Contact Energy Limited (CEN)

Discount cash flow analysis

Buy Undervalued by 29.3%

5% margin of safety What's this?

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How does this work?

This is an interactive analyst report for Contact Energy Limited, based on a discounted cash flow valuation approach.

You can modify the assumptions and the valuation will be updated automatically. You can also save and share your valuation.

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Values in $ millions
2009 2010 2011 2012 2013 2014 2015 2016
 
                 
               
 

What will the revenues be in the future?

Growth beyond year three is driven by the terminal growth rate.

Sensitivity matrix

   
-1%
Discount Rate %
0%

1%
  -1% $6.45 $6.27 $6.10
Terminal Growth% 0 $6.53 $6.35 $6.17
  +1% $6.61 $6.42 $6.25

How does a change in discount rate or terminal growth affect valuation?

This table shows the sensitivity of the valuation to two key variables - the discount rate and the terminal growth rate

Valuations and comments

  • Valuecruncher created a new valuation of $2.01 (overvalued by 59.06%) - 8 months ago
  • sambling created a new valuation of $0.00 (overvalued by 100.0%) - over 7 years ago
  • sambling created a new valuation of $0.00 (overvalued by 100.0%) - over 7 years ago
  • sambling created a new valuation of $0.00 (overvalued by 100.0%) - over 7 years ago
  • sambling created a new valuation of $0.00 (overvalued by 100.0%) - over 7 years ago
  • sambling created a new valuation of $6.47 (undervalued by 13.31%) - over 7 years ago
  • DarrylLundy created a new valuation of $6.54 (overvalued by 1.06%) - almost 8 years ago
  • DarrylLundy created a new valuation of $0.00 (overvalued by 100.0%) - almost 8 years ago
  • DarrylLundy created a new valuation of $5.59 (overvalued by 15.43%) - almost 8 years ago
  • GordonGekko created a new valuation of $6.35 (undervalued by 0.95%) - almost 8 years ago
  • GordonGekko created a new valuation of $5.55 (overvalued by 4.8%) - almost 8 years ago
  • GordonGekko created a new valuation of $5.55 (overvalued by 4.8%) - almost 8 years ago
  • GordonGekko created a new valuation of $5.55 (overvalued by 4.8%) - almost 8 years ago
  • GordonGekko created a new valuation of $5.55 (overvalued by 4.8%) - almost 8 years ago
  • GordonGekko created a new valuation of $5.55 (overvalued by 4.8%) - almost 8 years ago
  • GordonGekko created a new valuation of $5.55 (overvalued by 4.8%) - almost 8 years ago
  • GordonGekko created a new valuation of $6.04 (undervalued by 2.55%) - almost 8 years ago
  • GordonGekko created a new valuation of $5.95 (undervalued by 6.25%) - 8 years ago
  • KiwiEMH created a new valuation of $6.44 (overvalued by 8.78%) - over 8 years ago
  • Bert created a new valuation of $12.36 (undervalued by 30.38%) - 9 years ago
  • Sam created a new valuation of $11.07 (undervalued by 18.02%) - 9 years ago
  • tiger created a new valuation of $9.45 (undervalued by 1.61%) - 9 years ago
  • GordonGekko created a new valuation of $7.73 (overvalued by 16.88%) - 9 years ago

Comments

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The boring details

All amounts in millions Figures
Enterprise Value: 3,817
Net Debt (Long-term borrowings less cash): 985
Equity Value: 3,628
Number of Shares Outstanding: 576,000,000
Calculated value per share: $6.35

Enterprise Value is the present value of the post-tax cash flows for a business into the future.


Calcuation of EV

Where:

  • C1, C2, C3 - the cash flow in period 1, 2, 3, ...
  • r - the discount rate

To capture the cash flows into the future a terminal value is calculated via a perpetuity calculation -
based on the final years forecast post-tax free cash flow.


Perpetuity

Where:

  • Cn - the cash flow in the final forecast period.
  • LTG - the long-term growth rate
  • r - the discount rate
  • g - the terminal growth rate

The Capital Asset Pricing Model (CAPM) is used to determine the equity component in the discount rate.


CAPM model

Where:

  • rt - the risk free rate
  • t - the tax rate
  • B - the beta of the company
  • MRP - the Market Risk Premium

Valuecruncher uses an estimate of Weighted Average Cost of Capital (WACC) to determine the discount rate in the calculation.