DCF Studio

    0823.HK · HKG · Real Estate

    Link Real Estate Investment Trust

    Also onConsensus Drift

    Implied value per share

    HKD 39.71

    Market price

    HKD 37.02

    Implied upside

    +7.3%

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

    AdjustedReported capital expenditure averages just 0.47% of revenue, which is too low to be the company's real investment - property trusts and similar structures invest through lines that are not reported as capex. Capex has been set to 1.00% of revenue so the forecast is not handed free growth. Override it if the reported figure is right.
    AdjustedCapital expenditure runs at 1.0% of revenue against depreciation of 0.7%. 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.

    Value Per Share

    Perpetuity growth
    HKD 39.71+7.3%
    Exit multiple
    HKD 48.84+31.9%
    Market price
    HKD 37.02

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (HKD). Outflows negative.

    0bn6bn11bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayHKD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueHKD 14.6bnHKD 15.2bnHKD 15.9bnHKD 16.6bnHKD 17.3bn+4.4%
    EBITHKD 10.0bnHKD 10.4bnHKD 10.9bnHKD 11.4bnHKD 11.9bn+4.4%
    NOPATHKD 9.4bnHKD 9.8bnHKD 10.2bnHKD 10.7bnHKD 11.1bn+4.4%
    Add depreciation & amortisationHKD 98.7mHKD 103.0mHKD 107.6mHKD 112.4mHKD 117.4m+4.4%
    Less capital expenditureHKD -145.6mHKD -152.0mHKD -158.8mHKD -165.8mHKD -173.2m+4.4%
    Less increase in working capitalHKD 25.0mHKD 26.1mHKD 27.2mHKD 28.4mHKD 29.7m-4.4%
    Free cashflow to firmHKD 9.3bnHKD 9.8bnHKD 10.2bnHKD 10.6bnHKD 11.1bn+4.4%
    Discount factor0.96520.89920.83770.78040.7271-
    Present valueHKD 9.0bnHKD 8.8bnHKD 8.5bnHKD 8.3bnHKD 8.1bn-2.7%
    Present Value Of The ForecastHKD 42.7bn

    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
    Beta0.916Reported 0.874, pulled toward 1.0 (Blume)
    Cost of equity9.61%Risk-free + beta x equity risk premium
    Cost of debt3.70%Interest expense / average total debt
    Market capitalisationHKD 95.9bn63.0% of capital
    Total debtHKD 56.3bn37.0% of capital, book value as a proxy
    Tax rate6.2%Effective, capped at statutory
    WACC7.34%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 39.71

    73% of EV

    Forecast FCFF, final year
    HKD 11.1bn
    Capex at depreciation, working capital in reinvestment
    HKD 11.1bn
    Less reinvestment at g/ROIC (34.1% of NOPAT)
    HKD -3.8bn
    Capitalised
    HKD 7.3bn
    ROIC (WACC floor)
    7.3%
    Terminal value, undiscounted
    HKD 155.5bn
    Terminal value, discounted
    HKD 113.1bn
    Enterprise value
    HKD 155.7bn
    Less net debt
    HKD 53.0bn
    Equity value
    HKD 102.8bn

    Exit at 15.7x EBITDA

    Value per shareHKD 48.84

    76% of EV

    Terminal value, undiscounted
    HKD 188.0bn
    Terminal value, discounted
    HKD 136.7bn
    Enterprise value
    HKD 179.4bn
    Less net debt
    HKD 53.0bn
    Equity value
    HKD 126.4bn

    Spread between methods: 21%.

    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%
    5.34%61.5261.8462.1662.4862.80
    6.34%48.6548.9049.1649.4249.68
    7.34%39.2939.5039.7139.9340.14
    8.34%32.1832.3632.5432.7232.90
    9.34%26.5926.7526.9027.0627.21

    Outlined: this model. Green text: above today's price of 37.02. 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 year4.4%3.4%-1.1pp
    EBIT margin68.5%65.4%-3.1pp
    Discount rate7.3%7.7%+0.3pp
    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.