Michael Hill International Limited (MHI)

Discount cash flow analysis

Within margin of safety Undervalued by 2.9%

5% margin of safety What's this?

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How does this work?

This is an interactive analyst report for Michael Hill International Limited, based on a discounted cash flow valuation approach.

You can modify the assumptions and the valuation will be updated automatically. You can also save and share your valuation.

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Values in $ millions
2008 2009 2010 2011 2012 2013 2014 2015
 
                 
               
 

What will the revenues be in the future?

Growth beyond year three is driven by the terminal growth rate.

Sensitivity matrix

   
-1% 		Discount Rate %
0%
1%
  -1% $0.71 $0.70 $0.69
Terminal Growth% 0 $0.72 $0.70 $0.69
  +1% $0.72 $0.71 $0.70

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 $0.74 (undervalued by 8.82%) - 17 hours ago
  • Silas316 created a new valuation of $0.70 (undervalued by 22.81%) - 1 year ago
  • square created a new valuation of $0.71 (undervalued by 47.92%) - 1 year ago
  • NZXCrunchBlog created a new valuation of $0.70 (undervalued by 40.0%) - 1 year ago
  • NZXCrunchBlog created a new valuation of $0.70 (undervalued by 40.0%) - 1 year ago
  • NZXCrunchBlog created a new valuation of $0.88 (undervalued by 31.34%) - 1 year ago
  • KiwiEMH created a new valuation of $0.91 (undervalued by 33.82%) - 1 year ago
  • KiwiEMH created a new valuation of $0.99 (undervalued by 11.24%) - 1 year ago
  • KiwiEMH created a new valuation of $0.87 (undervalued by 1.16%) - over 2 years ago

Comments

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The boring details

All amounts in millions Figures
Enterprise Value: 324
Net Debt (Long-term borrowings less cash): 64
Equity Value: 191
Number of Shares Outstanding: 382,000,000
Calculated value per share: $0.70

Enterprise Value is the present value of the post-tax cash flows for a business into the future.

Calcuation of EV

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.

Perpetuity

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.

CAPM model

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.