DCF Studio

    MPL.AX · ASX · Financial Services

    Medibank Private Limited

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD 5.64

    Market price

    AUD 4.57

    Implied upside

    +23.5%

    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 0.77% 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 1.21% 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 5.64+23.5%
    Exit multiple
    AUD 5.73+25.5%
    Market price
    AUD 4.57

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (AUD). Outflows negative.

    0m447m894mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayAUD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueAUD 10.1bnAUD 10.8bnAUD 11.6bnAUD 12.5bnAUD 13.5bn+7.6%
    EBITAUD 930.6mAUD 1.0bnAUD 1.1bnAUD 1.2bnAUD 1.2bn+7.6%
    NOPATAUD 651.5mAUD 701.0mAUD 754.2mAUD 811.6mAUD 873.2m+7.6%
    Add depreciation & amortisationAUD 121.5mAUD 130.7mAUD 140.7mAUD 151.4mAUD 162.9m+7.6%
    Less capital expenditureAUD -121.5mAUD -130.7mAUD -140.7mAUD -151.4mAUD -162.9m+7.6%
    Less increase in working capitalAUD 15.3mAUD 16.5mAUD 17.8mAUD 19.1mAUD 20.6m-7.6%
    Free cashflow to firmAUD 666.8mAUD 717.5mAUD 772.0mAUD 830.7mAUD 893.8m+7.6%
    Discount factor0.96480.89800.83590.77810.7242-
    Present valueAUD 643.3mAUD 644.3mAUD 645.3mAUD 646.3mAUD 647.3m+0.2%
    Present Value Of The ForecastAUD 3.2bn

    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
    Beta0.361Reported 0.046, pulled toward 1.0 (Blume)
    Cost of equity7.51%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 12.6bn97.9% of capital
    Total debtAUD 273.9m2.1% of capital, book value as a proxy
    Tax rate30.0%Effective, capped at statutory
    WACC7.43%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 5.64

    78% of EV

    Forecast FCFF, final year
    AUD 893.8m
    Capex at depreciation, working capital in reinvestment
    AUD 873.2m
    Less reinvestment at g/ROIC (10.9% of NOPAT)
    AUD -95.1m
    Capitalised
    AUD 778.2m
    ROIC (reported)
    23.0%
    Terminal value, undiscounted
    AUD 16.2bn
    Terminal value, discounted
    AUD 11.7bn
    Enterprise value
    AUD 14.9bn
    Less net debt
    AUD -602.5m
    Equity value
    AUD 15.5bn

    Exit at 11.7x EBITDA

    Value per shareAUD 5.73

    79% of EV

    Terminal value, undiscounted
    AUD 16.5bn
    Terminal value, discounted
    AUD 12.0bn
    Enterprise value
    AUD 15.2bn
    Less net debt
    AUD -602.5m
    Equity value
    AUD 15.8bn

    Spread between methods: 2%.

    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%
    5.43%7.488.239.2310.6512.79
    6.43%6.026.456.987.678.58
    7.43%5.065.335.646.036.51
    8.43%4.384.554.764.995.28
    9.43%3.873.994.124.284.46

    Outlined: this model. Green text: above today's price of 4.57. 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 year7.6%2.6%-5.0pp
    EBIT margin9.3%7.4%-1.8pp
    Discount rate7.4%8.7%+1.3pp
    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.