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414 Capital Inc. ● [email protected] ● www.414c.com

.

Valuation Report

Proteak Uno S.A.B. de C.V.

January, 2017

1


The analysts responsible for the production of this report certify that the views expressed herein exclusively reflect their personal views and opinions

about any and all of the subject issuers or securities, and were prepared independently and autonomously, including from 414 Capital Inc. and

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Disclaimer

2


I. Executive Summary 3

II. Company Overview 5

III. Investment Case 19

IV. Valuation Summary 24

V. Segmented Financial Statements 32

Agenda

3


I. Executive Summary

4


Introduction

414 Capital is pleased to present an independent valuation exercise for the Ordinary Participation Certificates (“CPOs”)

of Proteak Uno S.A.B. de C.V. (“Proteak”)

Proteak is a company that presents a particular difficulty when performing a valuation exercise, due to a number of

factors which will be discussed later on in this report; including:

― Long value realization horizon for the teak business line

― Opaque international market for teak products

― Uncertainty (limited) on the performance of forestry assets

― Additional value of the new MDF business line

Per the request of some members of Proteak’s investors, we developed this document focusing on:

― Deepening the understanding of the business and its key variables

― Detailing our considerations and steps used to reach a value conclusion

It is worth mentioning that during the life of the company, the expected cash flows will change continuously as the

teakwood estimated growth and the current market prices are dynamic and subject to change

On January 13, the Company announced a loan granted by the International Finance Corporation (IFC) of MXN 1,400

mm. Our understanding is that the loan will be used to restructure current debt. However, it will be included in the

valuation once Proteak publishes detailed uses of the loan

Valuation exercise conclusion

As of January 16, 2017, CPOs traded at MXN 21.0. Based on our analysis and applied methodology, there is

significant value in the company that has not been realized in its current market value. 414 Capital considers that

the fair value range of the CPOs is:

MXN 30.5 – 33.5

Please refer to Section IV for a discussion on the methodology used

Exchange rate USD/MXN: 20.6 (31/12/2016). Source: Banxico

Executive Summary Antecedentes

5


II. Company Overview

6


Proteak is one of the most important companies in the forestry industry in Mexico. It engages in the plantation,

exploitation and marketing of teak and eucalyptus in Mexico and abroad and the production of MDF boards

As of today, Proteak’s biological assets of teak are more than 8,300 planted hectares (has)

Most of its plantations are located in Mexico, with additional has in Colombia and Costa Rica

Recently, the company developed a new business line dedicated to the production and commercialization

of medium density fiber (MDF) boards

A of today, Proteak’s has more than 9,600 hectares of Eucalyptus (species characterized by its accelerated

growth) to provide the plant’s capacity of 280,000m3 per year

Distribution and business operation

TradingRoundwood commercialization

SalesMainly in China and India

ForestryRoundwood

Company Overview Introduction

7


Forestry

Proteak’s forestry activity is mainly teak plantation (also known as Tectona Grandis)

The teak forestry business consists of five phases:

Trading

This business line is engaged in the commercialization of round wood (at higher volumes) primarily in Asia´s

southeastern market

― One goal of this segment is to achieve a better understanding of the global teak market behavior in

order to exploit new business opportunities

― The Trading division was created in late 2011 to commercialize round wood obtained in the final harvests

of the Colombian plantations

- Preparing the land through drains and liming. In parallel, the seed is reproduced in

a nursery and later proceed with planting

Land preparation and planting2

- Clean the area where trees are planted to

ensure their healthy development

Maintenance3

- Proteak’s policy is to plant around 900 to 1,200 trees per ha. Thinning is

done in years 5, 9, 12, 15 and 20 in an approximate cycle of 25 years

Thinning4

- ~70% of revenues come from the final harvest

Final harvest5

- The Company has selected 27 properties

Site selection1

Company Overview Teak forestry business

8


Has total distribution Has distribution - Mexico

Source: Proteak

Costa Rica

Mexico

ColombiaCosta Rica

624 has of teak

Colombia

312 has of teak

Nayarit

1,888 has of teak

Tabasco

5,552 has of teak

89%

7%4%

Mexico

Costa Rica

Colombia

47%

53%

Teak

Eucalyptus

Company Overview Geographic coverage

9


What is MDF?

MDF is a board made of a mixture of wood fiber and resin, compacted with high pressure and heat

This product is mainly used to produce office furniture, kitchens, closets, doors, frames and moldings. Due to

its light weight, it is easy to cut and has an ideal smooth surface which can be painted or covered with

melamine or wooden sheets

The standard MDF board in the Mexican market has a density between 650 and 750 kg/m3, width of 1.22m

and height of 2.44m, with a thickness between 12mm and 18mm

Recently, MDF has substituted natural wood and other kinds of boards, such as triplay and agglomerate wood

boards

― Natural wood is becoming scarce and reducing its quality because there are less trees with the required

diameter to produce a board with the necessary size and hardness. Furthermore, the production cost of

natural wood furniture is significantly higher

― Even though the agglomerate wood boards are between 35% and 40% cheaper than MDF, they have a

disadvantage in the sense that they can only be cut straightly and their surface is rough

