DCF Studio

    MRL.MC · MCE · Real Estate

    MERLIN Properties SOCIMI, S.A.

    Also onConsensus Drift

    Implied value per share

    EUR 5.96

    Market price

    EUR 12.44

    Implied upside

    -52.1%

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

    AdjustedCapital expenditure runs at 1.7% of revenue against depreciation of 0.7%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.
    NoteRisk-free rate is an assumption: USD assumption - no free live source available for this market.

    Current EV/EBITDA of 28.7x 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
    EUR 5.96-52.1%
    Exit multiple
    EUR 11.51-7.4%
    Market price
    EUR 12.44

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (EUR). Outflows negative.

    0m295m590mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayEUR
    LineFY26FY27FY28FY29FY30CAGR
    RevenueEUR 577.1mEUR 617.9mEUR 661.6mEUR 708.4mEUR 758.6m+7.1%
    EBITEUR 434.6mEUR 465.3mEUR 498.3mEUR 533.5mEUR 571.3m+7.1%
    NOPATEUR 416.7mEUR 446.2mEUR 477.7mEUR 511.5mEUR 547.7m+7.1%
    Add depreciation & amortisationEUR 3.9mEUR 4.2mEUR 4.4mEUR 4.8mEUR 5.1m+7.1%
    Less capital expenditureEUR -9.7mEUR -10.4mEUR -11.1mEUR -11.9mEUR -12.7m+7.1%
    Less increase in working capitalEUR 38.1mEUR 40.8mEUR 43.7mEUR 46.8mEUR 50.1m-7.1%
    Free cashflow to firmEUR 449.0mEUR 480.8mEUR 514.8mEUR 551.2mEUR 590.2m+7.1%
    Discount factor0.96280.89260.82740.76700.7111-
    Present valueEUR 432.3mEUR 429.1mEUR 425.9mEUR 422.8mEUR 419.7m-0.7%
    Present Value Of The ForecastEUR 2.1bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.20%USD assumption - no free live source available for this market (assumption)
    Equity risk premium6.50%Market assumption
    Beta0.954Reported 0.931, pulled toward 1.0 (Blume)
    Cost of equity10.40%Risk-free + beta x equity risk premium
    Cost of debt4.20%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationEUR 7.7bn60.3% of capital
    Total debtEUR 5.1bn39.7% of capital, book value as a proxy
    Tax rate4.1%Effective, capped at statutory
    WACC7.87%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 shareEUR 5.96

    70% of EV

    Forecast FCFF, final year
    EUR 590.2m
    Capex at depreciation, working capital in reinvestment
    EUR 547.7m
    Less reinvestment at g/ROIC (31.8% of NOPAT)
    EUR -173.9m
    Capitalised
    EUR 373.8m
    ROIC (WACC floor)
    7.9%
    Terminal value, undiscounted
    EUR 7.1bn
    Terminal value, discounted
    EUR 5.1bn
    Enterprise value
    EUR 7.2bn
    Less net debt
    EUR 3.8bn
    Equity value
    EUR 3.4bn

    Exit at 20.0x EBITDA

    Value per shareEUR 11.51

    79% of EV

    Terminal value, undiscounted
    EUR 11.5bn
    Terminal value, discounted
    EUR 8.2bn
    Enterprise value
    EUR 10.3bn
    Less net debt
    EUR 3.8bn
    Equity value
    EUR 6.5bn

    Spread between methods: 64%.

    Sensitivity

    Value per share (EUR) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    5.87%10.1410.2110.2710.3410.40
    6.87%7.707.757.807.857.91
    7.87%5.875.925.966.006.05
    8.87%4.464.504.534.574.61
    9.87%3.333.363.403.433.46

    Outlined: this model. Green text: above today's price of 12.44. 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 year7.1%16.7%+9.6pp
    Discount rate7.9%5.2%-2.7pp
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    Yahoo Finance and RBA data. General information, not advice. Methodology.