DCF Studio

    DOW.AX · ASX · Industrials

    Downer EDI Limited

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD 2.00

    Market price

    AUD 6.56

    Implied upside

    -69.4%

    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 2.00-69.4%
    Exit multiple
    AUD 3.68-43.9%
    Market price
    AUD 6.56

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (AUD). Outflows negative.

    0m154m308mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayAUD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueAUD 9.1bnAUD 8.6bnAUD 8.1bnAUD 7.6bnAUD 7.2bn-5.9%
    EBITAUD 203.1mAUD 191.2mAUD 179.9mAUD 169.4mAUD 159.4m-5.9%
    NOPATAUD 150.6mAUD 141.7mAUD 133.4mAUD 125.6mAUD 118.2m-5.9%
    Add depreciation & amortisationAUD 279.1mAUD 262.7mAUD 247.3mAUD 232.8mAUD 219.1m-5.9%
    Less capital expenditureAUD -143.0mAUD -134.6mAUD -126.7mAUD -119.3mAUD -112.3m-5.9%
    Less increase in working capitalAUD 20.9mAUD 19.7mAUD 18.6mAUD 17.5mAUD 16.4m+5.9%
    Free cashflow to firmAUD 307.6mAUD 289.5mAUD 272.5mAUD 256.5mAUD 241.5m-5.9%
    Discount factor0.95470.87020.79320.72300.6590-
    Present valueAUD 293.7mAUD 252.0mAUD 216.2mAUD 185.5mAUD 159.1m-14.2%
    Present Value Of The ForecastAUD 1.1bn

    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
    Beta1.031Reported 1.047, pulled toward 1.0 (Blume)
    Cost of equity11.54%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 4.3bn75.9% of capital
    Total debtAUD 1.4bn24.1% of capital, book value as a proxy
    Tax rate25.9%Effective, capped at statutory
    WACC9.71%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 2.00

    43% of EV

    Forecast FCFF, final year
    AUD 241.5m
    Capex at depreciation, working capital in reinvestment
    AUD 118.2m
    Less reinvestment at g/ROIC (25.7% of NOPAT)
    AUD -30.4m
    Capitalised
    AUD 87.8m
    ROIC (WACC floor)
    9.7%
    Terminal value, undiscounted
    AUD 1.2bn
    Terminal value, discounted
    AUD 822.4m
    Enterprise value
    AUD 1.9bn
    Less net debt
    AUD 596.5m
    Equity value
    AUD 1.3bn

    Exit at 7.8x EBITDA

    Value per shareAUD 3.68

    64% of EV

    Terminal value, undiscounted
    AUD 2.9bn
    Terminal value, discounted
    AUD 1.9bn
    Enterprise value
    AUD 3.0bn
    Less net debt
    AUD 596.5m
    Equity value
    AUD 2.4bn

    Spread between methods: 59%.

    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%
    7.71%2.512.522.532.542.55
    8.71%2.222.232.242.252.25
    9.71%1.992.002.002.012.02
    10.71%1.801.811.811.821.82
    11.71%1.641.641.651.651.66

    Outlined: this model. Green text: above today's price of 6.56. 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-5.9%23.3%+29.2pp
    EBIT margin2.2%7.2%+4.9pp
    Discount rate9.7%3.8%-5.9pp
    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.