Page 66 - Stellar IAR2015

NOTES TO THE ANNUAL FINANCIAL STATEMENTS (CONTINUED)3. INVESTMENTS AT FAIR VALUE (Continued)Discounted cash ow modelWeighted average cost of capital (WACC) rate: Target debt/equity ratio:Beta:Unsystematic risk premium:Terminal growth rate:Enterprise value/EBITDA multiple valuation13%-14% 22.40%0.57 2.75%-3.25% 5%-7%The fair value of the investment in Torre represents a 14.0x enterprise value/EBITDA based on the latest reported nancial results of Torre. The peer group (comprising Invicta Holdings Ltd, Hudaco Industries Ltd and Eqstra Holdings Ltd) average multiple is 7.13x at the reporting date. The peer group average multiple has not been adjusted for the risk pro le di erential between the investment being valued and that of the peer group as the multiple has been used as an objective reasonability check and not as a primary valuation input. Due to the non-annualisation of Torre’s EBITDA for acquisitions concluded during the reporting period, the enterprise value/EBITDA multiple valuation method is not deemed by management to be a reliable valuation method at the reporting date.Goliath Gold Mining Ltd (listed investment)On 21 September 2015 Gold One Africa Ltd made a rm intention o er to acquire all of the shares in Goliath Gold not already owned by way of a scheme of arrangement (O er). In terms of the O er, shareholders may elect to receive either R1.00 per share on the implementation date, being 28 December 2015, or R1.60 per share after the expiry of a period of 18 months after the implementation date, being 6 June 2017 (Deferred Consideration). On 18 November 2015, all outstanding conditions precedent to the Scheme were ful lled. The Company has elected to receive the Deferred Consideration in respect of its 21.77% holding in the ordinary shares of Goliath Gold. The deferred proceeds have been recognised as Other nancial assets (refer to note 7).Mine Restoration Investments Ltd (listed investment)The increased investment in MRI, to 33.58% of the issued ordinary shares of MRI, was acquired on or about 16 January 2015, bringing the total investment value to R28.2 million or 10 cents per share (Transaction Value). On 20 July 2015, MRI announced that its operations had been placed under care and maintenance.As a result, management have valued the MRI investment at the R14.0 million or 5 cents per MRI share by reference to the price of recent transactions at Transaction Value, which has been adjusted downwards in the amount of 5 cents per MRI share primarily due to a lack of liquidity and market activity in MRI shares. The valuation represents a discount to the 6 cents per share closing market price of MRI shares on 30 November 2015.The adjusted market value method applied is considered to be appropriate given that while MRI’s operations have been placed under care and maintenance, pricing has taken into account the announced intention to acquire a strategic stake in Iron Mineral Bene ciation Services (Pty) Ltd, which is to be funded by way of a capital raise at 7 cents per share.Tellumat (Pty) Ltd (unlisted investment)The investment in Tellumat was acquired on or about 16 January 2015 at R100.1 million (Transaction Value).The Tellumat investment has been valued at FVTPL at R100.1 million by reference to the price of recent transactions at Transaction Value. Management are not aware of any factors or circumstances which require adjustment to the carrying value of the Tellumat investment.62 | STELLAR CAPITAL PARTNERS