WEGAGEN BANK S.

C
Credit Analysis Report
Kibco Service & Investment P.L.C

1. Facility Applied:
The company requested
o Construction bridge term loan of Birr 15,000,000.00 to be repaid on quarterly installments within
three years.
o MDTS Overdraft facility limit of Birr 4,000,000.00 for a period of one year.
o Release of building collateral with LHC No. ቦሌ 03/331/158-7628/00 so as to be used for the newly
requested credit facility.
o Asset financing term loan of Birr 6,279,000.00 to be repaid on quarterly installments within five
years.
o Extension of an advance payment guarantee of Birr 20,383,888.84 with a reduced amount of Birr
13,032,267.58 for further period of 180 days at the prevailing commission rate partially on clean
basis.
2. Purpose
o To facilitate its existing construction and beer distribution business.
o To finance 70% of the invoice value of two units of IVECO trucks with trailers to be purchased from
Dina Gezahegn Import and Export and two units of Hyundai EX-7 Cargo Trucks to be purchased
from Marathon Motor Engineering PLC having a combined proforma invoice value of Birr
10,655,000.00.
o The advance payment guarantee is meant to help the company execute construction contracts on
hand.
3. Collateral
The residential building located in A.A registered in the name of the deputy manager of the company, Ato
Kibrom Teumelisan, and motor vehicles & machinery in the name of the company are held for existing
facilities, the detail of which is presented below:
3.1 Collateral held for the existing credit facilities
3.1.1 Building
Ow Loc. Construction Location Total Date
nership Type LHC No Value Value Estimated Estimated
value
Kibrom* Res. ቦሌ 03/331/158- A.A 2,104,897.75 904,200.00 3,009,097.75 11/08/17
Teumelisan 7628/00
Kibrom Res. የካ/195351/08 A.A. 322,322.62 3,797,758.00 4,120,080.62 11/08/17
Teumelisan*
* Collateral pledged for the newly requested term loan and overdraft facility limit.
3.1.2 Motor vehicles/Machineries

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 No. Ownership Type Mfg. Plate No. Estimated
Year Value Date Estimated
1. The applicant Mini Bus 2005 3-95202AA 300,000.00 15/07/15
2. ,, Toyota Pick up 2008 3-86109 AA 600,000.00 15/07/15
3. ,, Dozer 2004 DZ-0968 3,000,000.00 16/07/15
4. ,, Sino Truck 2013 3-59444ET 1,000,000.00 15/07/15
5. ,, Two dump trucks 2017 3,000,000.00 Proforma Invoice
6. ,, Automobile 2017 3-A45928 600,000.00 06/07/17
7. The applicant Chain Excavator* 2012 EX-1941 2,700,000.00 19/08/17
8. ,, Chain Excavator* 2012 EX-1932 2,800,000.00 06/07/17
9. ,, Double Cabin p/up* 2016 3-A38143AA 1,280,000.00 06/07/17
Total 15,280,000.00
* Machineries and vehicle pledged for its newly requested term loan and overdraft facility limt.

3.2 Collateral pledged for the newly requested credit facility.

Year of
Description No. Unit cost in Br. Total price in Br. Total Cost
Make
HYUNDAI EX-7 Cargo Proforma invoice
2017 2 785,000.005 1,570,000.01
Truck
IVECO Trucks with trailer 2017 2 3,700,000.00 7,400,000.00 Proforma invoice
Total Cost 8,970,000.01
Collateral Coverage ratio:
Collateral to requested loan ratio= Collateral value = 13,909,178.37 = 0.73:1
Requested Amount 19,000,000.00
The collateral cannot fully secure the requested credit facility.

4. Back Ground Information

5.1. Establishment & Business Objective

Kibco Service & Investment P.L.C is a customer of our bank which is engaged in the construction business
as a Grade-1 Building Contractor being licensed in the year 2004 E.C with initial capital of Birr 1.2 million.
The company is established by two shareholders having business objectives of engaging in the construction
sector, construction machinery rental, real estate development, manufacturing of construction materials, hotel
& tourism, import & export and agro industry among others. The detail about the shareholders and their
respective share contribution is presented as follows:
Name of Shareholders No. of share Par Value Total Value %age
Frehiwot Shebiru Awash 1,000 1,000 1,000,000.00 83%

Kirom Teumelisan T/Haimanot 200 1,000 200,000.00 17%

TOTAL 1,200 1,000 1,200,000.00 100%

5.2. Management Profile

The company is managed by W/ro Frehiwot Shebiru, who is well experienced and qualified. She is an
Ethiopian by birth and English citizenship. There are also other individuals who play their key role in the day

