DCF Studio

    MGR.AX · ASX · Real Estate

    Mirvac Group

    Also onConsensus Drift

    Implied value per share

    AUD 1.19

    Market price

    AUD 1.75

    Implied upside

    -31.9%

    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 0.15% 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 2.96% 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 20.1x 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 1.19-31.9%
    Exit multiple
    AUD 2.94+68.4%
    Market price
    AUD 1.75

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (AUD). Outflows negative.

    0m395m790mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayAUD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueAUD 2.9bnAUD 3.3bnAUD 3.7bnAUD 4.2bnAUD 4.8bn+13.0%
    EBITAUD 482.5mAUD 545.0mAUD 615.7mAUD 695.5mAUD 785.6m+13.0%
    NOPATAUD 446.2mAUD 504.1mAUD 569.4mAUD 643.2mAUD 726.6m+13.0%
    Add depreciation & amortisationAUD 86.9mAUD 98.2mAUD 110.9mAUD 125.3mAUD 141.5m+13.0%
    Less capital expenditureAUD -86.9mAUD -98.2mAUD -110.9mAUD -125.3mAUD -141.5m+13.0%
    Less increase in working capitalAUD 39.1mAUD 44.1mAUD 49.9mAUD 56.3mAUD 63.6m-13.0%
    Free cashflow to firmAUD 485.3mAUD 548.2mAUD 619.3mAUD 699.5mAUD 790.2m+13.0%
    Discount factor0.95860.88090.80950.74390.6836-
    Present valueAUD 465.2mAUD 482.9mAUD 501.3mAUD 520.4mAUD 540.2m+3.8%
    Present Value Of The ForecastAUD 2.5bn

    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
    Beta0.938Reported 0.907, pulled toward 1.0 (Blume)
    Cost of equity10.97%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 6.9bn64.2% of capital
    Total debtAUD 3.8bn35.8% of capital, book value as a proxy
    Tax rate7.5%Effective, capped at statutory
    WACC8.82%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 1.19

    70% of EV

    Forecast FCFF, final year
    AUD 790.2m
    Capex at depreciation, working capital in reinvestment
    AUD 726.6m
    Less reinvestment at g/ROIC (28.3% of NOPAT)
    AUD -206.0m
    Capitalised
    AUD 520.6m
    ROIC (WACC floor)
    8.8%
    Terminal value, undiscounted
    AUD 8.4bn
    Terminal value, discounted
    AUD 5.8bn
    Enterprise value
    AUD 8.3bn
    Less net debt
    AUD 3.6bn
    Equity value
    AUD 4.7bn

    Exit at 20.0x EBITDA

    Value per shareAUD 2.94

    83% of EV

    Terminal value, undiscounted
    AUD 18.5bn
    Terminal value, discounted
    AUD 12.7bn
    Enterprise value
    AUD 15.2bn
    Less net debt
    AUD 3.6bn
    Equity value
    AUD 11.6bn

    Spread between methods: 85%.

    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%
    6.82%1.791.801.811.821.83
    7.82%1.441.451.461.471.48
    8.82%1.171.181.191.201.20
    9.82%0.960.970.970.980.98
    10.82%0.780.790.800.800.81

    Outlined: this model. Green text: above today's price of 1.75. 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 year13.0%18.9%+5.9pp
    EBIT margin16.4%20.9%+4.5pp
    Discount rate8.8%7.0%-1.8pp
    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.