DCF Studio

    CEN.NZ · NZE · Utilities

    Contact Energy Limited

    Also onConsensus Drift

    Implied value per share

    NZD 7.99

    Market price

    NZD 8.67

    Implied upside

    -7.9%

    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 18.1% of revenue against depreciation of 9.2%. 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: NZD assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    NZD 7.99-7.9%
    Exit multiple
    NZD 12.77+47.3%
    Market price
    NZD 8.67

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (NZD). Outflows negative.

    0m66m131mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayNZD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueNZD 3.7bnNZD 4.2bnNZD 4.9bnNZD 5.6bnNZD 6.4bn+15.0%
    EBITNZD 644.6mNZD 741.4mNZD 852.6mNZD 980.6mNZD 1.1bn+15.0%
    NOPATNZD 464.1mNZD 533.8mNZD 613.9mNZD 706.0mNZD 812.0m+15.0%
    Add depreciation & amortisationNZD 336.9mNZD 387.4mNZD 445.6mNZD 512.5mNZD 589.4m+15.0%
    Less capital expenditureNZD -664.7mNZD -764.4mNZD -879.2mNZD -1.0bnNZD -1.2bn+15.0%
    Less increase in working capitalNZD -61.3mNZD -70.5mNZD -81.1mNZD -93.3mNZD -107.3m+15.0%
    Free cashflow to firmNZD 75.0mNZD 86.3mNZD 99.2mNZD 114.1mNZD 131.3m+15.0%
    Discount factor0.96970.91190.85760.80640.7584-
    Present valueNZD 72.8mNZD 78.7mNZD 85.1mNZD 92.0mNZD 99.5m+8.2%
    Present Value Of The ForecastNZD 428.1m

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.50%NZD assumption - no free live source available for this market (assumption)
    Equity risk premium6.50%Market assumption
    Beta0.402Reported 0.108, pulled toward 1.0 (Blume)
    Cost of equity7.12%Risk-free + beta x equity risk premium
    Cost of debt5.53%Interest expense / average total debt
    Market capitalisationNZD 9.3bn75.3% of capital
    Total debtNZD 3.1bn24.7% of capital, book value as a proxy
    Tax rate28.0%Effective, capped at statutory
    WACC6.34%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 shareNZD 7.99

    96% of EV

    Forecast FCFF, final year
    NZD 131.3m
    Capex at depreciation, working capital in reinvestment
    NZD 812.0m
    Less reinvestment at g/ROIC (39.4% of NOPAT)
    NZD -320.0m
    Capitalised
    NZD 492.0m
    ROIC (reported)
    6.3%
    Terminal value, undiscounted
    NZD 13.1bn
    Terminal value, discounted
    NZD 10.0bn
    Enterprise value
    NZD 10.4bn
    Less net debt
    NZD 2.3bn
    Equity value
    NZD 8.1bn

    Exit at 11.4x EBITDA

    Value per shareNZD 12.77

    97% of EV

    Terminal value, undiscounted
    NZD 19.5bn
    Terminal value, discounted
    NZD 14.8bn
    Enterprise value
    NZD 15.2bn
    Less net debt
    NZD 2.3bn
    Equity value
    NZD 13.0bn

    Spread between methods: 46%.

    Sensitivity

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

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    4.34%16.2417.9320.5124.9934.73
    5.34%10.9611.4312.0312.8814.16
    6.34%7.897.947.998.048.09
    7.34%6.216.256.296.336.37
    8.34%4.944.985.015.045.08

    Outlined: this model. Green text: above today's price of 8.67. 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 year15.0%16.6%+1.6pp
    EBIT margin17.5%18.5%+1.0pp
    Discount rate6.3%6.1%-0.2pp
    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.