DCF Studio

    GDG.AX · ASX · Financial Services

    Generation Development Group Limited

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD 47.40

    Market price

    AUD 2.98

    Implied upside

    +1490.5%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Wrong toolThis is a financial. Banks and insurers report no meaningful operating income, and capex and working capital do not mean what a free-cashflow model assumes, so a DCF will misprice it. The model below runs on best-effort numbers - treat it as an illustration, not a valuation.
    Wrong toolThis model values the shares at 15.9x the market price. A gap that size is a modelling failure rather than a view - most often an unusable beta, a currency or units mismatch, or a cashflow base that does not represent the business. Read the figures below as diagnostics, not as a call.
    AdjustedSome line items were not reported and have been derived. Each one is labelled in the workings below.
    AdjustedReported capital expenditure averages just 0.52% 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 1.98% 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.

    Current EV/EBITDA of 2.5x sits outside a defensible 3-20x band, so the exit multiple is capped at 3.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    AUD 47.40+1490.5%
    Exit multiple
    AUD 19.68+560.4%
    Market price
    AUD 2.98

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (AUD). Outflows negative.

    0bn1bn2bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayAUD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueAUD 798.4mAUD 1.1bnAUD 1.5bnAUD 2.0bnAUD 2.7bn+35.4%
    EBITAUD 613.2mAUD 830.4mAUD 1.1bnAUD 1.5bnAUD 2.1bn+35.4%
    NOPATAUD 462.5mAUD 626.3mAUD 848.1mAUD 1.1bnAUD 1.6bn+35.4%
    Add depreciation & amortisationAUD 15.8mAUD 21.4mAUD 28.9mAUD 39.2mAUD 53.1m+35.4%
    Less capital expenditureAUD -15.8mAUD -21.4mAUD -28.9mAUD -39.2mAUD -53.1m+35.4%
    Less increase in working capitalAUD -4.9mAUD -6.6mAUD -8.9mAUD -12.1mAUD -16.3m+35.4%
    Free cashflow to firmAUD 457.6mAUD 619.7mAUD 839.2mAUD 1.1bnAUD 1.5bn+35.4%
    Discount factor0.95710.87690.80330.73600.6742-
    Present valueAUD 438.0mAUD 543.4mAUD 674.2mAUD 836.4mAUD 1.0bn+24.1%
    Present Value Of The ForecastAUD 3.5bn

    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
    Beta0.647Reported 0.473, pulled toward 1.0 (Blume)
    Cost of equity9.23%Risk-free + beta x equity risk premium
    Cost of debt9.62%Interest expense / average total debt
    Market capitalisationAUD 1.2bn96.2% of capital
    Total debtAUD 47.4m3.8% of capital, book value as a proxy
    Tax rate24.6%Effective, capped at statutory
    WACC9.15%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 47.40

    81% of EV

    Forecast FCFF, final year
    AUD 1.5bn
    Capex at depreciation, working capital in reinvestment
    AUD 1.6bn
    Less reinvestment at g/ROIC (4.2% of NOPAT)
    AUD -64.8m
    Capitalised
    AUD 1.5bn
    ROIC (reported)
    60.0%
    Terminal value, undiscounted
    AUD 23.0bn
    Terminal value, discounted
    AUD 15.5bn
    Enterprise value
    AUD 19.0bn
    Less net debt
    AUD -145.4m
    Equity value
    AUD 19.2bn

    Exit at 3.0x EBITDA

    Value per shareAUD 19.68

    55% of EV

    Terminal value, undiscounted
    AUD 6.3bn
    Terminal value, discounted
    AUD 4.3bn
    Enterprise value
    AUD 7.8bn
    Less net debt
    AUD -145.4m
    Equity value
    AUD 8.0bn

    Spread between methods: 83%.

    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%
    7.15%58.9463.5369.1076.0184.80
    8.15%49.5552.6656.3260.6865.97
    9.15%42.6444.8647.4050.3553.82
    10.15%37.3438.9840.8342.9345.34
    11.15%33.1634.4035.7937.3439.09

    Outlined: this model. Green text: above today's price of 2.98. 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 year35.4%-31.6%-67.0pp
    EBIT margin76.8%4.4%-72.4pp
    Discount rate9.2%88.7%+79.5pp
    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.