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to day smooth functioning of the business. The detail about management profile of the company is
presented below:
No. Name Position Qualification Experience
1. Frehiwot Shebiru General Manager BA in ILS 9 Yrs
2. Kibrom Tuemelisan D/ General Manager BA in Management 16 Yrs
3. Ashenafi Yilma Construction Manager BSC in Civil Engineering 9 Yrs
4. Elias Derbie Manager-Operations BSC in Civil Engineering(PE2) 8 Yrs
5. Sintayehu Zewdie Project Manager BSC in Civil Engineering(PE2) 6 Yrs
6. Moges Zewdie Site Engineer BSC in Civil Engineering(GE) 2 Yrs
7. Addisu Ayalew Construction Manager BSC in Civil Engineering(PE2) 5Yrs
8. Tilahun Kersima Project Manager BSC in Civil Engineering(EA6) 14 Yrs
As it could be witnessed from the above table and attached CV and testimonials the company is equipped
with well qualified and experienced personnel who will play a pivotal role for its success.
5.3. Current Business Activities
The company is currently engaged in the distribution of Heineken beer products for which a transport vehicle
term loan is requested so as to be able to transport the said products using its own trucks.
Besides, the company is engaged in the construction sector with active contractual agreement with Addis
Ababa Saving Housing Development Enterprise (40/60) for the construction of 2 blocks (B+G+12) at Bole
Ayat site with a total cost of around 102 million. The detail of the progress of the project is tabulated below.
Active Projects at hand
Amt. Performed Remaining Contract
Project Employer Contract Amount Work signed date
Construction of City Govt of A.A
2B+G+12 Saving Houses
Saving Houses 101,919,444.20 35,396,622.97 66,522,821.23 01/08/15
Condominium 40/60
Dev’t Enterprise
Previously Executed Projects
Name of Project Employer Contract amount
Eight G+1 Luxurious Residential buildings Rosseta Real Estate 29,400,000.00
Service quarter and ditch Defense House Administration Main 4,289,166.19
Directorate
TOTAL 33,689,166.19

5. Banking Relation
5.1. With our Bank
The company has an outstanding term loan, advance payment guarantee and two bid bone guarantees the
detail of which tabulated below.

Type of Loan Amount Granted Date Granted Expiry Date O/S balance as Status
at 30/09/17

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 ADP 20,383,888.84 09/09/15 09/09/17 20,383,888.84 Active
TVL 2,100,000.00 06/09/17 06/09/22 2,100,000.00 Pass
2 BBDs 200,000.00 15/07/17 15/01/18 200,000.00 Active

 Past Credit Record

Type of facility Amount Granted Date granted Expiry date Status
T/L 1,500,000.00 25/07/14 25/07/16 Settled
T/L 1,200,000.00 05/01/13 05/01/15 Settled
BBD 100,000.00 17/02/12 17/06/12 Expired
BBD 50,000.00 12/10/12 24/11/12 ,,
PBD 388,705.93 09/09/14 06/01/15 ,,

5.2. With other Banks

As per the NBE’s credit information dated 19/07/2017 Ref.No. 539465, the company has no credit facility
with other banks. As per credit information dated 19/07/2017 Ref.No. 539433, one of the two shareholders
of the company, Ato Kibrom Tuemelisan, has no credit facility with other banks. As per credit information
Ref.No. CRB/536/2017 dated July 24, 2017, W/ro Firehiwot Shibru Awash has no credit facility with other
banks.
6. Facility Utilization
Current account movement
The company has a current account at Dashen Bank the utilization of which is tabulated below.
Total Debit/
Banks Period Covered Highest Credit Lowest Credit
Credit turnover
1,815,155.57 204.55
Wegagen Bank 26/09/16 – 26/09/17 1,669,199.67 3,164.55 3,034,660.50
1,665,841.21 3,704.55
627,486.00 3,350.63
Dashen Bank 07/08/16 – 07/07/17 538,975.34 4,387.25 74,734,924.66
514,738.46 7,325.74
7. Financial Synopsis
The applicant has presented audited financial statement for the years ended July 07, 2013, 2014, 2015 and
2016 and provisional financial statement for the year ended July 07, 2017. Financial figures are on the
spreadsheet attached herewith the annex and analysis of some financial ratios are as follows.

10.1 Activity/ Sales Analysis

PERIOD ENDED 07/07/2013 07/07/2014 07/07/2015 07/07/2016 07/07/2017

Number of days 365 365 365 365 365
Net Sales ‘000 6,626 5,782 14,640 41,128 80,622
Net Sales Gr. Rate (%) -12.74% 153.20% 180.93% 96.03%
The revenue of the company which stood at Birr 80.6 million for the year ended July 07, 2017 has been
increasing for the past three years at an average growth rate of 143%.

