DCF Studio

    MFG.AX · ASX · Financial Services

    Magellan Financial Group Limited

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD 4.42

    Market price

    AUD 8.45

    Implied upside

    -47.7%

    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.
    AdjustedSome line items were not reported and have been derived. Each one is labelled in the workings below.
    AdjustedReported capital expenditure averages just 0.08% 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 1.24% 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.

    Value Per Share

    Perpetuity growth
    AUD 4.42-47.7%
    Exit multiple
    AUD 5.65-33.1%
    Market price
    AUD 8.45

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (AUD). Outflows negative.

    0m40m79mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayAUD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueAUD 145.9mAUD 111.6mAUD 85.4mAUD 65.3mAUD 50.0m-23.5%
    EBITAUD 98.6mAUD 75.4mAUD 57.7mAUD 44.1mAUD 33.8m-23.5%
    NOPATAUD 70.3mAUD 53.8mAUD 41.1mAUD 31.5mAUD 24.1m-23.5%
    Add depreciation & amortisationAUD 1.8mAUD 1.4mAUD 1.1mAUD 810.9kAUD 620.3k-23.5%
    Less capital expenditureAUD -1.8mAUD -1.4mAUD -1.1mAUD -810.9kAUD -620.3k-23.5%
    Less increase in working capitalAUD 9.0mAUD 6.9mAUD 5.3mAUD 4.1mAUD 3.1m+23.5%
    Free cashflow to firmAUD 79.3mAUD 60.7mAUD 46.4mAUD 35.5mAUD 27.2m-23.5%
    Discount factor0.95780.87860.80600.73930.6782-
    Present valueAUD 76.0mAUD 53.3mAUD 37.4mAUD 26.3mAUD 18.4m-29.8%
    Present Value Of The ForecastAUD 211.4m

    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
    Beta0.611Reported 0.420, pulled toward 1.0 (Blume)
    Cost of equity9.02%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 2.5bn99.9% of capital
    Total debtAUD 2.0m0.1% of capital, book value as a proxy
    Tax rate28.7%Effective, capped at statutory
    WACC9.01%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 4.42

    51% of EV

    Forecast FCFF, final year
    AUD 27.2m
    Capex at depreciation, working capital in reinvestment
    AUD 24.1m
    Less reinvestment at g/ROIC (14.2% of NOPAT)
    AUD -3.4m
    Capitalised
    AUD 20.6m
    ROIC (reported)
    17.6%
    Terminal value, undiscounted
    AUD 325.0m
    Terminal value, discounted
    AUD 220.4m
    Enterprise value
    AUD 431.8m
    Less net debt
    AUD -345.8m
    Equity value
    AUD 777.7m

    Exit at 18.7x EBITDA

    Value per shareAUD 5.65

    67% of EV

    Terminal value, undiscounted
    AUD 644.1m
    Terminal value, discounted
    AUD 436.8m
    Enterprise value
    AUD 648.2m
    Less net debt
    AUD -345.8m
    Equity value
    AUD 994.1m

    Spread between methods: 24%.

    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%
    7.01%4.915.035.185.365.59
    8.01%4.574.644.734.844.97
    9.01%4.324.374.424.494.57
    10.01%4.124.154.194.234.28
    11.01%3.973.994.014.044.07

    Outlined: this model. Green text: above today's price of 8.45. 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 year-23.5%-1.5%+22.0pp
    Discount rate9.0%4.4%-4.6pp
    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.