DCF Studio

    ARE · NYQ · Real Estate

    Alexandria Real Estate Equities, Inc.

    Also onConsensus Drift

    Implied value per share

    USD -6.10

    Market price

    USD 53.30

    Implied upside

    -111.4%

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

    AdjustedReported capital expenditure averages just 0.00% 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 40.66% of revenue so the forecast is not handed free growth. Override it if the reported figure is right.

    Value Per Share

    Perpetuity growth
    USD -6.10-111.4%
    Exit multiple
    USD 54.25+1.8%
    Market price
    USD 53.30

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m378m755mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 3.1bnUSD 3.2bnUSD 3.4bnUSD 3.5bnUSD 3.7bn+4.6%
    EBITUSD 709.8mUSD 742.2mUSD 776.1mUSD 811.5mUSD 848.5m+4.6%
    NOPATUSD 709.8mUSD 742.2mUSD 776.1mUSD 811.5mUSD 848.5m+4.6%
    Add depreciation & amortisationUSD 1.2bnUSD 1.2bnUSD 1.3bnUSD 1.3bnUSD 1.4bn+4.6%
    Less capital expenditureUSD -1.3bnUSD -1.3bnUSD -1.4bnUSD -1.4bnUSD -1.5bn+4.6%
    Less increase in working capitalUSD 1.0mUSD 1.1mUSD 1.1mUSD 1.2mUSD 1.2m-4.6%
    Free cashflow to firmUSD 631.8mUSD 660.6mUSD 690.8mUSD 722.3mUSD 755.3m+4.6%
    Discount factor0.96420.89650.83350.77490.7205-
    Present valueUSD 609.2mUSD 592.2mUSD 575.8mUSD 559.8mUSD 544.2m-2.8%
    Present Value Of The ForecastUSD 2.9bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.113Reported 1.168, pulled toward 1.0 (Blume)
    Cost of equity11.12%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 9.2bn41.8% of capital
    Total debtUSD 12.8bn58.2% of capital, book value as a proxy
    Tax rate0.0%Effective, capped at statutory
    WACC7.56%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 shareUSD -6.10

    74% of EV

    Forecast FCFF, final year
    USD 755.3m
    Capex at depreciation, working capital in reinvestment
    USD 848.5m
    Less reinvestment at g/ROIC (33.1% of NOPAT)
    USD -280.7m
    Capitalised
    USD 567.8m
    ROIC (WACC floor)
    7.6%
    Terminal value, undiscounted
    USD 11.5bn
    Terminal value, discounted
    USD 8.3bn
    Enterprise value
    USD 11.2bn
    Less net debt
    USD 12.2bn
    Equity value
    USD -1.0bn

    Exit at 11.4x EBITDA

    Value per shareUSD 54.25

    87% of EV

    Terminal value, undiscounted
    USD 25.8bn
    Terminal value, discounted
    USD 18.6bn
    Enterprise value
    USD 21.5bn
    Less net debt
    USD 12.2bn
    Equity value
    USD 9.2bn

    Sensitivity

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

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    5.56%17.3617.7118.0618.4118.76
    6.56%3.563.844.134.414.70
    7.56%-6.57-6.34-6.10-5.86-5.62
    8.56%-14.32-14.12-13.92-13.72-13.52
    9.56%-20.44-20.26-20.09-19.92-19.75

    Outlined: this model. Green text: above today's price of 53.30. 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 year4.6%20.4%+15.9pp
    EBIT margin23.0%43.3%+20.2pp
    Discount rate7.6%4.0%-3.5pp
    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.