00)

(24,320.00)

(22,144.97)

(23,935.89)

(25,372.04)

(26,894.36)

(28,508.02)

(30,218.50)

Income Statement

Provisions for doubtful debts

(388.00)

(295.00)

(2,013.00)

(1,336.00)

(1,513.00)

(1,389.13)

(1,595.73)

(1,691.47)

(1,792.96)

(1,900.53)

(2,014.57)

Provision for inventories (24.00)

(24.00)

(72.00)

(72.00)

(120.00)

(211.00)

(87.76)

(93.03)

(98.61)

(104.53)

(110.80)

Operation Profit

27,652.00

21,387.00

12,171.00

6,406.00

5,002.00

7,311.07

8,688.73

9,210.05

9,762.65

10,348.41

10,969.32

Interest income 343.00

287.00

144.00

27.00

8.00

40.00

42.40

44.94

47.64

50.50

53.53

Other income 297.00

31.00

489.00

8.00

610.00

163.00

167.55

177.60

188.26

199.56

211.53

Gain on Currency revaluation

155.00

226.00

243.00

176.00

104.00

56.00

159.57

169.15

179.30

190.05

201.46

Other provisions -

-

-

-

-

(753.00)

-

-

-

-

-

Finance costs (530.00)

(59.00)

-

(208.00)

(321.00)

(794.00)

(635.20)

(476.40)

(317.60)

(158.80)

(79.40)

Profit of the year

27,917.00

21,872.00

13,047.00

6,409.00

5,403.00

6,023.07

8,423.05

9,125.35

9,860.25

10,629.72

11,356.43

Total Comprehensive income of the year

27,917.00

21,872.00

13,047.00

6,409.00

5,403.00

6,023.07

8,423.05

9,125.35

9,860.25

10,629.72

11,356.43

0.0872

0.0684

0.0408

0.0200

0.0169

0.0164

0.0229

0.0248

0.0268

0.0289

0.0309

Basic earnings per share (In Fils)