MDF Agglomerate wood

vs

Company Overview MDF business

10


Production process of MDF boards

1 2 3

Selection Heating

• Once the logs arrive at the

Factory, the first step is totriturate or splinter them

with the Wood chipper

4

Trituration Shredding

DryingMixingFormationVolume

Cooling Cutting

• The mixture is shaped with

heat and pressure

Pressing

• The splinters pass through a

screen in order to be selectedby size. At the same time

scraps are removed

• The splinters are then heated

with steam and pressure, inorder to break the lignin

linkages

• The splinters pass through a

shredder that converts it intofiber

• The mixture passes through

a pre-pressing procedure inorder to reduce its volume

• The mixture is then left in a

molder• The resulting product is later

mixed with urea formaldehyde

• The fiber is dried to reduce

the humidity content from40% to 10%

• Before packing, the boards

are cut and rubbed• Boards are cooled down

568 7

9 10 11

Business Description MDF business

11


Why will Proteak commercialize MDF?

Taking advantage of its forestry platform in order to continue its growth, Proteak acquired the only existing private

Eucalypt plantation in Mexico and has built a factory to produce MDF with wood coming from this plantation

90.5% of MDF consumed in Mexico is imported mainly from Chile and the U.S., resulting in high logistic costs that represent

an important amount of the price paid by distributors. Currently, there are no MDF continuous process lines in Mexico

and the consumption per capita is still low in comparison with most countries in the world. Given this opportunity, Proteak

decided to diversify its growth strategy

― Mexico has the potential to become an important wood exporter because of its geographical location, climate,

domestic market growth potential and trade agreements

Additionally, when the plant reaches full capacity, 35% of the boards commercialized by Proteak will include added

value, which will increase their selling price by 30%-70%

― Only 15% of the MDF boards sold in Mexico include melamine sheets

Proteak’s objective is to reach a 30-35% market share by substituting imports

Collaboration Agreement with FINSA

In January 2015, Proteak announced a collaboration agreement with Financiera Maderera S.A. (“Finsa”), the largest

Spanish company engaged in board, resin, melamine and veneer production in the Iberian peninsula

Some of the highlights of the agreement include:

― The joint operation of Proteak’s MDF plant

― The transfer of technology from Finsa to Proteak

― The marketing of Finsa’s products in Mexico

Company Overview MDF business

12


Feasibility analysis

Strategic and financial study in which engineers

and consultants are retained to establish the type

of timber that will be harvested, calculate IRR for

investors and set the site for the pilot plantation

Phase

zero

1999-

2000

Phase

one

2001-

2006

Phase

two

2007-

2009

Phase

three

2010-

2011

Phase

four

2012-

2013

Phase

five

2013-

2015

Project scalability

Incorporation of small investors to start planting

between 150 and 200 has per year

580 has are planted in the state of Nayarit and

the certification from FSC (Forestry Stewardship

Council) is obtainedScale generation

Operating procedures are established to secure

the appropiate cost and expense structure

1,700 has are seeded in 23 plantations in the state

of Nayarit and Tabasco. 90% of the land is private

owned and 10% is comunal landIPO and institutional growth

The company´s institutionalization process begins

The company opened subsidiaries in Panama,

Costa Rica and Colombia. Also, a new plant in

Estado de Mexico begins to process timber

119 has of mature plantations are acquired in

Tabasco (16 years), 950 has in Mexico, 1,450 has

in Costa Rica and 890 in ColombiaStabilization of the company

A new business segment is created calles

“Trading” for roundwood commercialization at an

international level

Consolidation of operations

Proyecto MDF

FOMEX´s plantation acquisition,

conceptualization and engineering design

Plant installation in 2014

Phase

six2016

MDF project execution

Production tests began in February, 2016 and

commercialization in April, 2016

Company Overview Company phases

13


Management

Name Position

Gastón Mauvezin CEO

Enrique Espinosa Teak General Director

Omar Nacif MDF General Director

José García Moreno CFO

Jurgen Stock Forestry Director

Corporate structure

Finance and Accounting

Forestry

Planning and Institutional

Relations

Teak Management MDF Management

General Management

Company Overview Management and corporate structure

14


Teak represents a small proportion of the world’s timber production; the estimated supply of teak logs in the market is

less than 2%. However, the teak industry is important in this market due to its high value

The teak currently planted in Asia, Africa and Latin America, total more than 5,900,000 hectares. A vast majority of these

plantations are found in Asia (India, Laos and Thailand)

India is the largest consumer of teak in the world followed by Thailand, China and Vietnam, while the last two are the

principal importers of teak worldwide

In Mexico, the states of Veracruz, Tabasco, Campeche, Chiapas, Puebla and Nayarit are the leaders on planted has

of different species, including teak. They concentrate more than 65% of the total plantations

