The Warehouse Group Limited (WHS)
Discount cash flow analysis
Sensitivity matrix
-1% |
Discount Rate % 0% |
1% |
||
---|---|---|---|---|
-1% | $4.18 | $4.11 | $4.04 | |
Terminal Growth% | 0 | $4.20 | $4.13 | $4.07 |
+1% | $4.23 | $4.16 | $4.09 |
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 $2.07 (overvalued by 29.11%) - over 1 year ago
- Valuecruncher created a new valuation of $2.07 (overvalued by 28.13%) - over 1 year ago
- GordonGekko created a new valuation of $2.84 (undervalued by 6.37%) - almost 6 years ago
- baconboy created a new valuation of $3.41 (overvalued by 10.26%) - 8 years ago
- sambling created a new valuation of $5.00 (undervalued by 24.38%) - 8 years ago
- sambling created a new valuation of $3.79 (overvalued by 5.25%) - over 8 years ago
- GordonGekko created a new valuation of $4.17 (undervalued by 11.5%) - over 8 years ago
- gordonsk created a new valuation of $3.47 (overvalued by 1.14%) - almost 9 years ago
- GordonGekko created a new valuation of $3.47 (undervalued by 0.58%) - almost 9 years ago
- nzvikram created a new valuation of $3.15 (overvalued by 4.83%) - 9 years ago
- KiwiEMH created a new valuation of $3.43 (undervalued by 0.88%) - over 9 years ago
- KiwiEMH created a new valuation of $3.58 (undervalued by 18.54%) - over 9 years ago
- KiwiEMH created a new valuation of $3.69 (undervalued by 12.5%) - over 9 years ago
- KiwiEMH created a new valuation of $3.91 (overvalued by 1.01%) - almost 10 years ago
- TheCrunchBlog created a new valuation of $4.13 (undervalued by 0.73%) - almost 10 years ago
- GordonGekko created a new valuation of $4.61 (undervalued by 2.22%) - almost 10 years ago
- GordonGekko created a new valuation of $5.65 (overvalued by 0.88%) - almost 10 years ago
Comments
The boring details
All amounts in millions | Figures |
Enterprise Value: | 949 |
Net Debt (Long-term borrowings less cash): | 41 |
Equity Value: | 1,274 |
Number of Shares Outstanding: | 310,000,000 |
Calculated value per share: | $4.13 |
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/2008/06/understanding-the-warehouse-whs-valuation/
Our assumptions of revenues for the next three years are NZ$1.745 billion in 2008 increasing to NZ$1.825 billion in 2010 – a compound annual growth rate of 2.3% (2008-10). We have projected flat EBITDA margins of 10% to 2010.
We have used a terminal growth rate of 3%. This is based on a New Zealand long-run economy growth rate. If you have a more optimistic or pessimistic view of the growth for WHS this will impact the valuation.
We have used a WACC (discount rate) of 8.5 %. The WACC (discount rate) has a material impact on a discounted cash flow valuation (as does the terminal growth rate). PricewaterhouseCoopers December 2007 cost of capital report gives WHS a calculated WACC of 8.2%.
We used a terminal capital expenditure number of NZ$60 million. In our opinion capital expenditure should stabilise around this number.