Finbond Group Limited · JSE:FGL
Finbond — Merger or Acquisition (May 2017)
32 slides from Finbond's merger presentation, May 25, 2017
Slide 1: Fair and Reasonable opinion: Finbond Group Limited
Fair and Reasonable opinion: Finbond Group Limited Preliminary opinion – supporting materials BDO Corporate Finance Mary 2017 Strictly private and confidential
Slide 2: Important notice
Strictly private and confidential Important notice This presentation (“Presentation”) has been prepared by BDO Corporate Finance Proprietary Limited (“BDO Corporate Finance”) solely for the independent board constituted to assess the mandatory offer (the “Offer”) (the “Independent Board”) to acquire
Slide 3: Contents
Contents Page Executive summary Introduction and scope 4 BDO Corporate Finance’s role and procedures 5 Valuation method and approach 6-7 Preliminary analysis of Finbond 8 Microfinance industry analysis 16 Valuation analysis 20 Conclusion 27 Opinion letter 30 BDO Corporate Finance Page 2
Slide 4: Executive summary
Executive summary Page 3
Slide 5: Introduction and scope
Strictly private and confidential Introduction and scope Transaction overview • Finbond Group Limited (“Finbond” or “Company” or “Group”) in an announcement released on the Stock Exchange News Service of the JSE Limited (“JSE”) (“SENS”) on 07 April 2017, informed holders of ordinary shares with a pa
Slide 6: BDO Corporate Finance's role and procedures
Strictly private and confidential BDO Corporate Finance’s role and procedures Nature and procedures • Audited annual financial statements of Finbond for the year ended 29 February 2016; • Unaudited management accounts of Finbond, on a consolidated basis and in respect of Finbond’s South African and
Slide 7: Valuation methodology and approach
Strictly private and confidential Valuation methodology and approach Summary • The valuation has been prepared on the basis of “Market Value”. The generally accepted definition of “Market Value” is the value as applied between a hypothetical willing vendor and a hypothetical willing prudent buyer in
Slide 8: Valuation methodology and approach
Strictly private and confidential Valuation methodology and approach Method Pros Cons Multiple: • Simple and most widely used in the industry • Comparison with other transactions is difficult because of Price to • Book value being a positive number, P/BV is always meaningful differences in context,
Slide 9: Preliminary analysis of Finbond
Preliminary analysis of Finbond Page 8
Slide 10: Overview of Finbond
Strictly private and confidential Overview of Finbond • Finbond is a North-American and South African Financial Services institution that specialises in the design and delivery of unique value and solution based savings, credit and insurance solutions tailored around depositor and borrower requireme
Slide 11: Expansion into North America
Strictly private and confidential Expansion into North America • As part of its long-term strategy, Finbond embarked on an earnings enhancing growth strategy of establishing a business presence in the North American payday lending market through acquisitions and subsequent organic growth of a number
Slide 12: Historical share price and trading of Finbond
Strictly private and confidential Historical share price and trading of Finbond Finbond share price and trading performance Stock Exchange Performance LTM Share Price and volumes traded (12 months to 6 April 2017) 400 375 Share price (cents) - Lowest 216 - Highest 365 350 300 - Closing 300 VWAP (cen
Slide 13: Financial projections – per Forecast 2018 to 2022
Strictly private and confidential Financial projections – per Forecast 2018 to 2022 BDO Corporate Finance Page 12
Slide 14: Financial projections – South African Operations
Strictly private and confidential Financial projections – South African Operations BDO Corporate Finance Page 13
Slide 15: Financial projections – International Operations
Strictly private and confidential Financial projections – International Operations BDO Corporate Finance Page 14
Slide 16: Financial projections – Balance Sheet – SA Operations
Strictly private and confidential Financial projections – Balance Sheet – SA Operations BDO Corporate Finance Page 15
Slide 17: Financial projections – Balance Sheet – Int'l Operations
Strictly private and confidential Financial projections – Balance Sheet – Int’l Operations BDO Corporate Finance Page 16
Slide 18: Microfinance industry analysis
Microfinance industry analysis Page 17
Slide 19: Valuation of low-income publicly listed finance institutions
Strictly private and confidential Valuation of low-income publicly listed finance institutions • In this section, we analyze data on low-income finance institutions (“LIFIs”). These institutions provide financial services (consumer and microenterprises loans, payments, and insurance) to low-income s
Slide 20: Current valuation of LIFI Index
Strictly private and confidential Current valuation of LIFI Index • The LIFI Index currently trades on 1.7x forward P/B, for an average expected ROE in FY17 of 16.5%. Capitec has the highest expected ROE of c.26% and trades at a forward P/B of 4.3x and forward P/E of 17.1x. ROE Year- Market Cap P/B
Slide 21: Current valuation of South African banking sector
Strictly private and confidential Current valuation of South African banking sector • The market parameters for South African listed banking stocks are detailed below. Year- Market Cap P/B P/B P/E P/E ROE ROE ROE Company Name Ticker end (ZAR'm) (LTM) (NTM) (LTM) (NTM) FY17E FY18E FY19E Beta FirstRan
Slide 22: Valuation analysis
Valuation analysis Page 21
Slide 23: Fair P/B methodology
Strictly private and confidential Fair P/B methodology Fair P/B • Empirically, forecast RoE is a good indicator of fair value P/B for financial services firms. We set the fair value multiples using a Gordon Growth Model derived P/B. • The valuation multiple is based on a standard Gordon Growth Model
Slide 24: Fair P/B methodology – South African Operations
Strictly private and confidential Fair P/B methodology – South African Operations Fair P/B – TNAV attributable to Finbond shareholders BDO Corporate Finance Page 23
Slide 25: Fair P/B methodology – International Operations
Strictly private and confidential Fair P/B methodology – International Operations Fair P/B – TNAV attributable to Finbond shareholders BDO Corporate Finance Page 24
Slide 26: Valuation metrics
Strictly private and confidential Valuation metrics Valuation BDO Corporate Finance Page 25
Slide 27: Valuation summary
Strictly private and confidential Valuation summary BDO Corporate Finance Page 26
Slide 28: Conclusion
Conclusion Page 27
Slide 29: Consideration received and valuation results
Strictly private and confidential Consideration received and valuation results Consideration received • The Cash Consideration is R2.91 per Offer Share. Valuation results • Based on the results of our procedures performed, our detailed valuation work and other considerations, we determined a valuati
Slide 30: Reasonableness of the Offer
Strictly private and confidential Reasonableness of the Offer Considerations • The Offer Consideration represents a discount to the date of publication of the announcement by Finbond on 07 April 2017: Price per Finbond Discount of Offer Share (R) Price the closing price per ordinary share on the JSE
Slide 31: Annexure I – Draft opinion letter
Annexure I – Draft opinion letter Page 30
Slide 32: Disclaimer
Strictly private and confidential Disclaimer Important notice This report provides a summary of our detailed work. The report is intended to provide sufficient information to the Directors of Finbond to assist in determining the fairness of the proposed Offer. This report should not be relied upon f