2026-04-14T08:14:23Zhttps://recercat.cat/oai/request

oai:recercat.cat:2117/3624202026-02-24T04:23:39Zcom_2072_1033col_2072_452951

Valuation multiples analysis of African companies: analysis across consumer and telecommunication industries Camilleri Serrano, Luis - Alejandro Universitat Politècnica de Catalunya. Departament d'Organització d'Empreses HEC Paris Wunnik, Lucas Philippe van Legland, Patrick Àrees temàtiques de la UPC::Informàtica Telecommunication Telecomunicació At the beginning of the 90s, the US, Western Europe and Japan represented the majority of the global economy, while Asia, Latin America and Africa had a strong capacity for expansion but accounted for just a limited fraction of global output. Over the first decade of the new century, emerging economies had an impressive growth. In fact, many of these countries in underdeveloped economies even recovered faster and earlier than developed markets in the global crisis of 2008. For instance, in 2014, China, India, Russia, and Brazil appeared as the top 10 largest economies1 (measured by GDP in US dollars). But even if some of these emerging economies appear to be the largest and fastest- growing economies, why are African companies trading at a discount? This thesis will try to compare trading levels between African companies and firms in developed economies, particularly in the United States and Europe, across the consumer and telecommunications sectors. Three different analyses will be done in order to understand why African companies are undervalued compared to its Western peers: (i) current and historical trading levels of African companies vs. developed markets across the consumer and telecommunications sectors, (ii) trading performance of the four biggest African IPOs during the last three years, and (iii) how African listed subsidiaries trade compared to its mother blue-chip companies in developed markets. These three different analyses will reveal that African companies appear to have a clear discount compared to their peers in developed markets. The rationale for the discount will be discussed in Section 8, and it is mainly driven by these factors: (i) the intrinsic uncertainty of the region, (ii) currency volatility and the inevitable exposure to foreign global currencies, and (iii) operations risks due to the infrastructure development level and the high competitiveness in one of the fastest growing markets. As just stated, Africa is one of the fastest growing economies on Earth. But does the high growth compensate the risks, reflected in the cost of capital? To be able to answer this question, a comparison between WACC and growth across African and Western companies will be carried out. The cost of capital will be translated from a local currency, for example 12 the Kenyan shilling, into the US dollar using Fisher International’s parity conditions which uses inflation to convert WACCs. After quantifying the discount and showing that the significantly higher growth in Africa does not compensate the high cost of capital, two companies with an outstanding valuation will be further analysed, one for the consumer industry and another for the telecommunications sector. These two companies, Nestle Nigeria and Safaricom, can serve as examples to other African companies that want to reach a better market valuation. Nonetheless, the unique features of these firms are built after many years of heritage and a leading market position in the region in which they operate. 2021-10-11 Master thesis https://hdl.handle.net/2117/362420 ETSEIB-240.148238 eng Restricted access - author's decision application/pdf Universitat Politècnica de Catalunya