DCF Studio

    BLND.L · LSE · Real Estate

    British Land Company PLC

    Also onConsensus Drift

    Implied value per share

    GBp 25.20

    Market price

    GBp 397.80

    Implied upside

    -93.7%

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

    Wrong toolThis model values the shares at 6.3% of the market price. A gap that size is a modelling failure rather than a view - most often an unusable beta, a currency or units mismatch, or a cashflow base that does not represent the business. Read the figures below as diagnostics, not as a call.
    AdjustedSome line items were not reported and have been derived. Each one is labelled in the workings below.
    AdjustedFree cashflow is negative in at least one forecast year, so terminal value carries most of the valuation.
    AdjustedCapital expenditure runs at 43.9% of revenue against depreciation of 0.0%. 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.
    NoteRisk-free rate is an assumption: GBP assumption - no free live source available for this market.

    Current EV/EBITDA of 23.4x 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
    GBp 25.20-93.7%
    Exit multiple
    GBp 329.44-17.2%
    Market price
    GBp 397.80

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (GBP). Outflows negative.

    -4995491-24977450FY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayGBP
    LineFY27FY28FY29FY30FY31CAGR
    RevenueGBP 563.6mGBP 607.3mGBP 654.4mGBP 705.1mGBP 759.8m+7.8%
    EBITGBP 320.9mGBP 345.8mGBP 372.6mGBP 401.5mGBP 432.7m+7.8%
    NOPATGBP 240.7mGBP 259.4mGBP 279.5mGBP 301.1mGBP 324.5m+7.8%
    Add depreciation & amortisationGBP 0.00GBP 0.00GBP 0.00GBP 0.00GBP 0.00-
    Less capital expenditureGBP -247.3mGBP -266.5mGBP -287.2mGBP -309.5mGBP -333.5m+7.8%
    Less increase in working capitalGBP 2.9mGBP 3.2mGBP 3.4mGBP 3.7mGBP 4.0m-7.8%
    Free cashflow to firmGBP -3.7mGBP -4.0mGBP -4.3mGBP -4.6mGBP -5.0m-7.8%
    Discount factor0.96450.89710.83450.77620.7220-
    Present valueGBP -3.6mGBP -3.6mGBP -3.6mGBP -3.6mGBP -3.6m-0.2%
    Present Value Of The ForecastGBP -18.0m

    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
    Beta1.119Reported 1.177, pulled toward 1.0 (Blume)
    Cost of equity10.65%Risk-free + beta x equity risk premium
    Cost of debt4.50%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationGBP 4.1bn56.8% of capital
    Total debtGBP 3.1bn43.2% of capital, book value as a proxy
    Tax rate25.0%Effective, capped at statutory
    WACC7.51%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 0.25

    101% of EV

    Forecast FCFF, final year
    GBP -5.0m
    Capex at depreciation, working capital in reinvestment
    GBP 324.5m
    Less reinvestment at g/ROIC (33.3% of NOPAT)
    GBP -108.1m
    Capitalised
    GBP 216.4m
    ROIC (WACC floor)
    7.5%
    Terminal value, undiscounted
    GBP 4.4bn
    Terminal value, discounted
    GBP 3.2bn
    Enterprise value
    GBP 3.2bn
    Less net debt
    GBP 2.9bn
    Equity value
    GBP 252.5m

    Exit at 20.0x EBITDA

    Value per shareGBP 3.29

    100% of EV

    Terminal value, undiscounted
    GBP 8.7bn
    Terminal value, discounted
    GBP 6.2bn
    Enterprise value
    GBP 6.2bn
    Less net debt
    GBP 2.9bn
    Equity value
    GBP 3.3bn

    Spread between methods: 172%.

    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%
    5.51%1.751.771.791.821.84
    6.51%0.860.880.900.920.94
    7.51%0.220.240.250.270.28
    8.51%-0.26-0.25-0.24-0.22-0.21
    9.51%-0.64-0.63-0.62-0.61-0.60

    Outlined: this model. Green text: above today's price of 3.98. 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 year7.8%25.7%+17.9pp
    Discount rate7.5%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.