DCF Studio

    CIA.AX · ASX · Basic Materials

    Champion Iron Limited

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD 7.89

    Market price

    AUD 3.25

    Implied upside

    +142.8%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · CAD model at 1.0036

    AdjustedReports in CAD, trades in AUD. Modelled in CAD, converted at the end.
    AdjustedFree cashflow is negative in at least one forecast year, so terminal value carries most of the valuation.
    AdjustedCapital expenditure runs at 26.2% of revenue against depreciation of 9.1%. 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.

    Value Per Share

    Perpetuity growth
    AUD 7.89+142.8%
    Exit multiple
    AUD 4.49+38.0%
    Market price
    AUD 3.25

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (CAD). Outflows negative.

    -20621172-103105860FY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayCAD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueCAD 1.9bnCAD 2.1bnCAD 2.2bnCAD 2.4bnCAD 2.6bn+8.3%
    EBITCAD 440.2mCAD 476.5mCAD 515.8mCAD 558.4mCAD 604.5m+8.3%
    NOPATCAD 308.1mCAD 333.5mCAD 361.1mCAD 390.9mCAD 423.1m+8.3%
    Add depreciation & amortisationCAD 173.5mCAD 187.8mCAD 203.3mCAD 220.1mCAD 238.2m+8.3%
    Less capital expenditureCAD -501.6mCAD -542.9mCAD -587.7mCAD -636.2mCAD -688.8m+8.3%
    Less increase in working capitalCAD 4.9mCAD 5.4mCAD 5.8mCAD 6.3mCAD 6.8m-8.3%
    Free cashflow to firmCAD -15.0mCAD -16.3mCAD -17.6mCAD -19.0mCAD -20.6m-8.3%
    Discount factor0.96440.89710.83440.77620.7219-
    Present valueCAD -14.5mCAD -14.6mCAD -14.7mCAD -14.8mCAD -14.9m-0.7%
    Present Value Of The ForecastCAD -73.4m

    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
    Beta0.733Reported 0.601, pulled toward 1.0 (Blume)
    Cost of equity9.74%Risk-free + beta x equity risk premium
    Cost of debt5.35%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationCAD 1.8bn62.7% of capital
    Total debtCAD 1.1bn37.3% of capital, book value as a proxy
    Tax rate30.0%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 shareCAD 7.86

    101% of EV

    Forecast FCFF, final year
    CAD -20.6m
    Capex at depreciation, working capital in reinvestment
    CAD 424.1m
    Less reinvestment at g/ROIC (19.4% of NOPAT)
    CAD -82.3m
    Capitalised
    CAD 341.8m
    ROIC (reported)
    12.9%
    Terminal value, undiscounted
    CAD 7.0bn
    Terminal value, discounted
    CAD 5.1bn
    Enterprise value
    CAD 5.0bn
    Less net debt
    CAD 783.7m
    Equity value
    CAD 4.2bn

    Exit at 5.3x EBITDA

    Value per shareCAD 4.47

    102% of EV

    Terminal value, undiscounted
    CAD 4.5bn
    Terminal value, discounted
    CAD 3.2bn
    Enterprise value
    CAD 3.2bn
    Less net debt
    CAD 783.7m
    Equity value
    CAD 2.4bn

    Spread between methods: 55%.

    Sensitivity

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

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    5.51%12.3613.7315.5418.0721.83
    6.51%9.119.8310.7311.8813.39
    7.51%6.967.377.868.469.19
    8.51%5.445.695.976.306.69
    9.51%4.324.464.634.815.03

    Outlined: this model. Green text: above today's price of 3.24. 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 year8.3%-5.3%-13.5pp
    EBIT margin23.0%14.3%-8.7pp
    Discount rate7.5%11.0%+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.