Drakensberg Cable Car
31 Jul 2013 11:33 #57865
by hasamatt
Replied by hasamatt on topic Drakensberg Cable Car
www.iol.co.za/travel/travel-news/r500m-plan-for-kzn-cableway-1.1555352#.UfjusSpXs3l
Read comments below... seems like there are many sceptics regarding this proposal!
Read comments below... seems like there are many sceptics regarding this proposal!
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31 Jul 2013 11:55 #57866
by elinda
Replied by elinda on topic Drakensberg Cable Car
See the report issued as per the link below:
> www.kznded.gov.za/
There are some flashing icons in the centre which are links to the pdfs.
> The top right-hand one is the report
> www.kznded.gov.za/
There are some flashing icons in the centre which are links to the pdfs.
> The top right-hand one is the report
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31 Jul 2013 13:19 #57867
by Selous
Replied by Selous on topic Drakensberg Cable Car
Where do these guys get there figures from?
300 000 cable car visitors a year or 820 a day!!! Any fool can make an excel spreadsheet look profitable.
That must be one idiot who is doing the feasibility study.
Selous
300 000 cable car visitors a year or 820 a day!!! Any fool can make an excel spreadsheet look profitable.
That must be one idiot who is doing the feasibility study.
Selous
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31 Jul 2013 14:53 - 31 Jul 2013 17:29 #57869
by Grandeur
Replied by Grandeur on topic Drakensberg Cable Car
Ok wait. Let's put emotions aside for a second even though they are extremely important.
Some numbers given assuming they are all true and I didn't miss something important:
Around R500m to construct (excl VAT) (based on 60% accuracy
That is not very accurate is it?)
+-R200 per ticket
300,000 visitors annually
Total annual revenue = R60m
Total estimated annual operating costs = R17,5m (based on 3,5% of initial capital outlay of R500m)
Total annual profit = R42,5m
That means the project has a payback period of nearly 12 years without taking time value of money / interest etc into account.
Now let's put emotions back into it - I don't know about you but when I did accounts at varsity, if I said that a project was viable with a 12 year payback period without taking time value of money into account, I would have been given an F!
Some numbers given assuming they are all true and I didn't miss something important:
Around R500m to construct (excl VAT) (based on 60% accuracy
That is not very accurate is it?)+-R200 per ticket
300,000 visitors annually
Total annual revenue = R60m
Total estimated annual operating costs = R17,5m (based on 3,5% of initial capital outlay of R500m)
Total annual profit = R42,5m
That means the project has a payback period of nearly 12 years without taking time value of money / interest etc into account.
Now let's put emotions back into it - I don't know about you but when I did accounts at varsity, if I said that a project was viable with a 12 year payback period without taking time value of money into account, I would have been given an F!
Last edit: 31 Jul 2013 17:29 by intrepid. Reason: Removed comment about GM Associates
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31 Jul 2013 15:10 - 31 Jul 2013 17:31 #57871
by BobbyStanton
Replied by BobbyStanton on topic Drakensberg Cable Car
You have missed the point entirely and are not seeing the big picture. The cable car would not be put there only for it's own benefit.
Last edit: 31 Jul 2013 17:31 by intrepid. Reason: Removed personalised rebuttal
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31 Jul 2013 15:28 - 31 Jul 2013 16:49 #57873
by ghaznavid
Replied by ghaznavid on topic Drakensberg Cable Car
Ok - so we aren't accounting for free cashflow, depreciation etc, not accounting for children paying lower fees. Lets assume a life of 20 years with profit growing at 6% p.a. (which is way too high, if inflation was 10%, 6% would be too much due to rising input costs) and terminating after 20 years when the setup needs a complete overhaul.
