DCF Studio

    MTS.AX · ASX · Consumer Defensive

    Metcash Limited

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD 24.18

    Market price

    AUD 2.82

    Implied upside

    +757.5%

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

    Wrong toolThis line has no market capitalisation, which means it is not ordinary shares - typically a hybrid, preference line, note or unlisted stub. A discounted cashflow values a claim on the whole business, so applying it here attributes all of the group’s revenue to a security that has no such claim. Its value is its coupon and call schedule. Look up the ordinary line instead.
    AdjustedSome line items were not reported and have been derived. Each one is labelled in the workings below.
    AdjustedReported capital expenditure averages just 0.92% 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 1.30% 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.

    No usable EV/EBITDA (EBITDA is not positive), so the exit multiple falls back to 8x.

    Value Per Share

    Perpetuity growth
    AUD 24.18+757.5%
    Exit multiple
    AUD 7.42+163.1%
    Market price
    AUD 2.82

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (AUD). Outflows negative.

    0m484m969mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayAUD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueAUD 17.9bnAUD 18.5bnAUD 19.1bnAUD 19.7bnAUD 20.3bn+3.2%
    EBITAUD 534.8mAUD 551.7mAUD 569.2mAUD 587.2mAUD 605.9m+3.2%
    NOPATAUD 380.6mAUD 392.7mAUD 405.1mAUD 418.0mAUD 431.2m+3.2%
    Add depreciation & amortisationAUD 232.1mAUD 239.5mAUD 247.1mAUD 254.9mAUD 263.0m+3.2%
    Less capital expenditureAUD -232.1mAUD -239.5mAUD -247.1mAUD -254.9mAUD -263.0m+3.2%
    Less increase in working capitalAUD 474.3mAUD 489.3mAUD 504.8mAUD 520.8mAUD 537.3m-3.2%
    Free cashflow to firmAUD 854.9mAUD 882.0mAUD 910.0mAUD 938.8mAUD 968.6m+3.2%
    Discount factor0.98150.94550.91080.87740.8453-
    Present valueAUD 839.1mAUD 833.9mAUD 828.8mAUD 823.7mAUD 818.7m-0.6%
    Present Value Of The ForecastAUD 4.1bn

    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
    Beta0.610Reported 0.418, pulled toward 1.0 (Blume)
    Cost of equity9.01%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 0.000.0% of capital
    Total debtAUD 1.9bn100.0% of capital, book value as a proxy
    Tax rate28.8%Effective, capped at statutory
    WACC3.81%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 24.18

    85% of EV

    Forecast FCFF, final year
    AUD 968.6m
    Capex at depreciation, working capital in reinvestment
    AUD 431.2m
    Less reinvestment at g/ROIC (14.8% of NOPAT)
    AUD -63.8m
    Capitalised
    AUD 367.4m
    ROIC (reported)
    16.9%
    Terminal value, undiscounted
    AUD 28.8bn
    Terminal value, discounted
    AUD 24.4bn
    Enterprise value
    AUD 28.5bn
    Less net debt
    AUD 1.8bn
    Equity value
    AUD 26.7bn

    Exit at 8.0x EBITDA

    Value per shareAUD 7.42

    59% of EV

    Terminal value, undiscounted
    AUD 7.0bn
    Terminal value, discounted
    AUD 5.9bn
    Enterprise value
    AUD 10.0bn
    Less net debt
    AUD 1.8bn
    Equity value
    AUD 8.2bn

    Spread between methods: 106%.

    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%
    1.81%111.11————
    2.81%26.6240.67100.53——
    3.81%15.3418.5424.1836.8090.56
    4.81%10.8612.1513.9916.8521.88
    5.81%8.439.099.9311.0812.71

    Outlined: this model. Green text: above today's price of 2.82. 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 year3.2%-12.7%-15.9pp
    EBIT margin3.0%0.3%-2.7pp
    Discount rate3.8%14.7%+10.8pp
    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.