Gabex (Pty) Ltd is a fairly new company that has been operating for the past 3 years since 2019, but has not been realizing the initial anticipated results. Management has made a decision to dilute 50% of their ordinary shares and sell to interested investors. This is being done in order to raise the necessary funds to get the company back on track and achieve initial goals set out. As a financial analyst at a big financial services company, you are approached by Gabex (Pty) Ltd, to prepare an analysis on the companys figures both before and after the planned dilution. The organisation has provided the financial information for the past three years. Based on the analysis, you need to prepare a detailed report on your findings to advise them on whether the shares dilution will be the right action to take. The company has 150 000 issued shares at R100 each. Current dividend policy is to pay out 15% of the annual profit. It is planned to increase to 35%, should the dilution take effect. Additional shares, after dilution, will be issued at R200 per share. No Dilution 50% ,Dilution and sale of all shares Turnover - X, 32% Cost Of Sales -0.50% ,30% Operating costs- 5% ,15% Interest Payments- 5% ,-5% Trade Debtors - X, 32% Inventory- X, 32% Property, plant and equipment 0%, 30% Accumulated Depreciation 20% ,36% Trade Creditors -0.50% ,30% Other Short Term Finance -100% ,100% Long term bonds -10.00% ,-10.00%

1 2 Turnover Cost Of Sales 3 4 Operating costs Interest Paymen Trade Debtors Inventory 8 Property, plant al Accumulated De 9 10 11 12 13 14 15 16 17 18 19 20 21 567 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 A 50 B No Dilution -0.50% 5% 5% 0% 20% -0.50% Trade Creditors Other Short Tern -100% Long term bonds -10.00% Unsaved changes C 50% Dilution and sale of all shares 32% 30% 15% -5% 32% 32% 30% 36% 30% -100% -10.00% Save 1 2 3 6 9 Turnover 10 Cost Of Sales 11 Gross Profit 12 Operating costs before depreciation 13 EBITDA 14 Depreciation 15 EBIT 16 Interest Payments 17 EBT 18 Taxation 19 Net Profit (EAC) 20 21 22 23 24 24 25 26 27 28 29 32 33 34 35 DE 36 Assets Trade Debtors Inventory 30 Cash and cash equivalents 31 Total Current Assets Property, plant and equipment 27 37 47 48 48 49 50 51 52 53 54 55 56 57 38 39 40 41 42 Ordinary Share Capital 43 Retained income 44 Total ordinary equity 45 Total Liabilities and Equity 46 60 61 62 63 64 65 66 67 70 71 72 73 74 74 75 76 77 78 79 80 Change in Accounts Receivable Change in Inventory Change in Accounts Payable Total Cash Flows from Operations Cash Flows from Investing Acquisition of fixed assets Total Cash Flows from Investing 58 Cash Flows from Financing 59 Change in Other Short Term Finance 81 82 83 Ordinary share dividend Addition to retained earnings GP Margin Net Profit Margin 97 98 99 100 101 102 Accumulated Depreciation Total Non-Current Assets Total Assets 103 104 105 106 107 108 109 Liabilities and equity Trade Creditors Other Short Term Finance Total Current Liabilities 110 111 112 119 Long term bonds Total Non-Current Liabilities Cash Flows from Operations Net Income Depreciation Expense Change in Long term bonds Dividend payment Change in Common Stock Total Cash Flows from Financing Net Change in Cash Balance 84 Profit Margin 85 Inventory Turnover 86 Days Sales Outstanding 87 88 Cash at the beginning of the year Cash at the end of the year Outstanding ordinary shares Market Value per Share Book Value per Share Earnings per Share Currennt Ratio 89 90 91 Return on Assets 92 Return on equity 93 Price/ earnings 94 Market/book 95 96 Total Assets Turnover Fixed asset turnover Debt Ratio Times Interest Earned B C Insaved changes Gabex (Pty) Ltd Financial Model of Gabex (Pty) Ltd For the year ended,2019 to 2022 Actual 2019 87.013 200 75.380.100 11.633.100 7,896.353 3,736,748 Income Statement 1,201,350 2,535,398 1.470.105 1,065,293 298 282 767,011 115.052 651.959 13.37% 0.88% Balance Sheet 16,201,050 11,775,900 1,953.989 29,930,939 6,751 200 1,201,350 5,549.850 35,480,789 14,805,090 226 200 15,031,290 4,634 550 4,634,550 15,000,000 814949 15.814.949 35,480.789 (20,251 313) (14,719,875) 18,506,363 (14,004,374) (8,439,000) (8,439,000) 282,750 5,793,188 (143.814) 18,750,000 24,682,123 2,238,749 Actual 2020 2,238,749 D Equity Value (R) 150,000.00 120.00 77,876,760 68,760,960 9,115,800 6,120.936 2,994,864 961,080 2,033,784 188,960 844,824 228,102 Cash Flow Statement 958,763 1,501,688 616,722 92,508 524,213 11.71% 0.79% 21,120,588 5,400,950 Relevant Charts 10,500,108 8,594,750 10,620,480 12,380,625 2,162,430 3.238.520 