DCF Studio

    HVN.AX · ASX · Consumer Cyclical

    Harvey Norman Holdings Limited

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD 1.85

    Market price

    AUD 4.10

    Implied upside

    -54.8%

    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 1.85-54.8%
    Exit multiple
    AUD 4.24+3.3%
    Market price
    AUD 4.10

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (AUD). Outflows negative.

    0m182m364mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayAUD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueAUD 4.4bnAUD 4.5bnAUD 4.7bnAUD 4.8bnAUD 4.9bn+2.7%
    EBITAUD 452.0mAUD 464.1mAUD 476.6mAUD 489.4mAUD 502.5m+2.7%
    NOPATAUD 316.4mAUD 324.9mAUD 333.6mAUD 342.6mAUD 351.8m+2.7%
    Add depreciation & amortisationAUD 277.9mAUD 285.3mAUD 293.0mAUD 300.9mAUD 308.9m+2.7%
    Less capital expenditureAUD -194.4mAUD -199.6mAUD -204.9mAUD -210.4mAUD -216.1m+2.7%
    Less increase in working capitalAUD -72.6mAUD -74.6mAUD -76.6mAUD -78.7mAUD -80.8m+2.7%
    Free cashflow to firmAUD 327.3mAUD 336.1mAUD 345.1mAUD 354.3mAUD 363.8m+2.7%
    Discount factor0.96210.89070.82450.76330.7066-
    Present valueAUD 314.9mAUD 299.3mAUD 284.5mAUD 270.5mAUD 257.1m-4.9%
    Present Value Of The ForecastAUD 1.4bn

    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
    Beta0.807Reported 0.712, pulled toward 1.0 (Blume)
    Cost of equity10.19%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 5.1bn66.4% of capital
    Total debtAUD 2.6bn33.6% of capital, book value as a proxy
    Tax rate30.0%Effective, capped at statutory
    WACC8.02%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 1.85

    69% of EV

    Forecast FCFF, final year
    AUD 363.8m
    Capex at depreciation, working capital in reinvestment
    AUD 351.8m
    Less reinvestment at g/ROIC (31.2% of NOPAT)
    AUD -109.6m
    Capitalised
    AUD 242.2m
    ROIC (WACC floor)
    8.0%
    Terminal value, undiscounted
    AUD 4.5bn
    Terminal value, discounted
    AUD 3.2bn
    Enterprise value
    AUD 4.6bn
    Less net debt
    AUD 2.3bn
    Equity value
    AUD 2.3bn

    Exit at 10.7x EBITDA

    Value per shareAUD 4.24

    81% of EV

    Terminal value, undiscounted
    AUD 8.7bn
    Terminal value, discounted
    AUD 6.1bn
    Enterprise value
    AUD 7.6bn
    Less net debt
    AUD 2.3bn
    Equity value
    AUD 5.3bn

    Spread between methods: 78%.

    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%
    6.02%3.013.033.053.073.09
    7.02%2.342.352.372.382.40
    8.02%1.831.841.851.871.88
    9.02%1.431.451.461.471.48
    10.02%1.121.131.141.151.16

    Outlined: this model. Green text: above today's price of 4.10. 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 year2.7%26.0%+23.3pp
    EBIT margin10.2%16.5%+6.3pp
    Discount rate8.0%4.9%-3.1pp
    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.