10.2 Profitability

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 PERIOD ENDED 07/07/2013 07/07/2014 07/07/2015 07/07/2016 07/07/2017
Net profit ‘000 (532) (2,275) 1,359 2,682 7,531
Gross Profit Margin (%): 35.65% 12.02% 14.12% 17.67% 14.10%
Op. Profit Margin (%): -8.15% -39.35% 9.28% 6.82% 9.34%
Net Profit Margin (%): -8.03% -39.35% 9.28% 6.52% 6.54%
The company has been profitable for the past three years in that it registered an average gross profit margin and
net profit margin of 15% and 7% respectively.

10.3 Liquidity
PERIOD ENDED 07/07/2013 07/07/2014 07/07/2015 07/07/2016 07/07/2017
Current Ratio: 0.42 0.05 0.90 0.65 1.21
Quick Asset Ratio: 0.31 0.05 0.90 0.58 0.77
The company’s liquidity position has been weak in that it is not in a position to meet its current liabilities using
its current assets. But the company is in a relatively better liquidity position this year than the preceding years.

10.4 Leverage
PERIOD ENDED 07/07/2013 07/07/2014 07/07/2015 07/07/2016 07/07/2017
Tangible Net Worth ‘000 (769) (1,093) 3,803 582 10,397
Total Liabilities/TNW 6.21 32.82 1.95
Bank Debt/TNW

The company’s networking capital ratio has been negative for 2013 and 2014 but it managed to register a
positive figure for the last three years. The company is highly geared as evidenced by the Total liabilities to
tangible net worth of 1.95 for the year ended July 07, 2017.

10.5 Working capital management

Period 07/07/2013 07/07/2014 07/07/2015 07/07/2016 07/07/2017

Stock Turnover (Days): 93 14 47
Debtors T/O (Days): 12 24 262 18 44
Creditors T/O (Days): 2 2 574 165 107

Debtors and creditors days for the year ended July 07, 2017 stood at 44 and 107 days respectively. The
company manages its working capital efficiently.

8. Risk Assessment
8.1 Ownership Risk

Since company’s shareholders contribute significant capital contribution towards the business ownership risk
to be faced is found minimal.
8.2 Management Risk

The Company is managed by Ato Kibrom Teumelisan, who is well qualified and has acquired ample
experience in line of the business. Besides, other individuals assist him in the day to day smooth functioning
of the business by playing their respective role. Hence, management risk is minimal.

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8.3 Business Risk

The company has a standing contract which enables it to distribute Heineken products to the domestic
market. The company is currently distributing production Heineken Beer using rented trucks. The vehicles to
be purchased are supposed to minimize the transportation expenses of the company thereby increasing its
profitability.

8.4 Collateral Adequacy

The applicant pledged to offer building, machineries and vehicle collateral as collateral for the loan. The
collateral offered, though strong, cannot fully secure the requested credit facility.
9 Request assessment
9.1 Transport Vehicle term loan

The applicant requested asset financing term loan of Birr 6,279,000.00 for five years to finance 70% of the
purchase cost of two units of IVECO trucks with trailer and two units of Hyundai trucks. The applicant is
primarily engage in the construction sector as building contractor. As per the letter from Heineken
Breweries, the applicant, as a sales agent of the company, distributes such beer products of the company as
Heineken, Walia, Bedele and Sofi-malt to Southern Ethiopian region in general and the Gamo-gofa zone
(Arbaminch and its environs) in particular. As per the audited financial statement for the year ended Sene 30,
2008 E.C., the company derived Birr 8.2 million from the sales of beverages (which is 20% of its annual
revenue). The company needs to have its own vehicles so as to minimize its transportation expense, thereby
increasing the profitability of the business. The company falls under risk grade ‘B’. According to the credit
procedure of our bank:
‘If the loan request is for the purchase of new vehicle, applicant with credit risk grade of A and
B, should make an equity contribution of at least 30% of the purchase cost or the invoice value
of the vehicle.
For grade A and B customers if the vehicle is brand new additional collateral may not be
required on the top of the vehicle purchased.’’
As a grade ‘B’ customer, the applicant deserves 70% asset finance from our bank to purchase the
trucks.

9.2 Release of building collateral with LHC No. ቦሌ 03/331/158-7628/00

The applicant requested the release of the building collateral (LHC No. ቦሌ 03/331/158-7628/00)
having an estimated value of Birr 3,009,097.75 which is held as partial security for the active advance
payment guarantee of Birr 20,383,888.84. This advance payment guarantee for which extension is
requested with a reduced amount of Birr 13,032,267.58 has been partially collateralized by a building,
vehicles and machinery collateral having an estimated value of Birr 7,909,097.75 and partially (Birr
12,474,791.09) on clean basis. The applicant is now requesting that the building collateral be released
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and that the reduced advance payment guarantee of Birr 13,032,267.58 be issued partially against
existing vehicle and machineries and partially on clean basis. It seems sensible to grant the reduced
advance payment guarantee on clean basis and to release building collateral so that it could be used to
secure the new working capital request of the applicant.
9.3 Extension of Advance payment guarantee of Birr 20,383,888.84 at a reduced amount of Birr
13,032,267.58 for further period of 180 days.

