DCF Studio

    COL.AX · ASX · Consumer Defensive

    Coles Group Limited

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD 13.99

    Market price

    AUD 23.12

    Implied upside

    -39.5%

    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.

    Value Per Share

    Perpetuity growth
    AUD 13.99-39.5%
    Exit multiple
    AUD 24.40+5.5%
    Market price
    AUD 23.12

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (AUD). Outflows negative.

    0bn1bn2bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayAUD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueAUD 47.4bnAUD 49.3bnAUD 51.3bnAUD 53.4bnAUD 55.5bn+4.0%
    EBITAUD 1.9bnAUD 2.0bnAUD 2.1bnAUD 2.2bnAUD 2.3bn+4.0%
    NOPATAUD 1.4bnAUD 1.4bnAUD 1.5bnAUD 1.5bnAUD 1.6bn+4.0%
    Add depreciation & amortisationAUD 1.7bnAUD 1.8bnAUD 1.8bnAUD 1.9bnAUD 2.0bn+4.0%
    Less capital expenditureAUD -1.7bnAUD -1.8bnAUD -1.8bnAUD -1.9bnAUD -2.0bn+4.0%
    Less increase in working capitalAUD -7.5mAUD -7.8mAUD -8.1mAUD -8.4mAUD -8.8m+4.0%
    Free cashflow to firmAUD 1.4bnAUD 1.4bnAUD 1.5bnAUD 1.5bnAUD 1.6bn+4.0%
    Discount factor0.96530.89950.83820.78110.7279-
    Present valueAUD 1.3bnAUD 1.3bnAUD 1.2bnAUD 1.2bnAUD 1.2bn-3.1%
    Present Value Of The ForecastAUD 6.1bn

    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
    Beta0.516Reported 0.278, pulled toward 1.0 (Blume)
    Cost of equity8.45%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 31.1bn75.8% of capital
    Total debtAUD 9.9bn24.2% of capital, book value as a proxy
    Tax rate29.7%Effective, capped at statutory
    WACC7.31%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 13.99

    78% of EV

    Forecast FCFF, final year
    AUD 1.6bn
    Capex at depreciation, working capital in reinvestment
    AUD 1.6bn
    Less reinvestment at g/ROIC (10.7% of NOPAT)
    AUD -169.3m
    Capitalised
    AUD 1.4bn
    ROIC (reported)
    23.4%
    Terminal value, undiscounted
    AUD 30.2bn
    Terminal value, discounted
    AUD 22.0bn
    Enterprise value
    AUD 28.1bn
    Less net debt
    AUD 9.3bn
    Equity value
    AUD 18.8bn

    Exit at 11.7x EBITDA

    Value per shareAUD 24.40

    85% of EV

    Terminal value, undiscounted
    AUD 49.4bn
    Terminal value, discounted
    AUD 35.9bn
    Enterprise value
    AUD 42.1bn
    Less net debt
    AUD 9.3bn
    Equity value
    AUD 32.8bn

    Spread between methods: 54%.

    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%
    5.31%21.1624.2028.3034.1843.28
    6.31%15.4417.1419.2722.0525.80
    7.31%11.6812.7313.9915.5417.48
    8.31%9.039.7210.5211.4712.62
    9.31%7.057.538.078.699.42

    Outlined: this model. Green text: above today's price of 23.12. 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 year4.0%12.6%+8.6pp
    EBIT margin4.1%5.8%+1.8pp
    Discount rate7.3%5.8%-1.5pp
    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.