Teak plantations distribution by age

Source: FAO, 2015

0%

80%

0 - 20 years 21 - 40 years 41 - 60 years > 60 years

Industry Overview Teak supply and demand

15


The demand of teak has been growing at double digit in the last years. It was registered that between 2010

and 2012 the demad of teak increased by 47%. Nowadays, the teak plantations ascend to 6.8 mm of hectares

worldwide, this represents a capacity to produce 30 mm of m3 of wood annually

The teak produced in Myanmar established the international standards of quality and was the principal log

provider of teak worldwide. During the 2010-2012 period the exportations of Myanmar grew 50%. However, in

2014 reforms in exports of forestry products where implemented in the country, reducing the availability of

teak in the world, providing new opportunities for other teak producers

Prices in exportations to India

Source: ITTO and Proteak

205

305

405

505

605

705

805

905

Industry Overview Teak supply and demand

16


The Mexican MDF market is still young. Therefore, consumption and production are relatively low

MDF – consumption per capita

Consumption by country

Production by country

Fuente: SIAVI y FAO

0

5

10

15

20

25

30

35

40

45

COL PER MEX VEN URU JAP GER ARG NED FRA USA KUW ITA CAN AUS BRA CHIL CHI COR NZ

48%

11%3%

3%

35%

China

United States

Germany

Russia

All others

50%

8%

3%3%

3%

3%

30%

China

United States

Russia

Canada

Germany

Brazil

All others

Descripción de la Industria Teak supply and demand

17


The MDF market in Mexico has suffered falls in the price per square meter

― Due to the oversupply of MDF in the Brazilian market, the exportations to Mexico increased and as a

consequence the price of MDF per m3 has decreased up to 11.1% from 2014 to 2015

― Brazil counts with an installed capacity of ~8 mm of m3 and the MDF they export represents 32% of the

market in Mexico

― Now that Proteak and other Mexican producers started to produce MDF, less pressure is expected from

Brazil

― Only 9% of the MDF consumed in Mexico is produced in the country

Imports to Mexico (2015) Prices - MDF imports (2015)

Source: ITTO

9%

4%

4%

12%

27%

32%

12%

National China Canada

Unites States Chile Brazil

-15%

-10%

-5%

0%

5%

10%

-

50

100

150

200

250

300

350

400

450

2012 2013 2014 2015

Thick (USD per m³) Thin (USD per m³)

Thick - growth Thin - growth

Industry Overview MDF industry

18


The forestry sector in Mexico has a large trade deficit. 80% of wood products consumed are imported

In 2015, the annual consumption of MDF in Mexico was 700,000 m3/year, and it is expected that this trend will

continue over the next few years

MDF global demand has increased almost four times in the last 11 years, while natural wood and other boards

have increased by 50%. MDF has become the preferred board among carpenters and furniture

manufacturers

Annual production of MDF in Mexico Annual consumption of MDF in Mexico

Source: SIAVI and FAO (2014)

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

0

5

10

15

20

25

30

35

40

9.50% 5.94% 14.66% -10.90% 47.68%

Production Growth

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

0

100

200

300

400

500

600

700

800

2010 2011 2012 2013 2014 2015

Consumption Growth

Industry Overview MDF supply and demand

19


III. Investment Case

20


Investment Case Investment highlights and key risks

Investment highlights

Diversified income

sources

Proteak has developed a vertically-integrated business model based on the following points:

― The company has secured financial resources to ensure the feasibility of its business

model through loans, subsidies and positive cash flows generated by recently-acquired

mature plantations

― Diversification of inventory in terms of economic value

― The company has been able to commercialize teak without the need to negotiate with

intermediaries through its Trading division, while also gaining a better understanding of

the teak market

Recently, Proteak decided to open a new business line that consists of MDF production

― With this strategy, the company will further diversify its income, mitigating the risk of relying

solely on the demand for teak

― In November 2013, the construction of the high-tech plant began (supplied by

Dieffenbacher, a highly-specialized German company), with a production capacity of

280,000 m3 per year. As of today, the plant is operating

Acquisition of mature

biological assets

Proteak timely acquired biological assets in Cosa Rica from a Dutch company, Eco Direct

Nederland B.V., which at that time was in a bankruptcy process

― 2,862 has were acquired for USD 16.5 mm, of which 240 has were mature teak (strategic

value) and the rest was land for sale

890 has of teak were purchased in Colombia of which 560 has are ready for final harvest

In September 2013, Proteak concluded the acquisition of Fomex (the largest private forestry

company in Mexico)

― Approximately 8,600 has of eucalyptus were acquired, along with the technology,

research and all the components to supply the raw material for the new MDF business

line

21



Efficient capital

structure

Proteak has managed to be at a healthy leveraged position with favorable conditions

― As of today, the obtained debt is with the International Finance Corporation (IFC),

Financiera Rural, and Commerzbank AG

Limited competition

There is only one scale competitor in Mexico (Agropecuaria Santa Genoveva) and since the

teak market is global, these two Mexican companies do not represent significant

competition to each other

Due to the insufficient wood supply, currently available in Mexico, the company may be one

of the few domestic providers for the next year with local wood sources, obtaining lower

costs and thus higher margins

Operation

The learning curve in terms of forest plantations has increased significantly in recent years

