New Zealand Exchange Limited (NZX)

Discount cash flow analysis

Buy Undervalued by 532.7%

5% margin of safety What's this?

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How does this work?

This is an interactive analyst report for New Zealand Exchange 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
2007 2008 2009 2010 2011 2012 2013 2014
 
                 
               
 

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% $6.83 $6.73 $6.64
Terminal Growth% 0 $6.87 $6.77 $6.67
  +1% $6.91 $6.81 $6.71

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 $0.95 (overvalued by 11.21%) - 1 year ago
  • GordonGekko created a new valuation of $2.97 (undervalued by 13.79%) - over 5 years ago
  • cdaynes created a new valuation of $3.13 (undervalued by 43.58%) - over 7 years ago
  • GordonGekko created a new valuation of $9.33 (undervalued by 13.09%) - over 8 years ago
  • GordonGekko created a new valuation of $6.40 (undervalued by 13.88%) - over 8 years ago
  • Julian created a new valuation of $4.14 (overvalued by 21.14%) - over 8 years ago
  • Julian created a new valuation of $4.01 (overvalued by 23.62%) - over 8 years ago
  • Julian created a new valuation of $4.97 (overvalued by 5.33%) - over 8 years ago
  • Julian created a new valuation of $6.87 (undervalued by 30.86%) - over 8 years ago
  • NZXCrunchBlog created a new valuation of $6.77 (undervalued by 14.75%) - 9 years ago
  • KiwiEMH created a new valuation of $6.41 (overvalued by 0.47%) - 9 years ago
  • KiwiEMH created a new valuation of $6.41 (overvalued by 0.62%) - 9 years ago
  • KiwiEMH created a new valuation of $7.58 (overvalued by 1.81%) - 9 years ago
  • andrew created a new valuation of $6.40 (overvalued by 23.35%) - over 9 years ago
  • KiwiEMH created a new valuation of $7.86 (overvalued by 0.51%) - over 9 years ago
  • tiger created a new valuation of $6.99 (overvalued by 14.96%) - over 9 years ago
  • Sam created a new valuation of $7.37 (overvalued by 10.34%) - over 9 years ago
  • Sam created a new valuation of $6.83 (overvalued by 15.26%) - over 9 years ago
  • GordonGekko created a new valuation of $8.36 (undervalued by 3.72%) - over 9 years ago

Comments

Running The Numbers –NZX Limited (NZX.NZ)

This valuation is part of this blog post:

http://blog.valuecruncher.com/2008/10/running-the-numbers-–nzx-limited-nzxnz/

Assumptions

In 2007 (31 December balance date) NZX.NZ had revenues of NZ$31.5 million and an EBITD margin (profits) of 49.9%. Reuters aggregates three analysts covering NZX.NZ and these have mean estimates of 2008 and 2009 revenues of NZ$32.5 and NZ$36.1 million respectively. For this analysis we have used revenues of NZ$32.5 million in 2008, NZ$36.0 million in 2009 and NZ$39.0 million in 2010. We have forecast EBITDA margins flat at 48.0% to 2010. We have estimated capital expenditure of NZ$4.0 billion in 2008 and then NZ$3.0 million moving forward. All of these assumptions can be amended in the Valuecruncher on-line valuation model to adjust the valuation.

Other Model Assumptions:

Discount Rate: 9.5%. PwC in their New Zealand cost of capital report calculates NZX.NZ WACC at 9.6%.

Terminal Growth Rate: 4.25%. The New Zealand economy has grown at an average rate of 2.6% over the last five-years. We see NZX.NZ growing more quickly than the New Zealand economy moving forward due to the growth options available to the company – primarily around data.

Our analysis incorporates the cash and debt on the NZX.NZ balance sheet – Valuecruncher calculates a net debt number.

By NZXCrunchBlog, about 9 years ago

The boring details

All amounts in millions Figures
Enterprise Value: 13
Net Debt (Long-term borrowings less cash): -12
Equity Value: 146
Number of Shares Outstanding: 24,000,000
Calculated value per share: $6.77

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.