DCF Studio

    1997.HK · HKG · Real Estate

    Wharf Real Estate Investment Company Limited

    Also onConsensus Drift

    Implied value per share

    HKD 26.30

    Market price

    HKD 30.48

    Implied upside

    -13.7%

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

    AdjustedReported capital expenditure averages just 0.32% 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 1.94% of revenue so the forecast is not handed free growth. Override it if the reported figure is right.
    NoteRisk-free rate is an assumption: HKD assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    HKD 26.30-13.7%
    Exit multiple
    HKD 31.70+4.0%
    Market price
    HKD 30.48

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (HKD). Outflows negative.

    0bn4bn8bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayHKD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueHKD 12.9bnHKD 13.1bnHKD 13.2bnHKD 13.3bnHKD 13.4bn+0.9%
    EBITHKD 9.5bnHKD 9.6bnHKD 9.7bnHKD 9.8bnHKD 9.9bn+0.9%
    NOPATHKD 7.9bnHKD 8.0bnHKD 8.1bnHKD 8.2bnHKD 8.2bn+0.9%
    Add depreciation & amortisationHKD 251.1mHKD 253.5mHKD 255.9mHKD 258.3mHKD 260.7m+0.9%
    Less capital expenditureHKD -251.1mHKD -253.5mHKD -255.9mHKD -258.3mHKD -260.7m+0.9%
    Less increase in working capitalHKD 120.9mHKD 122.1mHKD 123.2mHKD 124.4mHKD 125.5m-0.9%
    Free cashflow to firmHKD 8.1bnHKD 8.1bnHKD 8.2bnHKD 8.3bnHKD 8.4bn+0.9%
    Discount factor0.96330.89380.82930.76950.7140-
    Present valueHKD 7.8bnHKD 7.3bnHKD 6.8bnHKD 6.4bnHKD 6.0bn-6.3%
    Present Value Of The ForecastHKD 34.2bn

    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
    Beta0.890Reported 0.836, pulled toward 1.0 (Blume)
    Cost of equity9.43%Risk-free + beta x equity risk premium
    Cost of debt3.91%Interest expense / average total debt
    Market capitalisationHKD 92.5bn73.1% of capital
    Total debtHKD 34.0bn26.9% of capital, book value as a proxy
    Tax rate16.5%Effective, capped at statutory
    WACC7.77%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 26.30

    69% of EV

    Forecast FCFF, final year
    HKD 8.4bn
    Capex at depreciation, working capital in reinvestment
    HKD 8.2bn
    Less reinvestment at g/ROIC (32.2% of NOPAT)
    HKD -2.7bn
    Capitalised
    HKD 5.6bn
    ROIC (WACC floor)
    7.8%
    Terminal value, undiscounted
    HKD 108.7bn
    Terminal value, discounted
    HKD 77.6bn
    Enterprise value
    HKD 111.8bn
    Less net debt
    HKD 32.0bn
    Equity value
    HKD 79.8bn

    Exit at 13.0x EBITDA

    Value per shareHKD 31.70

    73% of EV

    Terminal value, undiscounted
    HKD 131.7bn
    Terminal value, discounted
    HKD 94.0bn
    Enterprise value
    HKD 128.2bn
    Less net debt
    HKD 32.0bn
    Equity value
    HKD 96.2bn

    Spread between methods: 19%.

    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%
    5.77%38.3338.5138.6938.8839.06
    6.77%31.2831.4331.5831.7331.88
    7.77%26.0526.1726.3026.4226.55
    8.77%22.0122.1122.2222.3222.43
    9.77%18.7918.8818.9819.0719.16

    Outlined: this model. Green text: above today's price of 30.48. 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 year0.9%3.2%+2.3pp
    EBIT margin73.5%81.9%+8.4pp
    Discount rate7.8%7.0%-0.8pp
    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.