Internal rate of return/target minimum weighted average cost of capital = 11.3%
If target debt/equity is 50:50
and cost of capital is prime and stays at current prime, 8.5%
then expected return on equity to achieve target WACC is 14.1%
If shares in the company are issued to the amount of R250m (to achieve debt equity of 50:50), if the shareholders expected a 20% return on investment (which for a private company would indicate a very low risk company, 25% is usually used on very solid companies, closer to 33% even 50% for risky ones) and 6% growth, the 100% equity share of the company would be worth R151.8m after 1 year.
In other words a shareholder's interest would devalue by at least 39% in the first year of operation.
Sorry to have to tag this on to the end of the post, but valuing companies is a big part of my job, so I have to...
Disclaimer
The above does not constitute advice, a service or any other product. I have not audited the figures, nor have I performed a due diligence on them and accordingly I express no assurance on the above or any other related information.
Internal rate of return/target minimum weighted average cost of capital = 11.3%
If target debt/equity is 50:50
and cost of capital is prime and stays at current prime, 8.5%
then expected return on equity to achieve target WACC is 14.1%
If shares in the company are issued to the amount of R250m (to achieve debt equity of 50:50), if the shareholders expected a 20% return on investment (which for a private company would indicate a very low risk company, 25% is usually used on very solid companies, closer to 33% even 50% for risky ones) and 6% growth, the 100% equity share of the company would be worth R151.8m after 1 year.
In other words a shareholder's interest would devalue by at least 39% in the first year of operation.
Sorry to have to tag this on to the end of the post, but valuing companies is a big part of my job, so I have to...
Disclaimer
The above does not constitute advice, a service or any other product. I have not audited the figures, nor have I performed a due diligence on them and accordingly I express no assurance on the above or any other related information.
Last edit: 31 Jul 2013 16:49 by ghaznavid.
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31 Jul 2013 16:38 #57874
by ghaznavid
What you say is in part true, but if the jobs created from bringing an extra 265 000 people per year to the Bergville region were to occur they would quickly dry up after closure of the cable-way. Thus failure of the business would cause failure of the entire endeavour.
Replied by ghaznavid on topic Drakensberg Cable Car
BobbyStanton wrote: You have missed the point entirely and are not seeing the big picture. The cable car would not be put there only for it's own benefit.
What you say is in part true, but if the jobs created from bringing an extra 265 000 people per year to the Bergville region were to occur they would quickly dry up after closure of the cable-way. Thus failure of the business would cause failure of the entire endeavour.
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31 Jul 2013 17:02 #57875
by ghaznavid
Replied by ghaznavid on topic Drakensberg Cable Car
Adding some more info to my earlier post - according to the Beaver univariate failure prediction model, a company with a debt repayment period in excess of 7 years will almost definitely fail (basically unless there is major intervention, in which case the odds still aren't great). The healthiest businesses usually operate around 3.5 years. Note: debt repayment period isn't the period of loans, its basically long term debt divided by profit.
At 50:50 debt equity, debt repayment period works out at 11.8 years. At debt equity of around 37.2 : 62.8 the debt repayment period falls just under 7 years (where failure is likely but not almost guaranteed). This would result in shareholders getting a measly 12.95% return on their investment.
Some context - Satrix Top 40 (a low risk JSE share basket) gave its shareholders 19.17% last year, and averaged 7.18% over the last 5 years even with the fact that the start of that period was before the massive drop in the JSE in mid 2008. It has averaged 14.09% in the last 2 years.
At 50:50 debt equity, debt repayment period works out at 11.8 years. At debt equity of around 37.2 : 62.8 the debt repayment period falls just under 7 years (where failure is likely but not almost guaranteed). This would result in shareholders getting a measly 12.95% return on their investment.
Some context - Satrix Top 40 (a low risk JSE share basket) gave its shareholders 19.17% last year, and averaged 7.18% over the last 5 years even with the fact that the start of that period was before the massive drop in the JSE in mid 2008. It has averaged 14.09% in the last 2 years.
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31 Jul 2013 17:13 #57876
by BobbyStanton
Replied by BobbyStanton on topic Drakensberg Cable Car
You have also not seen the big picture. This looks like Economists vs. Accountants. See page 75 of the report.
