DCF Studio

    NAB.AX · ASX · Financial Services

    National Australia Bank Limited

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD 37.02

    Market price

    AUD 38.47

    Implied upside

    -3.8%

    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.
    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.

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

    Value Per Share

    Perpetuity growth
    AUD 37.02-3.8%
    Exit multiple
    AUD 17.80-53.7%
    Market price
    AUD 38.47

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (AUD). Outflows negative.

    0bn6bn13bnFY25FY26FY27FY28FY29
    Nominal FCFFDiscounted to todayAUD
    LineFY25FY26FY27FY28FY29CAGR
    RevenueAUD 22.1bnAUD 23.8bnAUD 25.5bnAUD 27.4bnAUD 29.4bn+7.3%
    EBITAUD 11.4bnAUD 12.2bnAUD 13.1bnAUD 14.1bnAUD 15.1bn+7.3%
    NOPATAUD 8.2bnAUD 8.8bnAUD 9.4bnAUD 10.1bnAUD 10.8bn+7.3%
    Add depreciation & amortisationAUD 1.4bnAUD 1.5bnAUD 1.6bnAUD 1.7bnAUD 1.8bn+7.3%
    Less capital expenditureAUD -1.3bnAUD -1.4bnAUD -1.5bnAUD -1.6bnAUD -1.7bn+7.3%
    Less increase in working capitalAUD 1.5bnAUD 1.6bnAUD 1.7bnAUD 1.9bnAUD 2.0bn-7.3%
    Free cashflow to firmAUD 9.7bnAUD 10.4bnAUD 11.2bnAUD 12.0bnAUD 12.9bn+7.3%
    Discount factor0.97470.92600.87970.83580.7940-
    Present valueAUD 9.5bnAUD 9.7bnAUD 9.9bnAUD 10.1bnAUD 10.3bn+2.0%
    Present Value Of The ForecastAUD 49.3bn

    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
    Beta0.807Reported 0.712, pulled toward 1.0 (Blume)
    Cost of equity10.19%Risk-free + beta x equity risk premium
    Cost of debt7.35%Implied cost of debt of 20.2% is not a credible funding cost, so risk-free + 2bp is assumed instead. Interest expense and reported debt are measuring different things - common for banks, whose interest expense includes deposits that total debt excludes.
    Market capitalisationAUD 0.000.0% of capital
    Total debtAUD 214.3bn100.0% of capital, book value as a proxy
    Tax rate28.4%Effective, capped at statutory
    WACC5.26%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 37.02

    77% of EV

    Forecast FCFF, final year
    AUD 12.9bn
    Capex at depreciation, working capital in reinvestment
    AUD 10.8bn
    Less reinvestment at g/ROIC (47.5% of NOPAT)
    AUD -5.2bn
    Capitalised
    AUD 5.7bn
    ROIC (WACC floor)
    5.3%
    Terminal value, undiscounted
    AUD 211.3bn
    Terminal value, discounted
    AUD 167.8bn
    Enterprise value
    AUD 217.1bn
    Less net debt
    AUD 101.4bn
    Equity value
    AUD 115.7bn

    Exit at 8.0x EBITDA

    Value per shareAUD 17.80

    69% of EV

    Terminal value, undiscounted
    AUD 135.6bn
    Terminal value, discounted
    AUD 107.7bn
    Enterprise value
    AUD 157.0bn
    Less net debt
    AUD 101.4bn
    Equity value
    AUD 55.6bn

    Spread between methods: 70%.

    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%
    3.26%77.6478.1078.56103.23—
    4.26%52.2552.5852.9253.2653.60
    5.26%36.5036.7637.0237.2837.55
    6.26%25.7725.9826.2026.4126.62
    7.26%18.0018.1718.3518.5218.69

    Outlined: this model. Green text: above today's price of 38.47. 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 year7.3%7.8%+0.4pp
    EBIT margin51.5%52.6%+1.1pp
    Discount rate5.3%5.1%-0.1pp
    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.