DCF Studio

    BEN.AX · ASX · Financial Services

    Bendigo and Adelaide Bank Limited

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD -3.75

    Market price

    AUD 10.36

    Implied upside

    -136.2%

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

    Wrong toolThis is a financial. Banks and insurers report no meaningful operating income, and capex and working capital do not mean what a free-cashflow model assumes, so a DCF will misprice it. The model below runs on best-effort numbers - treat it as an illustration, not a valuation.
    AdjustedSome line items were not reported and have been derived. Each one is labelled in the workings below.
    AdjustedReported capital expenditure averages 1.35% of revenue against depreciation and amortisation of 6.03%. A business cannot depreciate more than it invests indefinitely. Capex has been set to 6.03% of revenue so the forecast is not handed free growth. The accounts do not separate depreciation from amortisation, so the combined charge is used - if a large part of it is amortisation of an acquisition, the reported capex is probably right and this substitution is not. Override it if the reported figure is right.

    Current EV/EBITDA of 21.0x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    AUD -3.75-136.2%
    Exit multiple
    AUD 5.84-43.7%
    Market price
    AUD 10.36

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (AUD). Outflows negative.

    0m210m419mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayAUD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueAUD 2.0bnAUD 2.0bnAUD 2.1bnAUD 2.1bnAUD 2.1bn+1.4%
    EBITAUD 558.6mAUD 566.6mAUD 574.7mAUD 582.9mAUD 591.3m+1.4%
    NOPATAUD 391.0mAUD 396.6mAUD 402.3mAUD 408.0mAUD 413.9m+1.4%
    Add depreciation & amortisationAUD 121.0mAUD 122.8mAUD 124.5mAUD 126.3mAUD 128.1m+1.4%
    Less capital expenditureAUD -121.0mAUD -122.8mAUD -124.5mAUD -126.3mAUD -128.1m+1.4%
    Less increase in working capitalAUD 5.0mAUD 5.0mAUD 5.1mAUD 5.2mAUD 5.3m-1.4%
    Free cashflow to firmAUD 395.9mAUD 401.6mAUD 407.4mAUD 413.2mAUD 419.1m+1.4%
    Discount factor0.96630.90220.84240.78650.7343-
    Present valueAUD 382.6mAUD 362.3mAUD 343.2mAUD 325.0mAUD 307.8m-5.3%
    Present Value Of The ForecastAUD 1.7bn

    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
    Beta0.845Reported 0.768, pulled toward 1.0 (Blume)
    Cost of equity10.42%Risk-free + beta x equity risk premium
    Cost of debt7.35%Implied cost of debt of 27.5% is not a credible funding cost, so risk-free + 2bp is assumed instead. Interest expense and reported debt are measuring different things - common for banks, whose interest expense includes deposits that total debt excludes.
    Market capitalisationAUD 6.0bn37.2% of capital
    Total debtAUD 10.1bn62.8% of capital, book value as a proxy
    Tax rate30.0%Effective, capped at statutory
    WACC7.10%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 -3.75

    72% of EV

    Forecast FCFF, final year
    AUD 419.1m
    Capex at depreciation, working capital in reinvestment
    AUD 413.9m
    Less reinvestment at g/ROIC (35.2% of NOPAT)
    AUD -145.7m
    Capitalised
    AUD 268.2m
    ROIC (WACC floor)
    7.1%
    Terminal value, undiscounted
    AUD 6.0bn
    Terminal value, discounted
    AUD 4.4bn
    Enterprise value
    AUD 6.1bn
    Less net debt
    AUD 8.5bn
    Equity value
    AUD -2.4bn

    Exit at 20.0x EBITDA

    Value per shareAUD 5.84

    86% of EV

    Terminal value, undiscounted
    AUD 14.4bn
    Terminal value, discounted
    AUD 10.6bn
    Enterprise value
    AUD 12.3bn
    Less net debt
    AUD 8.5bn
    Equity value
    AUD 3.8bn

    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%
    5.10%-0.22-0.17-0.12-0.07-0.02
    6.10%-2.32-2.28-2.24-2.20-2.16
    7.10%-3.82-3.79-3.75-3.72-3.69
    8.10%-4.95-4.92-4.90-4.87-4.84
    9.10%-5.84-5.81-5.79-5.76-5.74

    Outlined: this model. Green text: above today's price of 10.36. 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 year1.4%23.2%+21.7pp
    EBIT margin27.8%69.4%+41.6pp
    Discount rate7.1%2.8%-4.3pp
    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.