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31 Jul 2013 18:26 - 31 Jul 2013 18:26 #57877
by intrepid
Take nothing but litter, leave nothing but a cleaner Drakensberg.
Replied by intrepid on topic Drakensberg Cable Car
Every one of us needs to be very considerate of how we express our views here, myself included. This is a public forum, and this thread in particular is being followed increasingly as this debate picks up. Please remember that some of Vertical Endeavour's guiding principles are:
- Everyone is allowed to express their opinion, regardless of what it might be.
- Careful thought must be given to the tone and wording of what you write.
- Aggressiveness, personalised attacks, and personal criticisms will not be tolerated. Such remarks will be censored, and a warning will be issued if warranted.
- Abusive and foul language will also not be tolerated.
- Play the ball, not the person.
- Avoid the use of sarcasm. It is too easily misunderstood and tends to stir dissent.
- There is a big difference between discussion and dissent. The first is constructive, the latter is destructive.
Please bear this foremost in mind as we deal with this issue. I understand it can stir up emotions and that the tone will be serious. But it needn't have a negative, destructive tone.
I would also like to make a point of opening this thread up to views that are in favour of the cable car, even though Vertical Endeavour's official stance is opposed to it. If there are people out there that support it, we would like to hear from you and welcome your participation.
No doubt many of us are reading the newly released report. Let's all have a good, long read and consider what has been said. We can then start formulating a response. Be encouraged to not just read the report with the intent of ripping it apart, but consider some good points and conclusions which may have been made. Understand that boosting tourism in general is a needed thing in any country. You will notice that pages 79-80 of the the report is a direct response to our media statement.
I did an interview with City Press today, keep an eye out for that. Pity I missed the ECR session today. Currently I am in Canada, 9 hours behind South Africa time. If anyone is following this discussion and would like to get a response from Vertical Endeavour, please use this email address: This email address is being protected from spambots. You need JavaScript enabled to view it.
A copy will be sent to various people, and if I am not able to respond personally, Ian Miller (diverian on this forum) and Dominic Wieners (domsmooth) are also able to give comment.
- Everyone is allowed to express their opinion, regardless of what it might be.
- Careful thought must be given to the tone and wording of what you write.
- Aggressiveness, personalised attacks, and personal criticisms will not be tolerated. Such remarks will be censored, and a warning will be issued if warranted.
- Abusive and foul language will also not be tolerated.
- Play the ball, not the person.
- Avoid the use of sarcasm. It is too easily misunderstood and tends to stir dissent.
- There is a big difference between discussion and dissent. The first is constructive, the latter is destructive.
Please bear this foremost in mind as we deal with this issue. I understand it can stir up emotions and that the tone will be serious. But it needn't have a negative, destructive tone.
I would also like to make a point of opening this thread up to views that are in favour of the cable car, even though Vertical Endeavour's official stance is opposed to it. If there are people out there that support it, we would like to hear from you and welcome your participation.
No doubt many of us are reading the newly released report. Let's all have a good, long read and consider what has been said. We can then start formulating a response. Be encouraged to not just read the report with the intent of ripping it apart, but consider some good points and conclusions which may have been made. Understand that boosting tourism in general is a needed thing in any country. You will notice that pages 79-80 of the the report is a direct response to our media statement.
I did an interview with City Press today, keep an eye out for that. Pity I missed the ECR session today. Currently I am in Canada, 9 hours behind South Africa time. If anyone is following this discussion and would like to get a response from Vertical Endeavour, please use this email address: This email address is being protected from spambots. You need JavaScript enabled to view it.
A copy will be sent to various people, and if I am not able to respond personally, Ian Miller (diverian on this forum) and Dominic Wieners (domsmooth) are also able to give comment.
Take nothing but litter, leave nothing but a cleaner Drakensberg.
Last edit: 31 Jul 2013 18:26 by intrepid.
The following user(s) said Thank You: plouw
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