Fletcher Building Limited (FBU)
Discount cash flow analysis
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
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.
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.
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.
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.
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.
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%.