― The company has learned to select adequate land at the right price, which translates

into better quality and more profitable plantations

Geographical

presence

Proteak has plantations in Mexico, Costa Rica and Colombia to diversify some risks and has

different distribution centers

The company has its own sales office in Mexico. Also, it has offices under an outsourcing

scheme in United States, China, India and Colombia to serve different teak markets

Management board

and directors

Nine out of thirteen board members are independent and are mostly recognized

entrepreneurs or senior executives

Officials leading Proteak’s operations have experience and a successful track record in

businesses across different industries

Certifications

Proteak is certified by the FSC (Forest Stewardship Council) due to the sustainable forestry

practices it handles

― Having this certification allows the company to build a higher credibility and reputation

22



Key risks

Asset illiquidity

Proteak’s biological assets contemplate a long-term horizon and are illiquid as of today,

given the nature of the forestry business

Moreover, Proteak’s shares have little liquidity (3-month ADTV 21,056)

We believe that in the near future Proteak’s ADTV will increase due to the fact that the

company is facing an expansion phase, in 2017 the company will receive positive cash

flows (thanks to harvests from mature plantations and from the beginning of MDF

operations)

Regulatory framework

Proteak is subject to strict environmental regulations, both domestic and abroad, due to

an increase in illegal logging

― Proteak has the necessary specifications to mitigate this risk

Changes in environmental regulations in countries where Proteak operates could

adversely affect their business operation

Macroeconomic

conditions

Most sales are overseas so Proteak is subject to MXN’s appreciation or depreciation

― Currently the main markets for teak are located in China, India and US

Growth with

acquisitions

Proteak’s growth has been partly driven by acquisitions of new biological assets, that in

turn depend on terms and conditions in which they were acquired. The company’s

enhanced growth could be affected in case these terms and conditions are not met in

the future

MDF as a greenfield

component

The MDF business has yet to demonstrate its thesis. There may be a learning period the

company needs to go through

Despite a clear case for import substitutions, the price of local MDF may differ from

expectations

23



Price volatility

The International Tropical Timber Organization (ITTO) publishes on a monthly basis teak

prices recorded on the market, based on the Myanmar rating system. However, this

information is based on few transactions and teak that comes only from Myanmar, so it is

difficult to predict its behavior

We believe a rise in demand for teak from plantations is expected because natural teak

forests have slowly been extinguishing

― The current production of teak in the world is estimated between 9-10 mm m3 of which

~ 85% is supplied by teak plantations (most of them with no chance of being certified)

and ~ 15% of natural forest

414 Capital has conducted one of the most wide-ranging studies regarding teak prices

and uses it to validate the prices used in the financial projections

Meteorological

phenomena, pests

and fires

Like any other forestry asset, Proteak’s biological assets are subject to pest-related risks

― However, Proteak’s plantations are in various properties and the larger ones are

interspersed with native vegetation to keep pests from expanding

Regions where Proteak’s plantations are located (tropical climates near the sea) are

exposed to different weather events such as hurricanes and storms that could negatively

affect trees

Heavy rains help growth but require unplanned maintenance and exhaustive land

preparation

There is a risk that plantations might suffer from fire disasters. However, to mitigate this risk,

Proteak took some preventive measures such as:

― Create roads to divide plantations and constantly cleaning young plantations (where

there is greater risk due to lack of shade)

All these risks are mitigated due to the fact that teak is generally resistant to pests and fires

24


IV. Valuation Summary

25


We conducted a valuation exercise according to standard methodologies and the application of criteria based on the

nature of the assets

We performed a sum of the parts valuation estimating the company’s levered free cash flows for each of its business

lines

― For purposes of this exercise we took the teak´s business line as a finite project. In turn, we used a 10-year projection

and assumed a perpetual growth rate of 3.0% for the MDF business line

― We applied different discount rates for each business line considering the risks for each business

While the company is likely to continue its activities beyond the forecasted period (2045):

― A growth plan is not easy to project beyond what is already known and has been published by the company

― We would have to adjust the company’s investment plan for the next years without any basis or sufficient information

to do so

― We assigned a terminal value to the land once the final harvest of each plantation is concluded. We used a 7%

discount rate for the land’s NPV

Note that, as discussed below, the projected cash flows and the weighted average cost of capital are modeled in USD

(USD is the currency used in the global teak market)

― Cash flows are converted to MXN once they are discounted and unleveraged

In conclusion, we expect upside potential for Proteak’s stock that could be triggered by an increase in its trading activity

and a better understanding of the drivers that determine the value of the company

― We attribute – at least partially – the stock’s low liquidity to the fact that ~80% of the company’s value (at present

value) is materialized after 2025

― Value is also added because MDF’s flows are positive from the beginning

Introduction

26


Teak volume (m3)

Note: Volume is estimated by the company according to their future growth projection methodology

