DCF Studio

    GMG.AX · ASX · Real Estate

    Goodman Group

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD 3.11

    Market price

    AUD 25.62

    Implied upside

    -87.9%

    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 0.77% 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.

    Current EV/EBITDA of 61.6x 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 3.11-87.9%
    Exit multiple
    AUD 7.30-71.5%
    Market price
    AUD 25.62

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (AUD). Outflows negative.

    0m344m688mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayAUD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueAUD 2.8bnAUD 3.1bnAUD 3.4bnAUD 3.7bnAUD 4.0bn+9.6%
    EBITAUD 804.1mAUD 881.2mAUD 965.8mAUD 1.1bnAUD 1.2bn+9.6%
    NOPATAUD 726.5mAUD 796.2mAUD 872.6mAUD 956.3mAUD 1.0bn+9.6%
    Add depreciation & amortisationAUD 23.3mAUD 25.5mAUD 28.0mAUD 30.7mAUD 33.6m+9.6%
    Less capital expenditureAUD -28.0mAUD -30.7mAUD -33.6mAUD -36.9mAUD -40.4m+9.6%
    Less increase in working capitalAUD -245.1mAUD -268.6mAUD -294.4mAUD -322.6mAUD -353.6m+9.6%
    Free cashflow to firmAUD 476.7mAUD 522.5mAUD 572.6mAUD 627.5mAUD 687.8m+9.6%
    Discount factor0.95010.85760.77420.69880.6308-
    Present valueAUD 453.0mAUD 448.1mAUD 443.3mAUD 438.6mAUD 433.9m-1.1%
    Present Value Of The ForecastAUD 2.2bn

    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
    Beta1.020Reported 1.030, pulled toward 1.0 (Blume)
    Cost of equity11.47%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 52.6bn89.6% of capital
    Total debtAUD 6.1bn10.4% of capital, book value as a proxy
    Tax rate9.6%Effective, capped at statutory
    WACC10.78%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 3.11

    74% of EV

    Forecast FCFF, final year
    AUD 687.8m
    Capex at depreciation, working capital in reinvestment
    AUD 1.0bn
    Less reinvestment at g/ROIC (23.2% of NOPAT)
    AUD -243.1m
    Capitalised
    AUD 805.0m
    ROIC (WACC floor)
    10.8%
    Terminal value, undiscounted
    AUD 10.0bn
    Terminal value, discounted
    AUD 6.3bn
    Enterprise value
    AUD 8.5bn
    Less net debt
    AUD 2.0bn
    Equity value
    AUD 6.5bn

    Exit at 20.0x EBITDA

    Value per shareAUD 7.30

    87% of EV

    Terminal value, undiscounted
    AUD 23.9bn
    Terminal value, discounted
    AUD 15.1bn
    Enterprise value
    AUD 17.3bn
    Less net debt
    AUD 2.0bn
    Equity value
    AUD 15.3bn

    Spread between methods: 81%.

    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%
    8.78%4.124.144.164.184.19
    9.78%3.543.563.583.593.61
    10.78%3.083.093.113.123.14
    11.78%2.692.712.722.732.74
    12.78%2.372.382.392.402.42

    Outlined: this model. Green text: above today's price of 25.62. 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 year9.6%76.0%+66.4pp
    Discount rate10.8%2.7%-8.1pp
    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.