DCF Studio

    DRR.AX · ASX · Basic Materials

    Deterra Royalties Limited

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD 4.25

    Market price

    AUD 4.31

    Implied upside

    -1.4%

    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.
    AdjustedReported capital expenditure averages just 0.20% 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.

    Value Per Share

    Perpetuity growth
    AUD 4.25-1.4%
    Exit multiple
    AUD 4.39+1.8%
    Market price
    AUD 4.31

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (AUD). Outflows negative.

    0m85m170mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayAUD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueAUD 246.9mAUD 251.6mAUD 256.3mAUD 261.1mAUD 266.0m+1.9%
    EBITAUD 232.3mAUD 236.6mAUD 241.1mAUD 245.6mAUD 250.2m+1.9%
    NOPATAUD 162.6mAUD 165.6mAUD 168.7mAUD 171.9mAUD 175.1m+1.9%
    Add depreciation & amortisationAUD 2.1mAUD 2.1mAUD 2.1mAUD 2.2mAUD 2.2m+1.9%
    Less capital expenditureAUD -2.5mAUD -2.5mAUD -2.6mAUD -2.6mAUD -2.7m+1.9%
    Less increase in working capitalAUD -4.0mAUD -4.1mAUD -4.1mAUD -4.2mAUD -4.3m+1.9%
    Free cashflow to firmAUD 158.2mAUD 161.2mAUD 164.2mAUD 167.3mAUD 170.4m+1.9%
    Discount factor0.95690.87610.80210.73440.6724-
    Present valueAUD 151.4mAUD 141.2mAUD 131.7mAUD 122.8mAUD 114.6m-6.7%
    Present Value Of The ForecastAUD 661.7m

    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
    Beta0.698Reported 0.549, pulled toward 1.0 (Blume)
    Cost of equity9.53%Risk-free + beta x equity risk premium
    Cost of debt6.01%Interest expense / average total debt
    Market capitalisationAUD 2.3bn94.1% of capital
    Total debtAUD 143.3m5.9% of capital, book value as a proxy
    Tax rate30.0%Effective, capped at statutory
    WACC9.22%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 4.25

    72% of EV

    Forecast FCFF, final year
    AUD 170.4m
    Capex at depreciation, working capital in reinvestment
    AUD 175.1m
    Less reinvestment at g/ROIC (4.2% of NOPAT)
    AUD -7.3m
    Capitalised
    AUD 167.8m
    ROIC (reported)
    60.0%
    Terminal value, undiscounted
    AUD 2.6bn
    Terminal value, discounted
    AUD 1.7bn
    Enterprise value
    AUD 2.4bn
    Less net debt
    AUD 132.8m
    Equity value
    AUD 2.3bn

    Exit at 10.6x EBITDA

    Value per shareAUD 4.39

    73% of EV

    Terminal value, undiscounted
    AUD 2.7bn
    Terminal value, discounted
    AUD 1.8bn
    Enterprise value
    AUD 2.5bn
    Less net debt
    AUD 132.8m
    Equity value
    AUD 2.3bn

    Spread between methods: 3%.

    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%
    7.22%5.245.626.086.667.39
    8.22%4.444.705.015.375.81
    9.22%3.854.044.254.504.79
    10.22%3.393.533.693.874.07
    11.22%3.033.143.263.393.53

    Outlined: this model. Green text: above today's price of 4.31. 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 year1.9%2.2%+0.3pp
    Discount rate9.2%9.1%-0.1pp
    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.