Question 3 - (20 marks) As the chief analyst for the underwriting process, your boss has put together the following multiples using telecommunication companies in the African region because MTN has no comparable in Ghana that is listed. He believes that the median of the multiples gives a better estimate of the price for MTN. He hopes to generate a price range from your answers. I 2.40x Revenue multiples EBITDA multiples EBIT multiples PE multiples Market-to-book ratio Comparable Company EV/Sales EV/BITDA EV/EBIT PE Market/Book Vodacom Group South Africa 3.14x 8.24x 11.18x 16.68x 3.62x MTN South Africa 2.18x 6.18x 14.12x 51.24x Telecom Egypt 1.92x 8.80x 16.80x 11.27x 1.16x Safaricom (Kenya) 6.73x 13.94x 19.84x 19.75x 12.73x Average 3.49x 9.29x 15.48x 24.73x 4.98x Median 2.66x 8.52x 15.46x 18.22x 3.01x As a junior analyst, you have been tasked to determine the appropriate price for MTN's shares using a) Revenue multiples b) EBITDA multiples c) EBIT multiples d) PE multiples e) Market-to-book ratio (20 marks) Historical Income Statement 2013 2014 2015 GHS'000 GHS'000 GHS'000 2016 GHS'000 2017 GHS'000 Revenue 1,752,605 1,993,411 2,315,666 2,773,219 3,419,747 4,172 Other income 4,524 18,700 Intercom, roaming and network costs (599,155) (763,454) (960,429) (931,854) (1,185,197) Selling, general & admin expenses (496,197) (497,503) (411,360) (708,343) (902,328) EBITDA 661,425 736,978 943,877 1,133,022 1,350,922 Depreciation & amortization ho (153,610) (191,045) (285,906) (258,371) (359,928) Operating profit 507,815 545,933 657,971 874,651 990,994 Net finance cost (9,838) (37,114) (34,973) (54,188) (21,956) Profit before tax 497,977 508,819 622,998 820,463 969,038 Taxes (136,593) (152,197) (192,210) (277,951) (254,270) Profit for the year 361,384 356,622 430,788 542,512 714,768 Dividend 238,513 249,635 275,704 108,502 471,747