Pumpkin Patch Limited (PPL)
Discount cash flow analysis
5% margin of safety What's this?
Sensitivity matrix
|
-1% |
Discount Rate % 0% |
1% |
||
|---|---|---|---|---|
| -1% | $1.12 | $1.10 | $1.07 | |
| Terminal Growth% | 0 | $1.14 | $1.11 | $1.08 |
| +1% | $1.15 | $1.12 | $1.09 |
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 $1.40 (overvalued by 36.36%) - 6 hours ago
- Valuecruncher created a new valuation of $1.40 (overvalued by 36.36%) - 6 hours ago
- GordonGekko created a new valuation of $1.26 (undervalued by 1.61%) - 8 months ago
- seamarkj created a new valuation of $1.21 (overvalued by 3.2%) - 9 months ago
- SethWellbourne created a new valuation of $0.24 (overvalued by 76.7%) - 11 months ago
- GordonGekko created a new valuation of $1.07 (undervalued by 2.88%) - 1 year ago
- nzvikram created a new valuation of $0.00 (overvalued by 100.0%) - 1 year ago
- NZXCrunchBlog created a new valuation of $1.11 (undervalued by 0.0%) - 1 year ago
- KiwiEMH created a new valuation of $1.07 (undervalued by 1.9%) - 1 year ago
- KiwiEMH created a new valuation of $1.36 (undervalued by 4.62%) - 1 year ago
- KiwiEMH created a new valuation of $1.62 (undervalued by 0.62%) - 1 year ago
- selliott created a new valuation of $2.01 (undervalued by 28.85%) - 1 year ago
- KiwiEMH created a new valuation of $1.73 (overvalued by 4.95%) - 1 year ago
- KiwiEMH created a new valuation of $1.85 (undervalued by 1.65%) - 1 year ago
- GordonGekko created a new valuation of $1.60 (overvalued by 12.09%) - 1 year ago
Comments
The boring details
| All amounts in millions | Figures |
| Enterprise Value: | 475 |
| Net Debt (Long-term borrowings less cash): | 107 |
| Equity Value: | 185 |
| Number of Shares Outstanding: | 167,000,000 |
| Calculated value per share: | $1.11 |
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-pumpkin-patch-pplnz/
Assumptions
Revenue: Reuters aggregates seven analysts covering PPL.NZ and these analysts have mean estimates of 2009 revenues of NZ$441 million. For our analysis we have used NZ$425 million in 2009, NZ$450 million in 2010 and NZ$485 million in 2011.
Profitability: We have used an EBITDA margin of 12% in 2009 rising to 13% in 2011. Reuters has PPL.NZ‘s EBITD margin at 10.91% last year with a five-year average of 14.76%.
Capital Expenditure: We have assumed capital expenditures of NZ$18 million in 2009 rising to NZ$35 million in 2011 and then NZ$30 million beyond that.
Discount Rate: 11.0%. The PwC New Zealand cost of capital report [LINK] has PPL.NZ at a WACC of 13.5% with the wider NZ market at 9.5%. We feel that 13.5% is too high.
Terminal Growth Rate: 4.5%.
Our analysis incorporates the cash and debt the PPL.NZ balance sheet – Valuecruncher calculates a net debt number.