Contact Energy Limited (CEN)

Discount cash flow analysis

Buy Undervalued by 92.5%

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
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% $9.55 $9.00 $8.51
Terminal Growth% 0 $10.05 $9.45 $8.91
  +1% $10.60 $9.94 $9.35

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%) - over 4 years ago
  • sambling created a new valuation of $0.00 (overvalued by 100.0%) - over 11 years ago
  • sambling created a new valuation of $0.00 (overvalued by 100.0%) - over 11 years ago
  • sambling created a new valuation of $0.00 (overvalued by 100.0%) - over 11 years ago
  • sambling created a new valuation of $0.00 (overvalued by 100.0%) - over 11 years ago
  • sambling created a new valuation of $6.47 (undervalued by 13.31%) - over 11 years ago
  • DarrylLundy created a new valuation of $6.54 (overvalued by 1.06%) - over 11 years ago
  • DarrylLundy created a new valuation of $0.00 (overvalued by 100.0%) - over 11 years ago
  • DarrylLundy created a new valuation of $5.59 (overvalued by 15.43%) - over 11 years ago
  • GordonGekko created a new valuation of $6.35 (undervalued by 0.95%) - over 11 years ago
  • GordonGekko created a new valuation of $5.55 (overvalued by 4.8%) - over 11 years ago
  • GordonGekko created a new valuation of $5.55 (overvalued by 4.8%) - over 11 years ago
  • GordonGekko created a new valuation of $5.55 (overvalued by 4.8%) - over 11 years ago
  • GordonGekko created a new valuation of $5.55 (overvalued by 4.8%) - over 11 years ago
  • GordonGekko created a new valuation of $5.55 (overvalued by 4.8%) - over 11 years ago
  • GordonGekko created a new valuation of $5.55 (overvalued by 4.8%) - over 11 years ago
  • GordonGekko created a new valuation of $6.04 (undervalued by 2.55%) - over 11 years ago
  • GordonGekko created a new valuation of $5.95 (undervalued by 6.25%) - almost 12 years ago
  • KiwiEMH created a new valuation of $6.44 (overvalued by 8.78%) - 12 years ago
  • Bert created a new valuation of $12.36 (undervalued by 30.38%) - over 12 years ago
  • Sam created a new valuation of $11.07 (undervalued by 18.02%) - over 12 years ago
  • tiger created a new valuation of $9.45 (undervalued by 1.61%) - over 12 years ago
  • GordonGekko created a new valuation of $7.73 (overvalued by 16.88%) - over 12 years ago

Comments

About right

The current market price seems about right to me. It all seems to swing on the terminal cap ex. amount. I'm picking that the capital program over the short-term will be less than the Valuecruncher valuation suggests, but that the terminal cap ex will be greater.

By tiger, over 12 years ago

The boring details

All amounts in millions Figures
Enterprise Value: 3,363
Net Debt (Long-term borrowings less cash): 532
Equity Value: 5,363
Number of Shares Outstanding: 576,000,000
Calculated value per share: $9.45

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.