Fletcher Building Limited (FBU)

Discount cash flow analysis

Sell Overvalued by 44.4%

5% margin of safety What's this?

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How does this work?

This is an interactive analyst report for Fletcher Building 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
2008 2009 2010 2011 2012 2013 2014 2015
 
                 
               
 

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% $6.08 $5.96 $5.84
Terminal Growth% 0 $6.10 $5.98 $5.86
  +1% $6.13 $6.01 $5.89

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 $0.08 (overvalued by 99.26%) - over 4 years ago
  • sambling created a new valuation of $7.73 (overvalued by 0.64%) - 11 years ago
  • GordonGekko created a new valuation of $5.85 (overvalued by 10.41%) - over 11 years ago
  • Neil created a new valuation of $3.66 (overvalued by 39.0%) - almost 12 years ago
  • gordonsk created a new valuation of $5.64 (overvalued by 7.84%) - almost 12 years ago
  • GordonGekko created a new valuation of $5.63 (undervalued by 6.03%) - almost 12 years ago
  • nzvikram created a new valuation of $1.97 (overvalued by 62.48%) - almost 12 years ago
  • KiwiEMH created a new valuation of $5.88 (undervalued by 2.08%) - over 12 years ago
  • NZXCrunchBlog created a new valuation of $5.98 (overvalued by 7.29%) - over 12 years ago
  • KiwiEMH created a new valuation of $5.80 (overvalued by 3.01%) - over 12 years ago
  • KiwiEMH created a new valuation of $7.55 (undervalued by 8.01%) - over 12 years ago
  • KiwiEMH created a new valuation of $6.29 (undervalued by 0.32%) - almost 13 years ago
  • sahjid created a new valuation of $8.22 (undervalued by 22.32%) - almost 13 years ago
  • KiwiEMH created a new valuation of $7.86 (overvalued by 0.38%) - almost 13 years ago
  • tiger created a new valuation of $8.62 (overvalued by 1.71%) - almost 13 years ago

Comments

Running The Numbers – Fletcher Building (FBU.NZ)

This valuation is part of this blog post:

http://blog.valuecruncher.com/2008/10/running-the-numbers-fletcher-building-fbunz/

Assumptions

Revenue: Reuters aggregates nine analysts covering FBU.NZ and these analysts have mean estimates of 2009 revenues of NZ$7.1 billion. For our analysis we have used NZ$7.0 billion in 2009, NZ$7.25 billion in 2010 and NZ$7.5 billion in 2011.

Profitability: We have used an EBITDA margin of 12% in 2009 and 2010 rising to 13% in 2011. Reuters has FBU.NZ‘s EBITD margin at 13.02% last year and 14.15% over the last five-years.

Capital Expenditure: We have assumed capital expenditures of NZ$250.0 million flat moving forward.

Discount Rate: 12.0%. The PwC New Zealand cost of capital report has FBU.NZ at a WACC of 13.4% with the wider NZ market at 9.5%. We feel that 13.4% is too high. We believe there is an argument for a discount rate anywhere in the 9-12% range for FBU.NZ.

Terminal Growth Rate: 3.0%. The New Zealand economy has grown at an average rate of 2.6% over the last five-years. We see FBU.NZ growing broadly in-line with this moving forward.

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

By NZXCrunchBlog, over 12 years ago

Running The Numbers - Fletcher Building ($FBU.NZ) Update

This valuation updates our previous valuation. It is part of this blog post:

http://blog.valuecruncher.com/2008/11/running-the-numbers-fletcher-building-fbunz-update/

For this revised analysis we have lowered our 2009 EBITDA margin to 9.0% with 2010 at 11.0% and 2011 at 12.0%.

By NZXCrunchBlog, about 12 years ago

The boring details

All amounts in millions Figures
Enterprise Value: 7,262
Net Debt (Long-term borrowings less cash): 1,846
Equity Value: 3,246
Number of Shares Outstanding: 503,000,000
Calculated value per share: $5.98

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.