872.00

684.00

408.00

200.00

169.00

75.29

105.29

114.07

123.25

132.87

141.96

Balance Sheet 2009 2010 2011 2012 2013 E2014 E2015 E2016 E2017 E2018 E2019ASSETS

Current Assets

Cash and Bank Balances

19,740.00

18,097.00

5,238.00

1,766.00

3,156.00

14,878.44

15,384.75

17,212.68

15,372.07

13,555.62

11,188.27

Accounts and other receivables

25,035.00

19,111.00

21,554.00

19,930.00

20,644.00

24,000.00

21,520.44

22,811.66

24,180.36

25,631.19

27,169.06

Inventories 2,407.00

2,625.00

2,601.00

1,595.00

2,971.00

3,040.64

3,111.91

3,184.85

3,259.50

3,335.90

3,414.09

Others 1,978.36

2,589.36

3,199.36

3,808.36

4,416.36

Total Current Assets 47,182.00

39,833.00

29,393.00

23,291.00

26,771.00

41,919.08

41,995.45

45,798.56

46,011.29

46,331.07

46,187.78

Non-Current Assets

Property Plant and Equipment

41,139.00

46,309.00

49,848.00

53,310.00

61,367.00

60,181.77

57,241.42

52,688.44

49,951.41

44,991.18

37,967.38

Intangible assets 7,754.00

8,096.00

10,155.00

15,412.00

19,166.00

20,372.26

22,542.03

26,374.68

32,174.09

40,290.60

51,127.85

Total Non-Current Assets

48,893.00

54,405.00

60,003.00

68,722.00

80,533.00

80,554.03

79,783.45

79,063.12

82,125.50

85,281.78

89,095.23

Total Assets 96,075.00

94,238.00

89,396.00

92,013.00

107,304.00

122,473.11

121,778.90

124,861.67

128,136.79

131,612.85

135,283.01

Balance Sheet

LIABILITIES AND EQUITY

Liabilities

Current Liabilities

Bank Overdraft -

-

839.00

9,271.00

-

-

-

-

-

-

-

Account Payable and Accruals

24,450.00

26,442.00

25,466.00

23,684.00

29,166.00

30,257.73

31,390.33

32,565.33

33,784.31

35,048.91

36,360.85

Current Portion of term loans

2,585.00

-

-

-

3,286.00

4,568.00

4,568.00

4,568.00

4,568.00

4,568.00

4,568.00

Deferred revenue 4,377.00

4,144.00

3,950.00

4,749.00

4,769.00

4,849.00

4,930.34

5,013.05

5,097.14

5,182.65

5,269.59

Finance Lease Obligations

127.00

-

-

-

-

-

-

-

-

-

-

Total Current Liabilities

31,539.00

30,586.00

30,255.00

37,704.00

37,221.00

39,674.73

40,888.68

42,146.38

43,449.45

44,799.56

46,198.44

Non-Current Liabilities

Non-Current Portion of term loans

311.00

-

-

-

16,714.00

19,832.00

19,832.00

19,832.00

19,832.00

19,832.00

19,832.00

Provision for employees end of service benefits

317.00

272.00

314.00

273.00

330.00

330.00

330.00

330.00

330.00

330.00

330.00

Others -

-

-

-

-

3,592.76

Total Non-Current Liabilities

628.00

272.00

314.00

273.00

17,044.00

23,754.76

20,162.00

20,162.00

20,162.00

20,162.00

20,162.00

Total Liabilities 32,167.00

30,858.00

30,569.00

37,977.00

54,265.00

63,429.49

61,050.68

62,308.38

63,611.45

64,961.56

66,360.44

EQUITY

Share Capital 32,000.00

32,000.00

32,000.00

32,000.00

32,000.00

36,800.00

36,800.00

36,800.00

36,800.00

36,800.00

36,800.00

Share Premium 100.00

100.00

100.00

100.00

100.00

100.00

100.00

100.00

100.00

100.00

100.00

Statutory Reserve 4,781.00

6,968.00

8,272.00

8,913.00

9,453.00

9,453.00

9,453.00

9,453.00

9,453.00

9,453.00

9,453.00

Retained Earnings 27,027.00

24,312.00

18,455.00

13,023.00

11,486.00

12,690.61

14,375.22

16,200.29

18,172.34

20,298.29

22,569.57

Total Equity 63,908.00

63,380.00

58,827.00

54,036.00

53,039.00

59,043.61

60,728.22

62,553.29

64,525.34

66,651.29

68,922.57

Total Liabilities and Equity

96,075.00

94,238.00

89,396.00

92,013.00

107,304.00

122,473.11

121,778.90

124,861.67

128,136.79

131,612.85

135,283.01

Cash Flow 2009 2010 2011 2012 2013 E2014 E2015 E2016 E2017 E2018 E2019

Cash Flows From Operating Activities

Profit for The Year 27,917.00 21,872.00

13,047.00

6,409.00

5,403.00 6,023.07 8,423.05

9,125.35

9,860.25

10,629.72

11,356.43

Adjustment For:

Depreciation and Amortization 10,450.00 14,175.00

15,770.00

20,877.00

24,320.00 22,144.97 23,935.89

25,372.04

26,894.36

28,508.02

30,218.50

Gain on disposal of Property, Plant and Equipment - -

(359.00) - -

(40.00) - - - - -

Insurance Claim - - - - (470.00) - - - - - -

Provision for Doubtful Debts and Slow moving Inventories 412.00

319.00

2,085.00

1,408.00

1,633.00 - - - - - -

Finance Costs 530.00 59.00 -

208.00

321.00 - - - - - -

Interest income (343.00)

(287.00)

(144.00)

(27.00)

(8.00) - - - - - -

Provision for employees end of service benefits 89.00

150.00

81.00

78.00

62.00 - - - - - -

Loss on Property, Plant and Equipment written off - - - -

65.00 - - - - - -

Statement of Cash Flow

Operating Profit before working Capital changes

39,055.00

36,288.00

30,480.00

28,953.00

31,326.00

31,196.04

32,358.94

34,497.38

36,754.61

39,137.74

41,574.94

(Increase)/Decrease in accounts nd other receivables

(2,369.00)

6,225.00

(4,426.00)

288.00

(1,757.00)

(5,033.00)

(2,479.56)

(1,291.23)

(1,368.70)

(1,450.82)

(1,537.87)

(increase)/Decrease in Inventories

(640.00)

(242.00)

(48.00)

934.00

(1,496.00)

(69.64)

(71.27)

(72.94)

(74.65)

(76.40)

(78.19)

(increase)/Decrease in accounts Payable and accruals

(287.00)

1,788.00

(1,064.00)

(1,866.00)

5,420.00

(1,677.00)

1,132.60

1,175.00

1,218.98

1,264.61

1,311.94

(Increase)/Decrease in deferred revenue

1,498.00

(233.00)

(194.00)

799.00

20.00

80.00

81.34

82.71

84.09

85.50

86.94

Cash Generated from Operating Activities

37,257.00

43,826.00

24,748.00

29,108.00

33,513.00

24,678.04

31,022.04

34,390.92

36,614.33

38,960.63

41,357.75

Payment of employees end of service benefits

(35.00)