-

50

100

150

200

250

300

3502

01

6

201

7

201

8

201

9

202

0

202

1

202

2

202

3

202

4

202

5

202

6

202

7

202

8

202

9

203

0

203

1

203

2

203

3

203

4

203

5

203

6

203

7

203

8

203

9

204

0

204

1

204

2

204

3

204

4

204

5

000's P12

P11

P10

P9

P8

P7

P6

P5

P4

P3

Production Volume Projections

27


The base currency is USD due to the fact that the teak market is dictated by international buyers and sellers

We estimated a different discount rate for each business line considering the following:

― We used the unlevered beta of comparable global public companies and re-leveraged to Proteak’s capital

structure

― The teak business cycle is ~23 years and MDF is 6 to 8 years, which represents a lower risk

― We used a discount rate adjusted for the underlying asset’s low liquidity and country risk

― We adjusted the market cap value for each business line considering the amount of capital invested in each one

Teak WACC MDF WACC

Note: capitalization value in millions of USD

Equity

Cost of equity 17.3%

Debt

Weighted average cost of debt 8.3%

Effective tax rate 30.0%

Cost of debt 5.8%

Market capitalization 122

Total funding debt 20

WACC 15.7%

Equity

Cost of equity 17.7%

Debt

Weighted average cost of debt 4.2%

Effective tax rate 30.0%

Cost of debt 2.9%

Market capitalization 149

Total funding debt 86

WACC 12.3%

Considerations on Exchange Rate and Cost of Capital

28


1Includes cash flow from the land´s terminal value mentioned in page 28

Discounted cash flows 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

Teak

% of year 25% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

Operating income (5,765) (2,051) (1,241) (4,059) 9,169 49,816 17,658 19,614 30,102 90,303 50,813 54,024 106,129

Taxes - - - - - (11,182) (5,359) (6,045) (9,275) (27,383) (15,553) (16,533) (32,166)

Depreciation and amortization 3,767 3,390 3,051 2,782 2,540 2,323 2,119 1,907 1,717 1,545 1,391 1,251 1,170

Changes in working capital 895 341 (1,070) 691 (3,850) (9,987) 9,197 (387) (2,674) (15,790) 11,108 (1,142) (13,380)

Capex - - (3,839) (3,927) (4,016) (288) - - - - - (432) -

EBITDA (1,999) 1,339 1,810 (1,278) 11,709 52,139 19,778 21,521 31,819 91,848 52,204 55,276 107,298

Free cash flows (1,104) 1,680 (3,100) (4,513) 3,842 30,682 23,616 15,090 19,869 48,675 47,759 37,169 61,752

Discount factor 0.1 0.8 1.8 2.8 3.8 4.8 5.8 6.8 7.8 8.8 9.8 10.8 11.8

Discounted flows¹ (271) 1,505 (2,400) (3,021) 2,223 15,341 10,420 5,653 6,414 13,580 12,590 7,746 11,123

2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045

100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

73,265 135,139 84,486 192,463 224,778 490,078 385,185 476,589 169,409 428,125 111,750 118,300 125,427 136,891 558,265 590,778 452,987

(21,980) (40,542) (25,346) (57,739) (67,433) (147,023) (115,556) (142,977) (50,823) (128,437) (33,525) (35,490) (37,628) (41,067) (167,480) (177,233) (135,896)

1,053 947 853 767 691 679 611 550 495 445 401 437 393 354 319 287 258

8,365 (15,091) 12,925 (27,170) (7,759) (63,055) 25,796 (21,517) 74,533 (62,072) 75,718 (1,499) (1,492) (2,406) (99,744) (6,382) 32,755

- - - - (574) - - - - - (762) - - - - - -

74,318 136,087 85,338 193,230 225,469 490,757 385,796 477,139 169,903 428,570 112,151 118,737 125,821 137,245 558,584 591,064 453,245

60,703 80,453 72,918 108,321 149,702 280,678 296,037 312,645 193,614 238,060 153,583 81,748 86,700 93,771 291,360 407,449 350,104

12.8 13.8 14.8 15.8 16.8 17.8 18.8 19.8 20.8 21.8 22.8 23.8 24.8 25.8 26.8 27.8 28.8

9,740 10,887 8,543 11,044 13,866 21,830 20,444 18,725 11,072 12,201 6,931 3,515 2,345 2,192 5,887 7,964 5,284

Discounted Cash Flows (Teak) USD 000s

29


Discounted cash flows 2016 2017 2018 2019 2020 2021 2022 2023 2024

MDF

% of year 25% 100% 100% 100% 100% 100% 100% 100% 100%

Operating income (8,926) 2,799 21,362 42,795 44,187 46,855 48,191 49,244 50,034

Taxes - (329) (6,101) (12,623) (13,024) (11,752) (14,213) (14,696) (14,667)

Depreciation and amortization 6,894 10,566 9,801 9,039 8,371 7,739 7,120 6,554 5,992

Changes in working capital 11,277 (3,068) (5,156) (5,114) (2,976) (3,176) (3,015) (3,013) (3,018)

Capex (48,297) (3,631) (2,944) (3,245) (3,009) (2,580) (2,587) (2,135) (2,226)

