DCF Studio

    BSL.AX · ASX · Basic Materials

    BlueScope Steel Limited

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD 45.15

    Market price

    AUD 30.07

    Implied upside

    +50.2%

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

    Wrong toolThis line has no market capitalisation, which means it is not ordinary shares - typically a hybrid, preference line, note or unlisted stub. A discounted cashflow values a claim on the whole business, so applying it here attributes all of the group’s revenue to a security that has no such claim. Its value is its coupon and call schedule. Look up the ordinary line instead.
    AdjustedSome line items were not reported and have been derived. Each one is labelled in the workings below.
    AdjustedCapital expenditure runs at 6.7% of revenue against depreciation of 4.1%. 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.

    No usable EV/EBITDA (EBITDA is not positive), so the exit multiple falls back to 8x.

    Value Per Share

    Perpetuity growth
    AUD 45.15+50.2%
    Exit multiple
    AUD 20.51-31.8%
    Market price
    AUD 30.07

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (AUD). Outflows negative.

    0m105m211mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayAUD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueAUD 16.1bnAUD 15.6bnAUD 15.2bnAUD 14.7bnAUD 14.3bn-3.0%
    EBITAUD 818.3mAUD 794.0mAUD 770.5mAUD 747.6mAUD 725.5m-3.0%
    NOPATAUD 615.3mAUD 597.1mAUD 579.4mAUD 562.2mAUD 545.5m-3.0%
    Add depreciation & amortisationAUD 655.1mAUD 635.6mAUD 616.8mAUD 598.5mAUD 580.8m-3.0%
    Less capital expenditureAUD -1.1bnAUD -1.0bnAUD -1.0bnAUD -983.7mAUD -954.6m-3.0%
    Less increase in working capitalAUD 16.9mAUD 16.4mAUD 16.0mAUD 15.5mAUD 15.0m+3.0%
    Free cashflow to firmAUD 210.7mAUD 204.4mAUD 198.4mAUD 192.5mAUD 186.8m-3.0%
    Discount factor0.98050.94260.90610.87110.8374-
    Present valueAUD 206.6mAUD 192.7mAUD 179.8mAUD 167.7mAUD 156.4m-6.7%
    Present Value Of The ForecastAUD 903.2m

    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
    Beta1.147Reported 1.219, pulled toward 1.0 (Blume)
    Cost of equity12.23%Risk-free + beta x equity risk premium
    Cost of debt5.35%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationAUD 0.000.0% of capital
    Total debtAUD 1.8bn100.0% of capital, book value as a proxy
    Tax rate24.8%Effective, capped at statutory
    WACC4.02%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 45.15

    96% of EV

    Forecast FCFF, final year
    AUD 186.8m
    Capex at depreciation, working capital in reinvestment
    AUD 545.5m
    Less reinvestment at g/ROIC (36.2% of NOPAT)
    AUD -197.6m
    Capitalised
    AUD 348.0m
    ROIC (reported)
    6.9%
    Terminal value, undiscounted
    AUD 23.4bn
    Terminal value, discounted
    AUD 19.6bn
    Enterprise value
    AUD 20.5bn
    Less net debt
    AUD 600.0m
    Equity value
    AUD 19.9bn

    Exit at 8.0x EBITDA

    Value per shareAUD 20.51

    91% of EV

    Terminal value, undiscounted
    AUD 10.5bn
    Terminal value, discounted
    AUD 8.8bn
    Enterprise value
    AUD 9.7bn
    Less net debt
    AUD 600.0m
    Equity value
    AUD 9.1bn

    Spread between methods: 75%.

    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%
    2.02%172.823806.17———
    3.02%57.1777.39136.232928.26—
    4.02%33.2937.7745.1559.68101.93
    5.02%23.0024.4126.3429.2033.88
    6.02%17.2917.7118.2318.9019.82

    Outlined: this model. Green text: above today's price of 30.07. 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-3.0%-10.7%-7.7pp
    EBIT margin5.1%3.6%-1.5pp
    Discount rate4.0%4.7%+0.7pp
    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.