The applicant has requested the extension of the advance payment guarantee eof Birr 20,383,888.84 for
further period of one year. The applicant has brought a letter from ‘City government of Addis Ababa
Saving Houses Development Enterprise Branch Four’ stating their consent for the extension of the
advance payment guarantee.
9.2 Construction bridge term loan of Birr 15,000,000.00 for three years and MDTS overdraft
facility limit of Birr 4,000,000.00
The applicant requested a construction bridge term loan of Birr 15,000,000.00 for three years. The
applicant has entered a contract agreement with Addis Ababa Saving House Development enterprise to
construct two blocks of 2B+G+15 at Bole Hayat. The physical status of the project is as follows.
No Project description Total Contract Executed to Unexecuted
Amount date portion
1 Block-11 & Block 101,919,444.20 35,396,622.97 66,522,821.23
12

As per the credit procedure of our bank,

‘‘the maximum amount to be financed should not exceed 50% of the contractual value of the
project.’’
As the credit procedure of the bank, other things remaining constant, the applicant requires a working
injection of Birr 33,261,410.62 which is 50% of the unexecuted portion of the project.

The applicant has also requested MDTS overdraft facility limit of Birr 4,000,000.00 for a period of one
year. As per the credit procedure of the bank,
‘‘The applicant has to be a customer of the Bank as borrower or depositor for a period of at
least one year with good current account operations.’’
The applicant’s account performance in our bank is not that satisfactory in light of its sales volume and
its account performance with other banks. The applicant, as a contractor, is engaged in executing
government projects as a result of which it seems to prefer to maintain an account with the state bank.
The applicant, as an agent of Heineken brewery, has recently been deriving substantial income from
the distribution of beer products of the company. The applicant has not presented a license for its beer
distribution business though it has brought a letter from Heineken brewery testifying the fact that it is
engaged in the distribution of Heineken products. According to the CRM, the company is forced to use

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its account at Dashen bank in order to save its transaction cost as the beer company it is working with
maintains an account in the same bank and effects payments using Dashen checks.

10 Bases for Recommendation

Strong points
 Sound financial standing of the applicant’s business.
 Smooth relationship with our bank so far as a depositor, borrower & user of guarantees.
 Engaged in diversified business activities which helps to withstand adverse market conditions.
 The company needs to have its own trucks to facilitate its beverage distribution business.
 As a grade ‘B’ customer, the collateral is adequate to secure the requested Transport vehicle term
loan.
 The company brought a letter from the employer stating its consent to the extension of the contract.

Weak point
 Highly geared.

11 Recommendation
In view of the foregoing analysis, I recommend

Granting a construction bridge term loan of Birr 10,000,000.00 (Ten million birr only) to be repaid back
in three years on quarterly mode of repayment against two residential buildings having an estimated value
of Birr 7,129,178.37, two Excavators having a total estimated value of Birr 5,500,000.00, and pick up
vehicle having an estimated value of Birr 1,280,000.00.

Extending the previously approved (under LAF No. WB/CRM/560/15) Advance payment guarantee of
Birr 20,383,888.84 at a reduced amount of Birr 13,032,267.58 (Thirteen million thirty two thousand two
hundred sixty seven birr and fifty eight cents only) for further period of 180 days at the prevailing
commission rate partially against three vehicles and one machinery collateral having an estimated value
of Birr 4,900,000.00 and partially (amounting to Birr 8,132,267.58) on clean basis with all other terms
and conditions stated on the original LAF No. WB/CRM/560/15 held intact.

Releasing building collateral with LHC No. ቦሌ 03/331/158-7628/00 so as to be used as collateral for the
newly requested credit facility.

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 Granting transport vehicle term Loan of Birr 6,279,000.00 (Six million two hundred seventy nine
thousand birr only) to finance 70% of the purchase cost of two units of trucks with trailers to be
purchased from Dina Gezahegn Import & Export and two units of trucks to be purchased from
Marathon Motor Engineering PLC for a period of five years on quarterly mode of repayment at the
prevailing interest rate against two IVECO trucks with their trailers and two Hyundai trucks having a
total invoice value of Birr 8,970,000.01 and two buildings having an estimated value of Birr
7,129,178.37.

Conditions:

 Partial proceed amounting to Birr 5,180,000.00 (Five million one hundred eighty thousand birr only)
should be credited to the supplier, Dina Gezahegn Import & Export.
 Partial proceed amounting to Birr 1,099,000.000 (One million ninety nine thousand birr only) should
be credited to the supplier, Marathon Motor Engineering PLC.

____________
Dawit Haile
Sr. Credit Analyst

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