EBITDA (2,032) 13,365 31,163 51,834 52,558 54,594 55,311 55,798 56,026

Free cash flows (39,052) 6,336 16,962 30,852 33,550 37,086 35,496 35,954 36,116

Discount factor 0.1 0.8 1.8 2.8 3.8 4.8 5.8 6.8 7.8

Discounted flows (9,622) 5,805 13,834 22,399 21,684 21,338 18,180 16,393 14,659

Terminal value - perpetuity growth 161,770

Discounted Cash Flows (MDF) USD 000s

30


Enterprise value 539,814

Debt 86,836

Cash 4,810

Minority interest 34,373

Net debt 116,399

Equity value 423,415

USD MXN

Implied CPO price 1.56 32.1

Sensitivity table

Discount rate (MDF)

11.4% 11.7% 12.0% 12.3% 12.6% 12.9% 13.2%

15.0% 36.3 35.5 34.7 34.0 33.4 32.8 32.2

15.2% 35.6 34.8 34.1 33.4 32.7 32.1 31.5

15.5% 35.0 34.2 33.4 32.7 32.1 31.4 30.9

15.7% 34.3 33.5 32.8 32.1 31.4 30.8 30.2

16.0% 33.7 32.9 32.2 31.5 30.8 30.2 29.6

16.2% 33.2 32.4 31.6 30.9 30.2 29.6 29.1

16.5% 32.6 31.8 31.0 30.3 29.7 29.1 28.5

Dis

co

un

t ra

te

(te

ak

)

Discounted Cash Flows USD 000s

31


In order to detect which variables impact valuation the most we sensitized the key variables in by +/- 5.0%

29.0 30.0 31.0 32.0 33.0 34.0 35.0

Exchange rate

MDF sale price

Teak discount rate

MDF discount rate

Teak sale price

Teak inflation rate

MDF perpetuity growth

Variable range

5.2% - 5.8%

+/- 5% Change

3.2% - 2.9%

13.0% - 11.7%

16.5% - 14.9%

+/- 5% Change

+/- 5% Change

Sentitivity to Key Variables MXN

CPO price: MXN 32.1

32


V. Segmented Financial Statements

33


1Includes non-cash items

Income Statement 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

Total revenues 4,622 8,207 10,148 7,507 21,852 63,501 29,029 30,887 41,728 104,591 62,524 66,230 120,398 86,402

SG&A 2,843 2,995 4,368 4,716 5,973 7,088 4,870 4,874 5,306 8,025 5,484 5,998 8,018 6,876

Gross profit 1,779 5,212 5,779 2,791 15,879 56,413 24,159 26,013 36,422 96,567 57,040 60,233 112,380 79,526

Total expenses 7,545 7,263 7,021 6,850 6,710 6,598 6,501 6,399 6,320 6,263 6,227 6,209 6,251 6,261

EBIT (5,765) (2,051) (1,241) (4,059) 9,169 49,816 17,658 19,614 30,102 90,303 50,813 54,024 106,129 73,265

EBITDA (1,999) 1,339 1,810 (1,278) 11,709 52,139 19,778 21,521 31,819 91,848 52,204 55,276 107,298 74,318

EBITDA m argin -43% 16% 18% -17% 54% 82% 68% 70% 76% 88% 83% 83% 89% 86%

Net income¹ 12,383 1,908 (711) 533 14,484 44,514 17,721 19,582 27,394 69,933 42,631 45,234 82,045 58,626

2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045

149,818 97,383 208,956 242,000 511,982 404,436 497,287 183,279 447,197 124,962 131,761 138,931 150,391 578,689 610,435 470,453

8,393 6,573 10,117 10,782 15,332 12,600 13,956 7,030 12,122 6,144 6,190 6,106 5,966 12,746 11,827 9,477

141,425 90,810 198,839 231,218 496,649 391,836 483,330 176,249 435,075 118,818 125,571 132,825 144,424 565,943 598,607 460,977

6,286 6,325 6,376 6,440 6,572 6,651 6,741 6,841 6,950 7,068 7,271 7,398 7,534 7,678 7,830 7,990

135,139 84,486 192,463 224,778 490,078 385,185 476,589 169,409 428,125 111,750 118,300 125,427 136,891 558,265 590,778 452,987

136,087 85,338 193,230 225,469 490,757 385,796 477,139 169,903 428,570 112,151 118,737 125,821 137,245 558,584 591,064 453,245

91% 88% 92% 93% 96% 95% 96% 93% 96% 90% 90% 91% 91% 97% 97% 96%

102,305 67,233 143,222 166,267 352,423 279,467 343,942 129,431 311,075 90,182 95,365 100,982 109,665 405,319 428,805 333,114

Projected Income Statement (Teak) USD 000s

34


Balance Sheet 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

Cash and equivalents 11,126 12,537 1,383 - - 26,082 47,458 59,972 80,657 130,306 179,094 217,347 280,191 340,894

Accounts receivable 2,685 2,257 2,410 1,500 4,513 13,759 6,090 6,494 8,894 22,854 13,496 14,310 26,337 18,772

