Core Valuations @CoreValuations

Prerequisites for a game farm: 3. There must be secure and safe drinking water for the game, even in times of a severe drought. 4. Fire breaks are critical to prevent and control fires. The availability of enough grazing at all times is essential

Prerequisites for a game farm are: 1. It must be game-fenced all around, with 2.4m height fence of acceptable configuration 2. There should be no internal cattle fences which prohibit the game to roam freely.

What makes it a game farm? The bushveld cattle farm with free-ranging game on, is not a game farm. The karoo sheep farm with springboks alongside the sheep, is not a game farm

Game Farm vs Wildlife Farm A Game Farm is a smaller intensive wildlife production unit that is fenced on which wildlife is managed intensively for the production and harvesting of marketable game products

For a capital intensive business, as well as a business with a high investment in working capital (debtors and inventories), future free cash flow should be used.

Usually the Net Profit After Tax earnings is the preferred choice for the valuation computation.

If the revenue stream is expected to fluctuate, the DCF method and not the capitalisation method must be applied.

For a business or investment property one needs to assess the future pattern of revenue streams in terms of their year-on-year volatility

The economic life of an investment property is for all practical purposes 20 years, because the characteristics of the time value of money indicates that the net present value of cash flow received after 20 years, is virtually zero.

The period beyond the window period that generates additional earnings, is referred to as the terminal period.

The window period is the period which is relatively assured of revenue and earnings. It is usually 3- 5 years.

A forecast period consists of two components; the window period and a terminal period

The average economic life of a business is considered to be 15 years. This also recognizes the time value of money fact, that the present value of earnings beyond 15 years is virtually zero (with a discount rate higher than 20%).

A water allocation can be transferred / sold to another entity. However, the Department must authorize it. It cannot be taken for granted.

The Water Act of 1998 stipulates that a water allocation now belongs to a person / legal entity, not to a property as previously. Therefore, allocations that were registered on Title Deeds will evenutually disappear.

If a farmer does not use his water allocation, he will lose it

The other two categories are: 3) Storing water 4) Stream flow redaction (aforrestation)

There are 4 categories of registration. The first two categories are: 1) Taking water from a borehole / dam. 2) Water entitlement from an irrigation scheme.

A dam larger than 10,000 cubic meter and a borehole of more than 10,000 l/h must be registered.

If the farm does not possesses a water registration certificate / water license the value of the irrigation is R nil, because the irrigation is then illegal.