DCF Studio

    CQR.AX · ASX · Real Estate

    Charter Hall Retail REIT

    Also onConsensus Drift

    Implied value per share

    AUD -0.96

    Market price

    AUD 3.70

    Implied upside

    -126.1%

    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.
    AdjustedReported capital expenditure averages just 0.00% of revenue, which is too low to be the company's real investment - property trusts and similar structures invest through lines that are not reported as capex. Capex has been set to 1.00% of revenue so the forecast is not handed free growth. The accounts do not separate depreciation from amortisation, so the combined charge is used - if a large part of it is amortisation of an acquisition, the reported capex is probably right and this substitution is not. Override it if the reported figure is right.
    AdjustedCapital expenditure runs at 1.0% 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.

    Current EV/EBITDA of 37.6x 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
    AUD -0.96-126.1%
    Exit multiple
    AUD -0.33-108.9%
    Market price
    AUD 3.70

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (AUD). Outflows negative.

    0m46m92mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayAUD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueAUD 163.5mAUD 153.0mAUD 143.3mAUD 134.1mAUD 125.6m-6.4%
    EBITAUD 93.7mAUD 87.8mAUD 82.2mAUD 76.9mAUD 72.0m-6.4%
    NOPATAUD 93.7mAUD 87.8mAUD 82.2mAUD 76.9mAUD 72.0m-6.4%
    Add depreciation & amortisationAUD 0.00AUD 0.00AUD 0.00AUD 0.00AUD 0.00-
    Less capital expenditureAUD -1.6mAUD -1.5mAUD -1.4mAUD -1.3mAUD -1.3m-6.4%
    Less increase in working capitalAUD -438.2kAUD -410.3kAUD -384.1kAUD -359.6kAUD -336.6k-6.4%
    Free cashflow to firmAUD 91.7mAUD 85.8mAUD 80.3mAUD 75.2mAUD 70.4m-6.4%
    Discount factor0.96200.89030.82400.76260.7058-
    Present valueAUD 88.2mAUD 76.4mAUD 66.2mAUD 57.4mAUD 49.7m-13.4%
    Present Value Of The ForecastAUD 337.9m

    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
    Beta0.779Reported 0.670, pulled toward 1.0 (Blume)
    Cost of equity10.02%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 2.2bn57.8% of capital
    Total debtAUD 1.6bn42.2% of capital, book value as a proxy
    Tax rate0.0%Effective, capped at statutory
    WACC8.05%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 -0.96

    66% of EV

    Forecast FCFF, final year
    AUD 70.4m
    Capex at depreciation, working capital in reinvestment
    AUD 72.0m
    Less reinvestment at g/ROIC (31.1% of NOPAT)
    AUD -22.4m
    Capitalised
    AUD 49.6m
    ROIC (WACC floor)
    8.1%
    Terminal value, undiscounted
    AUD 916.8m
    Terminal value, discounted
    AUD 647.1m
    Enterprise value
    AUD 985.0m
    Less net debt
    AUD 1.5bn
    Equity value
    AUD -560.6m

    Exit at 20.0x EBITDA

    Value per shareAUD -0.33

    75% of EV

    Terminal value, undiscounted
    AUD 1.4bn
    Terminal value, discounted
    AUD 1.0bn
    Enterprise value
    AUD 1.4bn
    Less net debt
    AUD 1.5bn
    Equity value
    AUD -191.3m

    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%
    6.05%-0.46-0.45-0.44-0.43-0.43
    7.05%-0.75-0.75-0.74-0.73-0.73
    8.05%-0.98-0.97-0.96-0.96-0.95
    9.05%-1.15-1.14-1.14-1.13-1.13
    10.05%-1.29-1.28-1.28-1.28-1.27

    Outlined: this model. Green text: above today's price of 3.70. 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-6.4%26.0%+32.4pp
    Discount rate8.1%2.8%-5.3pp
    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.