DCF Studio

    0066.HK · HKG · Industrials

    MTR Corporation Limited

    Also onConsensus Drift

    Implied value per share

    HKD -1.95

    Market price

    HKD 32.98

    Implied upside

    -105.9%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedSome line items were not reported and have been derived. Each one is labelled in the workings below.
    AdjustedFree cashflow is negative in at least one forecast year, so terminal value carries most of the valuation.
    AdjustedCapital expenditure runs at 28.1% of revenue against depreciation of 0.0%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.
    NoteRisk-free rate is an assumption: HKD assumption - no free live source available for this market.

    Current EV/EBITDA of 31.2x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    HKD -1.95-105.9%
    Exit multiple
    HKD 5.20-84.2%
    Market price
    HKD 32.98

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (HKD). Outflows negative.

    -11661340774-58306703870FY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayHKD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueHKD 58.3bnHKD 61.2bnHKD 64.3bnHKD 67.6bnHKD 71.0bn+5.1%
    EBITHKD 6.7bnHKD 7.1bnHKD 7.4bnHKD 7.8bnHKD 8.2bn+5.1%
    NOPATHKD 5.6bnHKD 5.9bnHKD 6.2bnHKD 6.5bnHKD 6.8bn+5.1%
    Add depreciation & amortisationHKD 0.00HKD 0.00HKD 0.00HKD 0.00HKD 0.00-
    Less capital expenditureHKD -16.4bnHKD -17.2bnHKD -18.1bnHKD -19.0bnHKD -20.0bn+5.1%
    Less increase in working capitalHKD 1.2bnHKD 1.3bnHKD 1.3bnHKD 1.4bnHKD 1.5bn-5.1%
    Free cashflow to firmHKD -9.6bnHKD -10.1bnHKD -10.6bnHKD -11.1bnHKD -11.7bn-5.1%
    Discount factor0.96790.90690.84970.79600.7458-
    Present valueHKD -9.3bnHKD -9.1bnHKD -9.0bnHKD -8.8bnHKD -8.7bn+1.6%
    Present Value Of The ForecastHKD -44.9bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate3.20%HKD assumption - no free live source available for this market (assumption)
    Equity risk premium7.00%Market assumption
    Beta0.757Reported 0.638, pulled toward 1.0 (Blume)
    Cost of equity8.50%Risk-free + beta x equity risk premium
    Cost of debt3.20%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationHKD 204.6bn69.7% of capital
    Total debtHKD 89.0bn30.3% of capital, book value as a proxy
    Tax rate16.5%Effective, capped at statutory
    WACC6.73%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareHKD -1.95

    237% of EV

    Forecast FCFF, final year
    HKD -11.7bn
    Capex at depreciation, working capital in reinvestment
    HKD 6.8bn
    Less reinvestment at g/ROIC (37.1% of NOPAT)
    HKD -2.5bn
    Capitalised
    HKD 4.3bn
    ROIC (WACC floor)
    6.7%
    Terminal value, undiscounted
    HKD 104.0bn
    Terminal value, discounted
    HKD 77.6bn
    Enterprise value
    HKD 32.7bn
    Less net debt
    HKD 44.8bn
    Equity value
    HKD -12.1bn

    Exit at 20.0x EBITDA

    Value per shareHKD 5.20

    158% of EV

    Terminal value, undiscounted
    HKD 163.7bn
    Terminal value, discounted
    HKD 122.1bn
    Enterprise value
    HKD 77.2bn
    Less net debt
    HKD 44.8bn
    Equity value
    HKD 32.4bn

    Sensitivity

    Value per share (HKD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    4.73%4.364.454.554.644.74
    5.73%0.540.620.690.770.84
    6.73%-2.07-2.01-1.94-1.88-1.82
    7.73%-3.94-3.89-3.84-3.79-3.74
    8.73%-5.33-5.29-5.25-5.21-5.16

    Outlined: this model. Green text: above today's price of 32.98. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year5.1%37.3%+32.2pp
    EBIT margin11.5%35.6%+24.1pp
    Discount rate6.7%2.7%-4.0pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.