Meeting Minutes

Call to order
A meeting was held at Olayan School of Business on Thursday, March 1, 2018.

Attendees
Attendees included: Hibatullah Eido, Omar El Abiad, Rim El Rafei, Rawan Jalloul.

Members not in attendance

All members attended the meeting

Approval of minutes
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Reports
Calculated the risk-free rate (rf) in Abu Dhabi currency(AED) through the use of the
International Fischer Equation. Took the YTM on a 10-year treasury bond from
Bloomberg as the risk- free rate for the United States and used the IMF website to find
the forecasted inflation rate for the two countries. Used the long version of the Fischer
equation, due to the high levels of inflation. As for the Beta, we used the company’s
Annual report to identify the segments it operates in, found the unlevered beta adjusted
for cash of each segment using Damodaran’s website, calculated the weights of each
segment based on their EBIT contribution out of the total EBIT, calculated the weighted
average unlevered beta of the company, and assumed that the company was going to
maintain it’s current debt-to-equity ratio for the foreseeable future, due to lack of
information to enable us to estimate the target debt-to-equity ratio. Found the levered
beta of the company, used Damodaran’s website to find the country risk premium of Abu
Dhabi. We then used the implied equity risk premium of a mature market, and
calculated cost of equity. Then, in order to calculate the company risk premium, we
found the company’s interest coverage ratio, and looked up the rating of the company
based on this coverage ratio, and added this default spread to the country default spread
and the risk free rate, which gave us the cost of debt. To calculate the weight of debt,
we found the average interest paid on the company’s bank loans over the last 3 years
and discounted it at the cost of debt, assuming, given no clear maturity was given, that
this will be sustained for the foreseeable future. We also found the Operating lease
commitments for the foreseeable future and discounted them at the cost of debt. As for
the weight of equity, using Eikon, the price of the company’s share was determined, as
well as the number of outstanding shares, which enabled us to compute the market
value of equity, and subsequently the weights of debt and equity. As for the tax rate, it
was mentioned by Santander Trade that the tax rate on company’s in Abu Dhabi is zero
and given that there was no income taxes in the company’s income statement, we went
with this assumption. Using all this information, we were able to estimate the WACC for
the company

Unfinished business
None

New business
For the next meeting, begin to analyze the company’s financials to determine
the appropriate elements to include in our free cash flow valuation. Next
meeting will be discussed by next week.

Announcements
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Omar El Abiad Friday, March 2, 2018
Secretary Date of approval

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