(103.00)

(39.00)

(119.00)

(5.00)

(12.00)

(12.00)

(12.00)

(12.00)

(12.00)

(12.00)

Net Cash from Operating Activities

37,222.00

43,723.00

24,709.00

28,989.00

33,508.00

24,666.04

31,010.04

34,378.92

36,602.33

38,948.63

41,345.75

Cash Flow From Investing Activities

Purchase of Property, Plant and Equipment

(9,522.00)

(15,182.00)

(13,824.00)

(13,230.00)

(18,875.00)

(11,628.00)

(11,046.60)

(10,715.20)

(13,929.76)

(13,233.27)

(12,836.28)

Proceeds from disposal of Property, plant and equipment

3.00

-

-

-

-

-

Interest Received 328.00

273.00

144.00

27.00

8.00

9.00

10.00

11.00

12.00

13.00

14.00

Increase in Intengible Assets

(4,190.00)

(5,087.00)

(7,215.00)

(16,366.00)

(17,321.00)

(10,538.00)

(12,118.70)

(13,936.51)

(16,026.98)

(18,431.03)

(21,195.68)

Net Cash Used in Investing Activities

(13,384.00)

(19,996.00)

(20,895.00)

(29,569.00)

(36,188.00)

(22,154.00)

(23,155.30)

(24,640.71)

(29,944.74)

(31,651.30)

(34,017.96)

Cash flows from Financial Activities

Interest Paid (491.00)

(59.00) -

(208.00)

(291.00)

(500.00)

(610.00)

(610.00)

(610.00)

(610.00)

(610.00)

Dividend Paid

(15,920.00)

(22,288.00)

(17,512.00)

(11,116.00)

(6,368.00)

(4,818.46)

(6,738.44)

(7,300.28)

(7,888.20)

(8,503.78)

(9,085.15)

Term loan (7,590.00)

(2,585.00) - -

20,000.00

4,888.00 -

-

-

IPO 4,800.00 -

Repayment of Capital element of finance lease

(144.00)

(438.00) - - -

- -

-

-

-

-

Net Cash (used in)/ From Financial Activities

(24,145.00)

(25,370.00)

(17,512.00)

(11,324.00)

13,341.00

9,210.40

(7,348.44)

(7,910.28)

(8,498.20)

(9,113.78)

(9,695.15)

Net (decrease)/Increase in cash and cash equivalents

(307.00)

(1,643.00)

(13,698.00)

(11,904.00)

10,661.00

11,722.44

506.30

1,827.94

(1,840.61)

(1,816.45)

(2,367.35)

Cash and Cash Equivalents at beginning of the Year

20,047.00

19,740.00

18,097.00

4,399.00

(7,505.00)

3,156.00

14,878.44

15,384.75

17,212.68

15,372.07

13,555.62

Cash and Cash equivalents at end of the Year

19,740.00

18,097.00

4,399.00

(7,505.00)

3,156.00

14,878.44

15,384.75

17,212.68

15,372.07

13,555.62

11,188.27

Historical Projected

2012 2013 2014 2015 2016 2017 2018 2019

Net Income to common

6,409.00 5,403.00 6,023.07 8,423.05 9,125.35 9,860.25 10,629.72 11,356.43

Growth -51% -16% 11% 40% 8% 8% 8% 7%

Payout ratio 80% 80% 80% 80% 80% 80% 80% 80%

EPS 200.00 169.00 0.075 0.105 0.114 0.123 0.133 0.142

EPS Growth rate -51% -16% -100% -100% -100% -100% -100% -100%

Dividends

11,116,000.00

6,368,000.00

4,818,458.87

6,738,440.15

7,300,276.15 7,888,199.92

8,503,776.72

9,085,145.72

Per share 0.3474 0.1990 0.0602 0.0842 0.0913 0.0986 0.1063 0.1136

Dividend Cash Flow

Financial Ratios

Liquidity Ratios: 2009 2010 2011 2012 2013 2014F 2015F 2016F 2017F 2018F2019

F

Current Ratio 1.50 1.30 0.97 0.62 0.72 1.06 1.03 1.09 1.06 1.03 1.00

Quick Ratio 1.42 1.22 0.89 0.58 0.64 0.98 0.95 1.01 0.98 0.96 0.93

Altman Z Score 7.18 6.44 4.94 2.79 2.28 3.04 3.18 3.34 3.32 3.30 3.26

Accounts Receivable to Total Assets 0.26 0.20 0.24 0.22 0.19 0.20 0.18 0.18 0.19 0.19 0.20

