MAC3702
ASSIGNMENT 2
DUE DATE: 10 SEPTEMBER 2026
,MAC3702 ASSIGNMENT 2 2026
DUE 10 SEPTEMBER 2026
QUESTION 1
(a) P/E multiple valuation, reasonableness of the R15 million cash offer for the 70%
equity stake
Adjust earnings for non-recurring items
Year Net profit Add back pre- Adjusted Tax @ Adjusted PAT /
before tax tax penalties PBT (R’000) 25% Maintainable
(R’000) (R’000) (R’000) earnings (R’000)
2026 10 000 3 000 13 000 3 250 9 750
2025 8 500 5 000 13 500 3 375 10 125
Average maintainable earnings
(R9 750 000 + R10 125 000) / 2 = R9 937 500
Adjust P/E multiple
Description Multiple / Factor
Average listed SA health-tech / biotech P/E 12.00
, Unlisted discount 10%
Adjusted unlisted P/E 12.00 × 0.90 = 10.80
Equity valuation
Description Amount (R)
100% equity value (R9 937 500 × 10.80) 107 325 000
70% equity stake value 75 127 500
Cash offer tabled by Ubuntu Health 15 000 000
The R15 million cash offer is substantially lower than the P/E-derived value of R75 127
500 for the 70% stake. On a pure quantitative basis the offer is not reasonable (highly
advantageous to the acquirer / undervalued from the sellers’ perspective).
Positive and negative factors affecting the adjusted P/E multiple
Factor Factor Effect on multiple
type
Positive Experienced independent management Increases multiple (lower key-
team expected to remain man / continuity risk)
Positive Strategic fit with Ubuntu Health’s health- Increases multiple
technology and digitalisation portfolio +
potential synergies
ASSIGNMENT 2
DUE DATE: 10 SEPTEMBER 2026
,MAC3702 ASSIGNMENT 2 2026
DUE 10 SEPTEMBER 2026
QUESTION 1
(a) P/E multiple valuation, reasonableness of the R15 million cash offer for the 70%
equity stake
Adjust earnings for non-recurring items
Year Net profit Add back pre- Adjusted Tax @ Adjusted PAT /
before tax tax penalties PBT (R’000) 25% Maintainable
(R’000) (R’000) (R’000) earnings (R’000)
2026 10 000 3 000 13 000 3 250 9 750
2025 8 500 5 000 13 500 3 375 10 125
Average maintainable earnings
(R9 750 000 + R10 125 000) / 2 = R9 937 500
Adjust P/E multiple
Description Multiple / Factor
Average listed SA health-tech / biotech P/E 12.00
, Unlisted discount 10%
Adjusted unlisted P/E 12.00 × 0.90 = 10.80
Equity valuation
Description Amount (R)
100% equity value (R9 937 500 × 10.80) 107 325 000
70% equity stake value 75 127 500
Cash offer tabled by Ubuntu Health 15 000 000
The R15 million cash offer is substantially lower than the P/E-derived value of R75 127
500 for the 70% stake. On a pure quantitative basis the offer is not reasonable (highly
advantageous to the acquirer / undervalued from the sellers’ perspective).
Positive and negative factors affecting the adjusted P/E multiple
Factor Factor Effect on multiple
type
Positive Experienced independent management Increases multiple (lower key-
team expected to remain man / continuity risk)
Positive Strategic fit with Ubuntu Health’s health- Increases multiple
technology and digitalisation portfolio +
potential synergies