24,359,108 10,752,084 300,072 11.052 156 3,001,068 3.001,068 12,000,000 12,000,000 26,053,224 150,000.00 Key Ratios Actual 2020 Forecast 2021 Industry Average E 144.00 Actual 2021 109 276 335 96 300,870 12,975,465 8.865,975 4,109,490 1201 350 2,908,140 1.493.670 1.414.470 396,052 1,018.418 152,763 865 656 00 11.87% 0.93% 30,187,985 5,626,000 4.204,725 1,421,275 31,609,260 1,953,989 9212610 1,953.989 (6 201,362) 11.501,088 475,925 11,977,013 1,876 225 1,876,225 15,000,000 17,756,022 31,609,260 150,000.00 180.00 Difference 0.00X 0% 000X 0.00 Days 0.00X 0.00x 0% 0.00X 0% 0% 0.00X 0.00X Forecast 2022 #NA #NA #N/A #N/A #NA 150,000.00 2021 Forecast vs Industry Average #N/A #NA #NA #NA #NA #N/A #NA 200.00 Save 1 2 Turnover Cost Of Sales 3 4 Operating costs Interest Paymen Trade Debtors Inventory 8 Property, plant al Accumulated De 9 10 11 12 13 14 15 16 17 18 19 20 21 567 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 A 50 B No Dilution -0.50% 5% 5% 0% 20% -0.50% Trade Creditors Other Short Tern -100% Long term bonds -10.00% Unsaved changes C 50% Dilution and sale of all shares 32% 30% 15% -5% 32% 32% 30% 36% 30% -100% -10.00% Save 1 2 3 6 9 Turnover 10 Cost Of Sales 11 Gross Profit 12 Operating costs before depreciation 13 EBITDA 14 Depreciation 15 EBIT 16 Interest Payments 17 EBT 18 Taxation 19 Net Profit (EAC) 20 21 22 23 24 24 25 26 27 28 29 32 33 34 35 DE 36 Assets Trade Debtors Inventory 30 Cash and cash equivalents 31 Total Current Assets Property, plant and equipment 27 37 47 48 48 49 50 51 52 53 54 55 56 57 38 39 40 41 42 Ordinary Share Capital 43 Retained income 44 Total ordinary equity 45 Total Liabilities and Equity 46 60 61 62 63 64 65 66 67 70 71 72 73 74 74 75 76 77 78 79 80 Change in Accounts Receivable Change in Inventory Change in Accounts Payable Total Cash Flows from Operations Cash Flows from Investing Acquisition of fixed assets Total Cash Flows from Investing 58 Cash Flows from Financing 59 Change in Other Short Term Finance 81 82 83 Ordinary share dividend Addition to retained earnings GP Margin Net Profit Margin 97 98 99 100 101 102 Accumulated Depreciation Total Non-Current Assets Total Assets 103 104 105 106 107 108 109 Liabilities and equity Trade Creditors Other Short Term Finance Total Current Liabilities 110 111 112 119 Long term bonds Total Non-Current Liabilities Cash Flows from Operations Net Income Depreciation Expense Change in Long term bonds Dividend payment Change in Common Stock Total Cash Flows from Financing Net Change in Cash Balance 84 Profit Margin 85 Inventory Turnover 86 Days Sales Outstanding 87 88 Cash at the beginning of the year Cash at the end of the year Outstanding ordinary shares Market Value per Share Book Value per Share Earnings per Share Currennt Ratio 89 90 91 Return on Assets 92 Return on equity 93 Price/ earnings 94 Market/book 95 96 Total Assets Turnover Fixed asset turnover Debt Ratio Times Interest Earned B C Insaved changes Gabex (Pty) Ltd Financial Model of Gabex (Pty) Ltd For the year ended,2019 to 2022 Actual 2019 87.013 200 75.380.100 11.633.100 7,896.353 3,736,748 Income Statement 1,201,350 2,535,398 1.470.105 1,065,293 298 282 767,011 115.052 651.959 13.37% 0.88% Balance Sheet 16,201,050 11,775,900 1,953.989 29,930,939 6,751 200 1,201,350 5,549.850 35,480,789 14,805,090 226 200 15,031,290 4,634 550 4,634,550 15,000,000 814949 15.814.949 35,480.789 (20,251 313) (14,719,875) 18,506,363 (14,004,374) (8,439,000) (8,439,000) 282,750 5,793,188 (143.814) 18,750,000 24,682,123 2,238,749 Actual 2020 2,238,749 D Equity Value (R) 150,000.00 120.00 77,876,760 68,760,960 9,115,800 6,120.936 2,994,864 961,080 2,033,784 188,960 844,824 228,102 Cash Flow Statement 958,763 1,501,688 616,722 92,508 524,213 11.71% 0.79% 21,120,588 5,400,950 Relevant Charts 10,500,108 8,594,750 10,620,480 12,380,625 2,162,430 3.238.520 24,359,108 10,752,084 300,072 11.052 156 3,001,068 3.001,068 12,000,000 12,000,000 26,053,224 150,000.00 Key Ratios Actual 2020 Forecast 2021 Industry Average E 144.00 Actual 2021 109 276 335 96 300,870 12,975,465 8.865,975 4,109,490 1201 350 2,908,140 1.493.670 1.414.470 396,052 1,018.418 152,763 865 656 00 11.87% 0.93% 30,187,985 5,626,000 4.204,725 1,421,275 31,609,260 1,953,989 9212610 1,953.989 (6 201,362) 11.501,088 475,925 11,977,013 1,876 225 1,876,225 15,000,000 17,756,022 31,609,260 150,000.00 180.00 Difference 0.00X 0% 000X 0.00 Days 0.00X 0.00x 0% 0.00X 0% 0% 0.00X 0.00X Forecast 2022 #NA #NA #N/A #N/A #NA 150,000.00 2021 Forecast vs Industry Average #N/A #NA #NA #NA #NA #N/A #NA 200.00 Save