DCF Studio

    ABF.L · LSE · Consumer Defensive

    Associated British Foods plc

    Also onConsensus Drift

    Implied value per share

    GBp 1654.87

    Market price

    GBp 1806.00

    Implied upside

    -8.4%

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

    NoteRisk-free rate is an assumption: GBP assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    GBp 1654.87-8.4%
    Exit multiple
    GBp 1488.89-17.6%
    Market price
    GBp 1806.00

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (GBP). Outflows negative.

    0m450m901mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayGBP
    LineFY26FY27FY28FY29FY30CAGR
    RevenueGBP 19.4bnGBP 19.3bnGBP 19.2bnGBP 19.1bnGBP 19.0bn-0.5%
    EBITGBP 1.5bnGBP 1.5bnGBP 1.5bnGBP 1.5bnGBP 1.5bn-0.5%
    NOPATGBP 1.2bnGBP 1.2bnGBP 1.2bnGBP 1.2bnGBP 1.1bn-0.5%
    Add depreciation & amortisationGBP 909.0mGBP 904.5mGBP 900.0mGBP 895.6mGBP 891.1m-0.5%
    Less capital expenditureGBP -1.1bnGBP -1.1bnGBP -1.1bnGBP -1.1bnGBP -1.1bn-0.5%
    Less increase in working capitalGBP -59.8mGBP -59.5mGBP -59.2mGBP -58.9mGBP -58.6m-0.5%
    Free cashflow to firmGBP 900.7mGBP 896.3mGBP 891.9mGBP 887.5mGBP 883.1m-0.5%
    Discount factor0.96050.88610.81750.75410.6957-
    Present valueGBP 865.2mGBP 794.2mGBP 729.1mGBP 669.3mGBP 614.4m-8.2%
    Present Value Of The ForecastGBP 3.7bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.50%GBP assumption - no free live source available for this market (assumption)
    Equity risk premium5.50%Market assumption
    Beta0.868Reported 0.803, pulled toward 1.0 (Blume)
    Cost of equity9.27%Risk-free + beta x equity risk premium
    Cost of debt6.87%Interest expense / average total debt
    Market capitalisationGBP 12.6bn77.4% of capital
    Total debtGBP 3.7bn22.6% of capital, book value as a proxy
    Tax rate21.5%Effective, capped at statutory
    WACC8.40%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 shareGBP 16.55

    75% of EV

    Forecast FCFF, final year
    GBP 883.1m
    Capex at depreciation, working capital in reinvestment
    GBP 1.2bn
    Less reinvestment at g/ROIC (25.5% of NOPAT)
    GBP -310.4m
    Capitalised
    GBP 904.4m
    ROIC (reported)
    9.8%
    Terminal value, undiscounted
    GBP 15.7bn
    Terminal value, discounted
    GBP 10.9bn
    Enterprise value
    GBP 14.6bn
    Less net debt
    GBP 2.6bn
    Equity value
    GBP 12.0bn

    Exit at 5.9x EBITDA

    Value per shareGBP 14.89

    73% of EV

    Terminal value, undiscounted
    GBP 14.0bn
    Terminal value, discounted
    GBP 9.7bn
    Enterprise value
    GBP 13.4bn
    Less net debt
    GBP 2.6bn
    Equity value
    GBP 10.8bn

    Spread between methods: 11%.

    Sensitivity

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

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    6.40%23.9525.1026.5328.3630.80
    7.40%19.2919.8520.5221.3222.32
    8.40%15.9916.2516.5516.8917.29
    9.40%13.5213.6213.7313.8413.96
    10.40%11.7311.7811.8311.8811.93

    Outlined: this model. Green text: above today's price of 18.06. 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 year-0.5%0.4%+0.9pp
    EBIT margin7.7%8.3%+0.6pp
    Discount rate8.4%8.0%-0.4pp
    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.