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Your Valuation
10 June 2008 |
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Valuation Details
| Member: | TheCrunchBlog |
| On: | 23 Jun 2008 |
| Views: | 91 |
| Comments: | 1 |
Company Details
| Updated: | 5 hours ago |
| Ticker: | TEL |
| Market: | NZE |
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.