DCF Studio

    FRW.NZ · NZE · Industrials

    Freightways Group Limited

    Also onConsensus Drift

    Implied value per share

    NZD 10.96

    Market price

    NZD 12.83

    Implied upside

    -14.6%

    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 2.63% of revenue against depreciation and amortisation of 7.60%. A business cannot depreciate more than it invests indefinitely. Capex has been set to 7.60% 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.
    NoteRisk-free rate is an assumption: NZD assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    NZD 10.96-14.6%
    Exit multiple
    NZD 18.02+40.5%
    Market price
    NZD 12.83

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (NZD). Outflows negative.

    0m90m180mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayNZD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueNZD 1.6bnNZD 1.7bnNZD 1.9bnNZD 2.1bnNZD 2.3bn+9.3%
    EBITNZD 183.2mNZD 200.1mNZD 218.7mNZD 239.0mNZD 261.2m+9.3%
    NOPATNZD 131.9mNZD 144.1mNZD 157.5mNZD 172.1mNZD 188.1m+9.3%
    Add depreciation & amortisationNZD 121.6mNZD 132.9mNZD 145.2mNZD 158.7mNZD 173.4m+9.3%
    Less capital expenditureNZD -121.6mNZD -132.9mNZD -145.2mNZD -158.7mNZD -173.4m+9.3%
    Less increase in working capitalNZD -5.6mNZD -6.2mNZD -6.7mNZD -7.4mNZD -8.0m+9.3%
    Free cashflow to firmNZD 126.2mNZD 137.9mNZD 150.7mNZD 164.7mNZD 180.0m+9.3%
    Discount factor0.96220.89090.82490.76380.7072-
    Present valueNZD 121.5mNZD 122.9mNZD 124.3mNZD 125.8mNZD 127.3m+1.2%
    Present Value Of The ForecastNZD 621.8m

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.50%NZD assumption - no free live source available for this market (assumption)
    Equity risk premium6.50%Market assumption
    Beta0.761Reported 0.644, pulled toward 1.0 (Blume)
    Cost of equity9.45%Risk-free + beta x equity risk premium
    Cost of debt4.50%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationNZD 2.3bn76.7% of capital
    Total debtNZD 697.9m23.3% of capital, book value as a proxy
    Tax rate28.0%Effective, capped at statutory
    WACC8.00%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 shareNZD 10.96

    76% of EV

    Forecast FCFF, final year
    NZD 180.0m
    Capex at depreciation, working capital in reinvestment
    NZD 188.1m
    Less reinvestment at g/ROIC (18.8% of NOPAT)
    NZD -35.4m
    Capitalised
    NZD 152.6m
    ROIC (reported)
    13.3%
    Terminal value, undiscounted
    NZD 2.8bn
    Terminal value, discounted
    NZD 2.0bn
    Enterprise value
    NZD 2.6bn
    Less net debt
    NZD 665.0m
    Equity value
    NZD 2.0bn

    Exit at 10.7x EBITDA

    Value per shareNZD 18.02

    84% of EV

    Terminal value, undiscounted
    NZD 4.6bn
    Terminal value, discounted
    NZD 3.3bn
    Enterprise value
    NZD 3.9bn
    Less net debt
    NZD 665.0m
    Equity value
    NZD 3.2bn

    Spread between methods: 49%.

    Sensitivity

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

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    6.00%16.0317.3619.0621.3124.45
    7.00%12.4813.2114.1115.2216.64
    8.00%10.0110.4510.9611.5612.29
    9.00%8.218.478.779.129.52
    10.00%6.826.997.177.377.60

    Outlined: this model. Green text: above today's price of 12.83. 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 year9.3%12.3%+3.0pp
    EBIT margin11.5%12.9%+1.4pp
    Discount rate8.0%7.4%-0.6pp
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    Yahoo Finance and RBA data. General information, not advice. Methodology.