Inventory 1,707 1,825 3,061 3,356 4,484 5,481 3,422 3,400 3,769 6,234 3,877 4,319 6,142 5,065

Non-current assets 121,515 121,542 125,952 130,934 136,472 139,405 142,502 146,073 150,107 154,601 159,552 165,391 171,212 177,500

Total Assets 137,033 138,161 132,806 135,789 145,468 184,726 199,473 215,938 243,427 313,996 356,019 401,367 483,881 542,230

Suppliers 440 470 788 864 1,155 1,412 882 876 971 1,606 999 1,112 1,582 1,305

Long-term credit 19,562 18,753 13,790 11,275 8,793 5,556 3,111 0 0 0 0 0 0 0

Total Liabilities 25,216 24,437 19,793 22,242 17,437 12,182 9,207 6,090 6,185 6,820 6,213 6,327 6,796 6,519

Total equity 111,816 113,724 113,013 113,547 128,031 172,545 190,266 209,848 237,242 307,175 349,806 395,040 477,085 535,711

Total liabilities & equity 137,033 138,161 132,806 135,789 145,468 184,726 199,473 215,938 243,427 313,996 356,019 401,367 483,881 542,230

2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045

421,347 494,265 602,586 752,289 1,032,967 1,329,004 1,641,649 1,835,263 2,073,324 2,226,906 2,308,654 2,395,354 2,489,126 2,780,485 3,187,934 3,538,038

32,853 21,190 45,973 53,304 113,288 89,377 109,998 40,206 98,841 27,220 28,717 30,297 32,829 127,991 135,031 103,909

6,425 4,724 7,940 8,517 12,653 10,114 11,321 4,936 9,565 4,047 4,049 3,932 3,762 9,934 9,048 6,849

184,260 191,501 199,231 208,037 216,726 225,953 235,732 246,082 257,024 269,342 281,460 294,249 307,737 321,952 336,926 352,692

644,886 711,681 855,731 1,022,147 1,375,635 1,654,448 1,998,700 2,126,487 2,438,755 2,527,515 2,622,881 2,723,832 2,833,454 3,240,363 3,668,940 4,001,488

1,655 1,217 2,045 2,194 3,259 2,605 2,916 1,271 2,464 1,042 1,043 1,013 969 2,559 2,331 1,764

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

6,869 6,431 7,260 7,408 8,474 7,820 8,130 6,486 7,678 6,257 6,257 6,227 6,183 7,773 7,545 6,979

638,016 705,249 848,471 1,014,738 1,367,162 1,646,628 1,990,570 2,120,001 2,431,076 2,521,258 2,616,623 2,717,605 2,827,270 3,232,590 3,661,395 3,994,509

644,886 711,681 855,731 1,022,147 1,375,635 1,654,448 1,998,700 2,126,487 2,438,755 2,527,515 2,622,881 2,723,832 2,833,454 3,240,363 3,668,940 4,001,488

Projected Balance Sheet (Teak) USD 000s

35


Cash flow statement 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

Net income 1,908 (711) 533 14,484 44,514 17,721 19,582 27,394 69,933 42,631 45,234 82,045 58,626

Depreciation and amortization 3,390 3,051 2,782 2,540 2,323 2,119 1,907 1,717 1,545 1,391 1,251 1,170 1,053

Changes in working capital 341 (1,070) 691 (3,850) (9,987) 9,197 (387) (2,674) (15,790) 11,108 (1,142) (13,380) 8,365

Total cash from operations 5,638 1,270 4,006 13,174 36,850 29,038 21,103 26,436 55,688 55,129 45,344 69,835 68,043

Capex - (3,839) (3,927) (4,016) (288) - - - - - (432) - -

Income from fixed assets 670 670 670 670 - - - - - - - - -

Total cash from investment (3,418) (7,461) (7,763) (8,078) (5,256) (5,217) (5,478) (5,752) (6,039) (6,341) (7,090) (6,991) (7,341)

Changes in long-term debt (809) (4,963) (2,515) (2,482) (3,237) (2,444) (3,111) - - - - - -

Total cash from financing (809) (4,963) (2,515) (2,482) (3,237) (2,444) (3,111) - - - - - -

Net change in cash 1,411 (11,154) (6,272) 2,613 28,357 21,377 12,514 20,685 49,649 48,788 38,253 62,844 60,703

Initial cash 11,126 12,537 1,383 (4,889) (2,275) 26,082 47,458 59,972 80,657 130,306 179,094 217,347 280,191

Ending cash 12,537 1,383 (4,889) (2,275) 26,082 47,458 59,972 80,657 130,306 179,094 217,347 280,191 340,894

2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045

102,305 67,233 143,222 166,267 352,423 279,467 343,942 129,431 311,075 90,182 95,365 100,982 109,665 405,319 428,805 333,114

947 853 767 691 679 611 550 495 445 401 437 393 354 319 287 258

(15,091) 12,925 (27,170) (7,759) (63,055) 25,796 (21,517) 74,533 (62,072) 75,718 (1,499) (1,492) (2,406) (99,744) (6,382) 32,755

