Steel & Tube Holdings Limited (STU)
Discount cash flow analysis
5% margin of safety What's this?
Sensitivity matrix
|
-1% |
Discount Rate % 0% |
1% |
||
|---|---|---|---|---|
| -1% | $3.44 | $3.38 | $3.33 | |
| Terminal Growth% | 0 | $3.46 | $3.40 | $3.34 |
| +1% | $3.47 | $3.41 | $3.35 |
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 $14.50 (undervalued by 457.69%) - 2 hours ago
- bolizun created a new valuation of $3.83 (undervalued by 27.67%) - 5 months ago
- GordonGekko created a new valuation of $3.28 (undervalued by 17.14%) - 8 months ago
- GordonGekko created a new valuation of $3.09 (undervalued by 15.73%) - 1 year ago
- jeremy created a new valuation of $2.81 (overvalued by 0.35%) - 1 year ago
- NZXCrunchBlog created a new valuation of $3.40 (overvalued by 5.56%) - 1 year ago
- KiwiEMH created a new valuation of $3.13 (undervalued by 0.0%) - 1 year ago
Comments
The boring details
| All amounts in millions | Figures |
| Enterprise Value: | 313 |
| Net Debt (Long-term borrowings less cash): | 83 |
| Equity Value: | 318 |
| Number of Shares Outstanding: | 88,000,000 |
| Calculated value per share: | $3.40 |
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-steel-tube-stunz/
Assumptions
In 2008 (June balance date) STU.NZ had revenues of NZ$503.8 million and an EBITD margin (profits) of 9% (with a five-year average of 12%). Reuters aggregates seven analysts covering STU.NZ and these have mean estimates of 2009 revenues of NZ$504 million. For this analysis we have used revenues of NZ$500 million in 2009, NZ$525 million in 2010 and NZ$550million in 2011. We have forecast EBITDA margins flat at 10% to 2011. We have estimated capital expenditure flat at NZ$8.5 million moving forward. All of these assumptions can be amended in the Valuecruncher on-line valuation model to adjust the valuation.
Other Model Assumptions:
Discount Rate: 11%. PwC in their New Zealand cost of capital report calculates STU.NZ WACC at 11.4%.
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 STU.NZ growing broadly in-line moving forward.
Our analysis incorporates the cash and debt on the STU.NZ balance sheet – Valuecruncher calculates a net debt number.