DCF Studio

    AGL.AX · ASX · Utilities

    AGL Energy Limited

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD 3.42

    Market price

    AUD 8.45

    Implied upside

    -59.5%

    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.
    AdjustedCapital expenditure runs at 7.4% of revenue against depreciation of 5.7%. 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.

    Value Per Share

    Perpetuity growth
    AUD 3.42-59.5%
    Exit multiple
    AUD 2.80-66.9%
    Market price
    AUD 8.45

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (AUD). Outflows negative.

    0m116m232mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayAUD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueAUD 13.5bnAUD 13.4bnAUD 13.3bnAUD 13.2bnAUD 13.1bn-0.7%
    EBITAUD 666.5mAUD 662.0mAUD 657.6mAUD 653.1mAUD 648.7m-0.7%
    NOPATAUD 479.4mAUD 476.2mAUD 472.9mAUD 469.7mAUD 466.6m-0.7%
    Add depreciation & amortisationAUD 772.9mAUD 767.7mAUD 762.5mAUD 757.3mAUD 752.2m-0.7%
    Less capital expenditureAUD -998.7mAUD -992.0mAUD -985.3mAUD -978.6mAUD -972.0m-0.7%
    Less increase in working capitalAUD -21.5mAUD -21.3mAUD -21.2mAUD -21.0mAUD -20.9m-0.7%
    Free cashflow to firmAUD 232.1mAUD 230.5mAUD 229.0mAUD 227.4mAUD 225.9m-0.7%
    Discount factor0.96510.89890.83720.77980.7263-
    Present valueAUD 224.0mAUD 207.2mAUD 191.7mAUD 177.3mAUD 164.0m-7.5%
    Present Value Of The ForecastAUD 964.2m

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.35%Australian Government 10-year (RBA F2)
    Equity risk premium6.00%Market assumption
    Beta0.487Reported 0.234, pulled toward 1.0 (Blume)
    Cost of equity8.27%Risk-free + beta x equity risk premium
    Cost of debt8.47%Interest expense / average total debt
    Market capitalisationAUD 5.7bn58.5% of capital
    Total debtAUD 4.0bn41.5% of capital, book value as a proxy
    Tax rate28.1%Effective, capped at statutory
    WACC7.37%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 shareAUD 3.42

    83% of EV

    Forecast FCFF, final year
    AUD 225.9m
    Capex at depreciation, working capital in reinvestment
    AUD 466.6m
    Less reinvestment at g/ROIC (33.9% of NOPAT)
    AUD -158.4m
    Capitalised
    AUD 308.2m
    ROIC (WACC floor)
    7.4%
    Terminal value, undiscounted
    AUD 6.5bn
    Terminal value, discounted
    AUD 4.7bn
    Enterprise value
    AUD 5.7bn
    Less net debt
    AUD 3.4bn
    Equity value
    AUD 2.3bn

    Exit at 4.2x EBITDA

    Value per shareAUD 2.80

    82% of EV

    Terminal value, undiscounted
    AUD 5.9bn
    Terminal value, discounted
    AUD 4.3bn
    Enterprise value
    AUD 5.3bn
    Less net debt
    AUD 3.4bn
    Equity value
    AUD 1.9bn

    Spread between methods: 20%.

    Sensitivity

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

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    5.37%7.277.567.938.439.18
    6.37%4.824.864.904.944.99
    7.37%3.353.393.423.463.49
    8.37%2.252.282.302.332.36
    9.37%1.381.411.431.451.48

    Outlined: this model. Green text: above today's price of 8.45. 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-0.7%6.7%+7.4pp
    EBIT margin4.9%7.4%+2.5pp
    Discount rate7.4%5.3%-2.1pp
    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.