DCF Studio

    NWL.AX · ASX · Technology

    Netwealth Group Limited

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD 11.30

    Market price

    AUD 18.86

    Implied upside

    -40.1%

    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.
    AdjustedCapital expenditure runs at 2.7% of revenue against depreciation of 1.8%. 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.

    Current EV/EBITDA of 53.2x 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 11.30-40.1%
    Exit multiple
    AUD 24.73+31.1%
    Market price
    AUD 18.86

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (AUD). Outflows negative.

    0m151m302mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayAUD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueAUD 452.0mAUD 549.6mAUD 668.4mAUD 812.8mAUD 988.4m+21.6%
    EBITAUD 187.3mAUD 227.7mAUD 276.9mAUD 336.8mAUD 409.5m+21.6%
    NOPATAUD 134.3mAUD 163.3mAUD 198.5mAUD 241.4mAUD 293.6m+21.6%
    Add depreciation & amortisationAUD 8.0mAUD 9.8mAUD 11.9mAUD 14.4mAUD 17.6m+21.6%
    Less capital expenditureAUD -12.3mAUD -14.9mAUD -18.2mAUD -22.1mAUD -26.9m+21.6%
    Less increase in working capitalAUD 8.1mAUD 9.9mAUD 12.0mAUD 14.6mAUD 17.8m-21.6%
    Free cashflow to firmAUD 138.2mAUD 168.0mAUD 204.3mAUD 248.4mAUD 302.1m+21.6%
    Discount factor0.94650.84790.75960.68050.6096-
    Present valueAUD 130.8mAUD 142.5mAUD 155.2mAUD 169.1mAUD 184.2m+8.9%
    Present Value Of The ForecastAUD 781.7m

    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
    Beta1.062Reported 1.093, pulled toward 1.0 (Blume)
    Cost of equity11.72%Risk-free + beta x equity risk premium
    Cost of debt7.35%Assumed: risk-free + 2bp (interest expense not reported)
    Market capitalisationAUD 4.6bn98.5% of capital
    Total debtAUD 70.4m1.5% of capital, book value as a proxy
    Tax rate28.3%Effective, capped at statutory
    WACC11.63%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 11.30

    71% of EV

    Forecast FCFF, final year
    AUD 302.1m
    Capex at depreciation, working capital in reinvestment
    AUD 293.6m
    Less reinvestment at g/ROIC (4.9% of NOPAT)
    AUD -14.3m
    Capitalised
    AUD 279.3m
    ROIC (reported)
    51.2%
    Terminal value, undiscounted
    AUD 3.1bn
    Terminal value, discounted
    AUD 1.9bn
    Enterprise value
    AUD 2.7bn
    Less net debt
    AUD -79.0m
    Equity value
    AUD 2.8bn

    Exit at 20.0x EBITDA

    Value per shareAUD 24.73

    87% of EV

    Terminal value, undiscounted
    AUD 8.5bn
    Terminal value, discounted
    AUD 5.2bn
    Enterprise value
    AUD 6.0bn
    Less net debt
    AUD -79.0m
    Equity value
    AUD 6.1bn

    Spread between methods: 75%.

    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%
    9.63%13.2613.8414.4915.2516.12
    10.63%11.7912.2212.7013.2413.86
    11.63%10.6010.9311.3011.7112.16
    12.63%9.649.9010.1810.4910.84
    13.63%8.839.049.269.519.77

    Outlined: this model. Green text: above today's price of 18.86. 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 year21.6%36.3%+14.7pp
    EBIT margin41.4%70.2%+28.8pp
    Discount rate11.6%8.0%-3.6pp
    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.