DCF Studio

    OCA.NZ · NZE · Healthcare

    Oceania Healthcare Limited

    Also onConsensus Drift

    Implied value per share

    NZD -0.85

    Market price

    NZD 0.73

    Implied upside

    -216.6%

    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.
    AdjustedFree cashflow is negative in at least one forecast year, so terminal value carries most of the valuation.
    AdjustedCapital expenditure runs at 16.0% of revenue against depreciation of 7.9%. 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: NZD assumption - no free live source available for this market.

    Current EV/EBITDA of 120.4x 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
    NZD -0.85-216.6%
    Exit multiple
    NZD -0.62-184.7%
    Market price
    NZD 0.73

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (NZD). Outflows negative.

    -26005556-130027780FY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayNZD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueNZD 274.1mNZD 281.3mNZD 288.7mNZD 296.3mNZD 304.1m+2.6%
    EBITNZD -11.8mNZD -12.1mNZD -12.4mNZD -12.7mNZD -13.1m-2.6%
    NOPATNZD -8.5mNZD -8.7mNZD -8.9mNZD -9.2mNZD -9.4m-2.6%
    Add depreciation & amortisationNZD 21.8mNZD 22.4mNZD 22.9mNZD 23.5mNZD 24.2m+2.6%
    Less capital expenditureNZD -43.8mNZD -44.9mNZD -46.1mNZD -47.3mNZD -48.5m+2.6%
    Less increase in working capitalNZD 7.0mNZD 7.2mNZD 7.4mNZD 7.6mNZD 7.8m-2.6%
    Free cashflow to firmNZD -23.4mNZD -24.1mNZD -24.7mNZD -25.3mNZD -26.0m-2.6%
    Discount factor0.97000.91280.85890.80820.7605-
    Present valueNZD -22.7mNZD -22.0mNZD -21.2mNZD -20.5mNZD -19.8m+3.4%
    Present Value Of The ForecastNZD -106.2m

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.50%NZD assumption - no free live source available for this market (assumption)
    Equity risk premium6.50%Market assumption
    Beta0.738Reported 0.609, pulled toward 1.0 (Blume)
    Cost of equity9.30%Risk-free + beta x equity risk premium
    Cost of debt4.50%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationNZD 528.7m50.1% of capital
    Total debtNZD 526.8m49.9% of capital, book value as a proxy
    Tax rate28.0%Effective, capped at statutory
    WACC6.27%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 shareNZD -0.85

    0% of EV

    Terminal value, undiscounted
    NZD 0.00
    Terminal value, discounted
    NZD 0.00
    Enterprise value
    NZD -106.2m
    Less net debt
    NZD 510.2m
    Equity value
    NZD -616.4m

    Exit at 20.0x EBITDA

    Value per shareNZD -0.62

    270% of EV

    Terminal value, undiscounted
    NZD 221.9m
    Terminal value, discounted
    NZD 168.7m
    Enterprise value
    NZD 62.6m
    Less net debt
    NZD 510.2m
    Equity value
    NZD -447.7m

    Sensitivity

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

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    4.27%-0.86-0.86-0.86-0.86-0.86
    5.27%-0.85-0.85-0.85-0.85-0.85
    6.27%-0.85-0.85-0.85-0.85-0.85
    7.27%-0.85-0.85-0.85-0.85-0.85
    8.27%-0.84-0.84-0.84-0.84-0.84

    Outlined: this model. Green text: above today's price of 0.73. 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 year2.6%51.7%+49.0pp
    EBIT margin-4.3%30.6%+34.9pp
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    Yahoo Finance and RBA data. General information, not advice. Methodology.