Fairfax Media Limited (FXJ)
Discount cash flow analysis
Sensitivity matrix
|
-1% |
Discount Rate % 0% |
1% |
||
|---|---|---|---|---|
| -1% | $1.71 | $1.67 | $1.64 | |
| Terminal Growth% | 0 | $1.71 | $1.68 | $1.64 |
| +1% | $1.71 | $1.68 | $1.64 |
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 $1.50 (undervalued by 1.35%) - 8 hours ago
- althecat created a new valuation of $0.77 (overvalued by 45.39%) - 1 year ago
- z3186297 created a new valuation of $0.34 (overvalued by 67.62%) - 1 year ago
- reallyrichard created a new valuation of $1.34 (undervalued by 27.62%) - 1 year ago
- reallyrichard created a new valuation of $1.35 (undervalued by 28.57%) - 1 year ago
- reallyrichard created a new valuation of $1.35 (undervalued by 28.57%) - 1 year ago
- reallyrichard created a new valuation of $1.28 (undervalued by 21.9%) - 1 year ago
- althecat created a new valuation of $0.00 (overvalued by 100.0%) - 1 year ago
- althecat created a new valuation of $0.45 (overvalued by 58.33%) - 1 year ago
- gordonsk created a new valuation of $0.97 (overvalued by 6.73%) - 1 year ago
- althecat created a new valuation of $0.38 (overvalued by 55.29%) - 1 year ago
- NZXCrunchBlog created a new valuation of $1.68 (undervalued by 20.0%) - 1 year ago
- KiwiEMH created a new valuation of $1.85 (undervalued by 32.14%) - 1 year ago
- GordonGekko created a new valuation of $3.65 (undervalued by 7.99%) - over 2 years ago
Comments
The boring details
| All amounts in millions | Figures |
| Enterprise Value: | 4,652 |
| Net Debt (Long-term borrowings less cash): | 2,412 |
| Equity Value: | 2,118 |
| Number of Shares Outstanding: | 1,513,000,000 |
| Calculated value per share: | $1.68 |
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/2008/11/running-the-numbers-fairfax-media-fxjasx/
Assumptions
Revenue: Reuters aggregates nine analysts covering $FXJ.ASX and the mean estimates of 2009 and 2010 revenues are A$2.94 billion and A$3.08 billion respectively. For our analysis we have used A$2.85 billion in 2009, A$2.90 billion in 2010 and A$3.0 billion in 2011.
Profitability: We have used an EBITDA margin of 25.0% in 2009 rising to 26.0% in 2011. Reuters has $FXJ.ASX‘s EBITD margin at 28.5% last year and averaging 26.4% over the last five-years.
Capital Expenditure: We have assumed capital expenditures of A$120.0 million per annum moving forward.
Discount Rate: 11.0%. We believe a discount rate in the 10-12% range is appropriate. We have chosen the middle of this range.
Terminal Growth Rate: 1.0%.