88,161 81,011 116,819 159,198 290,047 305,874 322,974 204,459 249,448 166,301 94,303 99,883 107,613 305,894 422,709 366,128

- - - (574) - - - - - (762) - - - - - -

- - - - - - - - - - - - - - - -

(7,708) (8,093) (8,498) (9,496) (9,369) (9,837) (10,329) (10,845) (11,388) (12,719) (12,555) (13,183) (13,842) (14,534) (15,261) (16,024)

- - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - -

80,453 72,918 108,321 149,702 280,678 296,037 312,645 193,614 238,060 153,583 81,748 86,700 93,771 291,360 407,449 350,104

340,894 421,347 494,265 602,586 752,289 1,032,967 1,329,004 1,641,649 1,835,263 2,073,324 2,226,906 2,308,654 2,395,354 2,489,126 2,780,485 3,187,934

421,347 494,265 602,586 752,289 1,032,967 1,329,004 1,641,649 1,835,263 2,073,324 2,226,906 2,308,654 2,395,354 2,489,126 2,780,485 3,187,934 3,538,038

Projected Cash Flow (Teak) USD 000s

36


Income Statement 2016 2017 2018 2019 2020 2021 2022 2023 2024

Total revenues 22,211 52,181 78,314 103,461 105,820 108,233 110,701 113,225 115,806

SG&A 21,371 35,147 42,830 46,602 47,897 47,819 48,963 50,187 51,442

Gross profit 839 17,034 35,484 56,859 57,923 60,414 61,737 63,037 64,364

Total expenses 9,765 14,236 14,122 14,064 13,736 13,559 13,547 13,793 14,330

EBIT (8,926) 2,799 21,362 42,795 44,187 46,855 48,191 49,244 50,034

EBITDA (2,032) 13,365 31,163 51,834 52,558 54,594 55,311 55,798 56,026

EBITDA m argin -9% 26% 40% 50% 50% 50% 50% 49% 48%

Net income (6,181) 1,886 15,409 30,685 31,682 28,780 34,590 35,788 35,794

Projected Income Statement (MDF) USD 000s

37


Balance sheet 2016 2017 2018 2019 2020 2021 2022 2023 2024

Assets

Cash and equivalents 22,093 23,455 34,310 59,527 86,984 103,032 129,080 156,215 182,919

Accounts receivable 3,702 8,407 12,617 16,669 17,049 17,438 17,835 18,242 18,658

Inventory 6,233 4,881 4,759 3,884 3,991 3,985 4,080 4,182 4,287

Other accounts receivable 13,925 13,925 13,925 13,925 13,925 13,925 13,925 13,925 13,925

Non-current assets 133,573 126,638 119,781 113,987 108,625 103,466 98,934 94,515 90,749

Total Assets 179,527 177,306 185,392 207,992 230,575 241,846 263,855 287,080 310,537

Revolving credit line - - - - - - - - -

Suppliers 4,749 7,810 9,518 10,356 10,644 10,627 10,881 11,153 11,432

Credit 85,568 81,177 74,922 68,775 62,164 47,449 37,391 27,332 17,493

Total Liabilities 115,302 111,196 103,872 95,788 86,689 69,180 56,599 44,037 31,700

Total equity 64,225 66,111 81,519 112,204 143,886 172,666 207,255 243,043 278,837

Total liabilities & equity 179,527 177,306 185,392 207,992 230,575 241,846 263,855 287,080 310,537

Projected Balance Sheet (MDF) USD 000s

38


Cash flow statement 2017 2018 2019 2020 2021 2022 2023 2024

Net income 1,886 15,409 30,685 31,682 28,780 34,590 35,788 35,794

Depreciation and amortization 10,566 9,801 9,039 8,371 7,739 7,120 6,554 5,992

Changes in working capital (3,068) (5,156) (5,114) (2,976) (3,176) (3,015) (3,013) (3,018)

Total cash from operations 9,384 20,054 34,609 37,077 33,343 38,695 39,329 38,768

Capex (2,514) (1,771) (2,013) (1,715) (1,222) (1,161) (637) (653)

Income from sale of fixed assets - - - - - - - -

Total cash from investment (3,631) (2,944) (3,245) (3,009) (2,580) (2,587) (2,135) (2,226)

Dividends paid - - - - - - - -

Changes in long-term debt (4,391) (6,255) (6,147) (6,611) (14,715) (10,059) (10,059) (9,839)

Total cash from financing (4,391) (6,255) (6,147) (6,611) (14,715) (10,059) (10,059) (9,839)

Net change in cash 1,361 10,855 25,217 27,457 16,047 26,049 27,135 26,703

Initial cash 22,093 23,455 34,310 59,527 86,984 103,032 129,080 156,215

Ending cash 23,455 34,310 59,527 86,984 103,032 129,080 156,215 182,919

Projected Cash Flow (MDF) USD 000s

valuation report - proteakproteak.com/files/analyst/valuation414jan17.pdf · 4 414 capital inc....

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