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How does this work?
A valuation is an assessment of the value of one share in a company, it is not necessarily the same as the price listed in the sharemarket. You can use a variety of methods to value a company, Valuecruncher uses Discounted Cash Flow (DCF) analysis to help people create the valuations you see below.
Valuecruncher Valuation
-23.93%
from latest share price
Your Valuation
| Valuation | Compared to price | Member |
 Created
|
Views |
|---|---|---|---|---|
| $1.78 |
-23.93%
|
Valuecruncher | 19 Nov 2008 | 0 |
| $1.53 |
-32.6%
|
KWH | 07 Nov 2008 | 12 |
| $1.45 |
-34.39%
|
botis | 30 Oct 2008 | 10 |
| $2.41 |
 8.07%
|
NZXCrunchBlog | 16 Oct 2008 | 38 |
| $2.52 |
1.61%
|
KiwiEMH | 14 Oct 2008 | 13 |
| $2.58 |
-5.49%
|
KiwiEMH | 01 Oct 2008 | 18 |
| $2.82 |
0.0%
|
KiwiEMH | 23 Sep 2008 | 23 |
| $1.37 |
-51.25%
|
Patricko | 18 Sep 2008 | 24 |
| $3.16 |
-0.94%
|
KiwiEMH | 04 Sep 2008 | 21 |
| $3.12 |
-4.88%
|
KiwiEMH | 22 Aug 2008 | 25 |
| $2.98 |
-12.35%
|
GordonGekko | 09 Aug 2008 | 29 |
| $3.24 |
-11.96%
|
KiwiEMH | 08 Aug 2008 | 29 |
| $3.43 |
-0.58%
|
KiwiEMH | 18 Jul 2008 | 39 |
| $3.40 |
-8.85%
|
TheCrunchBlog | 23 Jun 2008 | 76 |
| $3.25 |
-14.25%
|
tiger | 23 Apr 2008 | 48 |
| $4.00 |
5.54%
|
GordonGekko | 23 Apr 2008 | 55 |
Recent Comments
| Updated: | 6 hours ago |
| Ticker: | TEL |
| Market: | NZE |
This valuation is part of this blog post:
http://blog.valuecruncher.com/2008/10/running-the-numbers-–-telecom-new-zealand-telnz/
Assumptions
In 2008 (June balance date) TEL.NZ had revenues of NZ$5.673 billion and an EBITD margin (profits) of 32.15%. Reuters aggregates 10 analysts covering TEL.NZ and these have mean estimates of 2009 and 2010 revenues of NZ$5.668 and NZ$5.652 billion respectively. For this analysis we have used revenues of NZ$5.65 billion in 2009, NZ$5.65 billion in 2010 and NZ$5.70 billion in 2011. We have forecast EBITDA margins falling from 31.5% in 2009 to 30.5% in 2011. We have estimated capital expenditure of NZ$1.25 billion in 2009 to a long-term (terminal) number of NZ$1.05 billion. All of these assumptions can be amended in the Valuecruncher on-line valuation model to adjust the valuation.
Other Model Assumptions:
Discount Rate: 9.5%. PwC in their New Zealand cost of capital report calculates TEL.NZ WACC at 9.6%.
Terminal Growth Rate: 2.0%. The New Zealand economy has grown at an average rate of 2.6% over the last five-years. We see TEL.NZ growing more slowly than the New Zealand economy moving forward.
Our analysis incorporates the cash and debt on the TEL.NZ balance sheet – Valuecruncher calculates a net debt number.
This valuation form part of this blog post:
http://blog.valuecruncher.com/2008/06/valuing-telecom-corporation-of-new-zealand-tel/
Our assumptions of revenues for the next three years are NZ$5.625 billion in 2008 decreasing to NZ$5.575 billion in 2010. We have projected EBITDA margins decreasing from 33.5% in 2008 to 31.5% in 2010.
We have used a terminal growth rate of 1%. Our view is that TEL will start to see modest growth post 2010 and 1% is a reasonable estimate. This assumption has a significant impact on the valuation. If you believe TEL has better future prospects – this will positively impact the valuation.
We have used a WACC (discount rate) of 10 %. 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 TEL a calculated WACC of 11.3%. In our opinion this is too high. In 2004 PricewaterhouseCoopers calculated a TEL WACC between 9.8% and 10.5% (with 10.1% as the point estimate). In our opinion this 2004 analysis appears more reasonable. The December 2007 cost of capital report gives a New Zealand market WACC of 10.3% – TEL having a WACC 1% higher seems wrong.
We used a terminal capital expenditure number of NZ$750 million. In our opinion capital expenditure should stabilise around this number.
The PwC WACC is an example of the dangers of too much faith in a complex formula in a small market. If PwC believe the NZ market WACC is 10.3% - I do not believe that TEL is a full percentage point higher. It just looks wrong. I am comfortable with 10.0%.
Re CAPEX - TEL have a lot to do. I just don't think the spend will continue beyond the next three years at the levels projected. A National Government and PPP will assist this - the terminal CAPEX is the expected spend beyond the three-year time horizon. I am not saying TEL's CAPEX issues will be solved by PPP - but it will assist in the terminal number coming down.
Haven't they already committed to spend $1.4 billion over the next few years on cabinetisation? The PPP (which obviously depends on the outcome of the election) will be outside of this time horizon if at all.
So, if you add that back in and go with the PwC WACC then the valuation drops to $3.25 (i.e. well below current share price).
WACC at 10%. PwC in their cost of capital report for December 2007 calculate WACC at 11.3% - I think that is too high. I have long-term growth at 2.5%. A key variable is terminal CAPEX. I think that is a big number, but more like $800 million rather than the $900 million to $1+ billion over the next three years. Public Private Partnerships (PPP) on broadband will assist that.