New Zealand Exchange Limited (NZX)

Discount cash flow analysis

Buy Undervalued by 634.6%

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% $7.94 $7.82 $7.72
Terminal Growth% 0 $7.97 $7.86 $7.75
  +1% $8.02 $7.90 $7.79

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%) - 12 months 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%) - almost 9 years ago
  • KiwiEMH created a new valuation of $6.41 (overvalued by 0.47%) - almost 9 years ago
  • KiwiEMH created a new valuation of $6.41 (overvalued by 0.62%) - almost 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

NZX Assumptions

WACC at 10.5% - PWC lists it at 10.9%. LTG at 4% - just above the long-run NZ economy 3.5%. There is some room for additional growth with the Australian expansion plans and additional NZ listings in future. That said it doesn't look like Fonterra just yet. EBITDA margins edging up toward 50% - it is a good business. Terminal CAPEX at $2 million - I view the additional growth requiring investment to achieve.

By KiwiEMH, over 9 years ago

The boring details

All amounts in millions Figures
Enterprise Value: 13
Net Debt (Long-term borrowings less cash): -12
Equity Value: 194
Number of Shares Outstanding: 24,000,000
Calculated value per share: $7.86

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.