Inventory to Total Assets 0.03 0.03 0.03 0.02 0.03 0.02 0.03 0.03 0.03 0.03 0.03

Long-Term Liabilities to Total Assets 0.003 0.000 0.000 0.000 0.156 0.162 0.163 0.159 0.155 0.151 0.147

Sales to Total Assets 0.97 0.94 0.86 0.80 0.73 0.61 0.66 0.68 0.70 0.72 0.74

Activity Ratios:

Accounts Receivable Turnover 3.72 4.65 3.57 3.69 3.78 3.14 3.71 3.71 3.71 3.71 3.71

Days Sales in Receivables 98.24 78.48 102.14 98.93 96.50 116.38 98.45 98.45 98.45 98.45 98.45

Inventory Turnover 38.64 33.86 29.61 46.10 26.28 24.75 25.64 26.55 27.50 28.49 29.50

Days Cost of Sales in Inventory 41.76 46.88 42.94 35.83 66.51 73.37 71.18 68.73 66.36 64.07 61.86

Accounts Payable Turnover

Days Cost of Sales in Payables 424.20 472.25 420.44 531.98 652.94 730.14 718.01 702.72 687.76 673.12658.7

9

Operating Cycle Days 56.48 31.60 59.20 63.10 29.99 43.01 27.27 29.72 32.09 34.38 36.59

Sales to Assets 0.97 0.94 0.86 0.80 0.73 0.61 0.66 0.68 0.70 0.72 0.74

Sales to Net Fixed Assets 2.26 1.92 1.55 1.38 1.27 1.25 1.39 1.61 1.79 2.11 2.65

Percent Depreciation Expense to Fixed Assets 25% 31% 32% 39% 40% 37% 42% 48% 54% 63% 80%

Percent Accumulated Depreciation to Fixed Assets

Net Fixed Assets to Equity 0.64 0.73 0.85 0.99 1.16 1.02 0.94 0.84 0.77 0.68 0.55

Profitability Ratios:

Percent Gross Profit 77% 77% 71% 78% 79% 80% 80% 80% 80% 80% 80%

Percent Profit Margin on Sales 30% 25% 17% 9% 7% 8% 11% 11% 11% 11% 11%

Percent Rate of Return on Assets 29% 23% 15% 7% 5% 5% 7% 7% 8% 8% 8%

Percent Rate of Return on Equity 44% 35% 22% 12% 10% 10% 14% 15% 15% 16% 16%

Price Earnings Ratio

Earnings Per Share

Coverage Ratios:

Debt to Equity 0.05

-

-

-

0.38

0.41

0.40

0.39

0.38

0.37

0.35


Telecommunication in Bahrain



Operator National Fix

International Calls

Mobile Internet Leased Line

Other Data Service

2Connect X X X X XAscentech Telecoms X X Batelco X X X X X XBahrain Internet Exchange XBT Solutions LTD X EQUANT EGN BV XEtisalcom X X X X GatewayGulf X Greenisis (Bahrain Broadband) X Kalam Telecoms X X X X Light Speed X X X X Mena Telecoms X X X X XMoving Gulf X North Star X X X Nuetel Communications X X X X Rapid Telecoms X X X X Gulf Electronic Tawasul Co. XViacloud X Viva Bahrain X X X X Zain Bahrain X X X X X

Mkt Cap ($))

Rev. ($ BL)

