DCF Studio

    IGO.AX · ASX · Basic Materials

    IGO Limited

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD 0.12

    Market price

    AUD 6.88

    Implied upside

    -98.3%

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

    Wrong toolThis model values the shares at 1.7% of 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 14.70% of revenue against depreciation and amortisation of 35.00%. A business cannot depreciate more than it invests indefinitely. Capex has been set to 35.00% 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.
    AdjustedFree cashflow is negative in at least one forecast year, so terminal value carries most of the valuation.

    Current EV/EBITDA of 76.7x 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 0.12-98.3%
    Exit multiple
    AUD -0.26-103.8%
    Market price
    AUD 6.88

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (AUD). Outflows negative.

    -146598328-732991640FY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayAUD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueAUD 338.2mAUD 254.8mAUD 191.9mAUD 144.6mAUD 108.9m-24.7%
    EBITAUD -186.9mAUD -140.8mAUD -106.1mAUD -79.9mAUD -60.2m+24.7%
    NOPATAUD -150.9mAUD -113.7mAUD -85.6mAUD -64.5mAUD -48.6m+24.7%
    Add depreciation & amortisationAUD 118.4mAUD 89.2mAUD 67.2mAUD 50.6mAUD 38.1m-24.7%
    Less capital expenditureAUD -118.4mAUD -89.2mAUD -67.2mAUD -50.6mAUD -38.1m-24.7%
    Less increase in working capitalAUD 4.3mAUD 3.2mAUD 2.4mAUD 1.8mAUD 1.4m+24.7%
    Free cashflow to firmAUD -146.6mAUD -110.4mAUD -83.2mAUD -62.7mAUD -47.2m+24.7%
    Discount factor0.95430.86910.79150.72080.6565-
    Present valueAUD -139.9mAUD -96.0mAUD -65.9mAUD -45.2mAUD -31.0m+31.4%
    Present Value Of The ForecastAUD -377.9m

    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
    Beta0.745Reported 0.619, pulled toward 1.0 (Blume)
    Cost of equity9.82%Risk-free + beta x equity risk premium
    Cost of debt7.35%Implied cost of debt of 30.7% is not a credible funding cost, so risk-free + 2bp is assumed instead. Interest expense and reported debt are measuring different things - common for banks, whose interest expense includes deposits that total debt excludes.
    Market capitalisationAUD 5.2bn99.7% of capital
    Total debtAUD 16.8m0.3% of capital, book value as a proxy
    Tax rate19.3%Effective, capped at statutory
    WACC9.80%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 0.12

    0% of EV

    Terminal value, undiscounted
    AUD 0.00
    Terminal value, discounted
    AUD 0.00
    Enterprise value
    AUD -377.9m
    Less net debt
    AUD -468.8m
    Equity value
    AUD 90.9m

    Exit at 20.0x EBITDA

    Value per shareAUD -0.26

    43% of EV

    Terminal value, undiscounted
    AUD -441.7m
    Terminal value, discounted
    AUD -289.9m
    Enterprise value
    AUD -667.9m
    Less net debt
    AUD -468.8m
    Equity value
    AUD -199.1m

    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%
    7.80%0.100.100.100.100.10
    8.80%0.110.110.110.110.11
    9.80%0.120.120.120.120.12
    10.80%0.130.130.130.130.13
    11.80%0.140.140.140.140.14

    Outlined: this model. Green text: above today's price of 6.88. Shading: distance from this model's own value.

    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.