EBIDA Margin NPM

Debt/ Equity

Capex / Sales ROE ROA

EV/ EBITDA P/E

P/ FCF P/BV P/S

Div. Yield

Bahrain Telecom 1.4 1.0 33% 12% 41% 12% 9% 5% 5.2 12.0 6.8 1.0 1.0 7%

Emirates Tel 7.6 2.9 39% 18% 56% 12% 27% 13% 6.3 14.1 11.1 3.9 2.5 3%

Etihad Etisalat 18.9 6.7 36% 27% 45% 15% 30% 16% 8.7 10.7 49.0 3.0 2.8 6%

Etisalat 26.5 10.2 33% 19% 14% 12% 16% 9% 7.8 13.2 14.0 2.4 2.5 6%

National Mobile 3.3 2.6 36% 9% 21% 19% 9% 5% 3.7 11.6 14.2 1.1 1.1 7%

Ooredoo 13.2 9.4 43% 8% 130% 22% 10% 3% 5.4 16.8 19.4 1.7 1.3 3%

Saudi Telecom 33.2 12.2 40% 22% 15% 16% 19% 10% 6.4 13.5 11.3 2.4 3.0 4%

Vodafone Qatar 2.8 0.5 19% -15% 18% 24% -5% -4% 39.3 0.0 0.0 1.7 1.7 0%

Zain Kuwait 9.8 4.4 43% 17% 43% 14% 13% 7% 6.2 12.0 10.1 1.8 2.1 7%

MEAN 13.0 5.5 36% 13% 43% 16% 14% 7% 9.9 11.5 15.1 2.1 2.0 5%

MEDIAN 9.8 4.4 36% 17% 41% 15% 13% 7% 6.3 12.0 11.3 1.8 2.1 6%

Zain Bahrain 0.19 0.21 40% 7% 43% 24% 10% 5% 4.29 12.30 8.74 1.26 0.99 8%


Telecommunication in GCC


Saudi Arabia UAE Oman Kuwait Qatar Bahrain

Below 15 0.31 0.18 0.24 0.26 0.14 0.2

Below 25 0.51 0.59 0.67 0.33 0.35 0.44

65+ 0.03 0.01 0.02 0.03 0.01 0.02

5%

15%

25%

35%

45%

55%

65%

75%

GCC Age Demographic

DCF Valuation 2014 2015 F 2016 F 2017 F 2018 F 2019 F Period 1 2 3 4 5

Net Income before interest (EBI) 6817.07 9058.25 9601.75 10177.85 10788.52 11435.83Add: NonCash Changes 22144.97 23935.89 25372.04 26894.36 28508.02 30218.50Less: Change in WC 6699.64 1336.89 106.47 140.28 177.11 217.18Less: Net Capex 22154.00 23155.30 24640.71 29944.74 31651.30 34017.96FCFF 108.40 8501.94 10226.61 6987.19 7468.13 7419.20Discount factor 0.9318 0.8682 0.8089 0.7537 0.7023Terminal Value 142124.13Present Value 99809.27 7921.71 8878.36 5652.03 5628.78 5210.27Firm Value 133100.42MV of debt 24,400.00

Equity Value = Firm Value - MV of Debt 108,700.42# of Shares 368,000 Fair Value 0.295

Valuation Tables

Equity Debt Capital

Market Value

$ 16,160,000.00

$ 17,289,451.88

$ 33,449,451.88

Weight in Cost of Capital 48.31% 51.69% 100.00%Cost of Component 12.06% 2.90% 7.32%

weight Weight cost

Cost of equity 48.31% 12.06%

Cost of debt 51.69% 2.90%

WACC 7.32%

Terminal Growth Rate

1.0% 1.5% 2.0% 2.5% 3.0%

WACC

5.32% 0.393 0.442 0.507 0.594 0.720

6.32% 0.308 0.339 0.377 0.425 0.487

7.32% 0.250 0.271 0.296 0.325 0.362

8.32% 0.208 0.223 0.240 0.260 0.284

9.32% 0.176 0.187 0.200 0.214 0.230

Terminal Growth Rate

1.0% 1.5% 2.0% 2.5% 3.0%

Cost of Equity

10.06% 0.264 0.274 0.287 0.300 0.316

11.06% 0.238 0.246 0.256 0.266 0.278

12.06% 0.217 0.223 0.231 0.239 0.248

13.06% 0.200 0.205 0.210 0.215 0.225

14.06% 0.184 0.189 0.193 0.199 0.204

Cost of Equity

Risk free rate 5%

Beta 1.02

Market Premium 6.9

Cost of Equity 12%

Cost of Debt 7.32

Cost of Equity 12%

Weight of Equity 48.31%

Weight of Debt 51.69%

WACC 7.32

Regression Statistics

Multiple R 0.31217097

R Square 0.097450715

Adjusted R Square 0.085087026

Standard Error 0.043393298

Observations 75

Regression

ANOVA

df SS MS FSignificance

FRegression 1 0.014841654 0.0148417 7.8820096 0.0063996Residual 73 0.13745742 0.001883Total 74 0.152299073

Coefficients Standard Error t Stat P-valueLower 95%

Upper 95%

Lower 95.0%

Upper 95.0%

Intercept -0.003732909 0.005113936-

0.7299480.467757

8-

0.0139250.006459

2-

0.0139250.006459

2

X Variable 1 0.410873251 0.1463488752.807491

70.006399

60.119200

40.702546

10.119200

40.702546

1

Documents

Fardan AlFardan Sajeda Salah Shaima AlAnsari Zainab Monfaredi