DCF Studio

    PDN.AX · ASX · Energy

    Paladin Energy Ltd

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD -0.80

    Market price

    AUD 9.83

    Implied upside

    -108.2%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · USD model at 1.4042

    AdjustedSome line items were not reported and have been derived. Each one is labelled in the workings below.
    AdjustedOnly 3 year(s) of history available to anchor assumptions on.
    AdjustedReports in USD, trades in AUD. Modelled in USD, converted at the end.
    AdjustedFree cashflow is negative in at least one forecast year, so terminal value carries most of the valuation.
    AdjustedCapital expenditure runs at 14.5% of revenue against depreciation of 8.4%. 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 73.1x 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 -0.80-108.2%
    Exit multiple
    AUD 1.39-85.9%
    Market price
    AUD 9.83

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    -202138456-1010692280FY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayUSD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueUSD 456.5mUSD 684.7mUSD 1.0bnUSD 1.5bnUSD 2.3bn+50.0%
    EBITUSD -26.7mUSD -40.1mUSD -60.1mUSD -90.2mUSD -135.2m-50.0%
    NOPATUSD -18.7mUSD -28.1mUSD -42.1mUSD -63.1mUSD -94.7m-50.0%
    Add depreciation & amortisationUSD 38.3mUSD 57.4mUSD 86.2mUSD 129.2mUSD 193.9m+50.0%
    Less capital expenditureUSD -66.3mUSD -99.5mUSD -149.2mUSD -223.8mUSD -335.7m+50.0%
    Less increase in working capitalUSD 6.8mUSD 10.2mUSD 15.3mUSD 22.9mUSD 34.4m-50.0%
    Free cashflow to firmUSD -39.9mUSD -59.9mUSD -89.8mUSD -134.8mUSD -202.1m-50.0%
    Discount factor0.94250.83710.74360.66050.5867-
    Present valueUSD -37.6mUSD -50.1mUSD -66.8mUSD -89.0mUSD -118.6m-33.2%
    Present Value Of The ForecastUSD -362.2m

    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
    Beta1.249Reported 1.372, pulled toward 1.0 (Blume)
    Cost of equity12.84%Risk-free + beta x equity risk premium
    Cost of debt7.35%Implied cost of debt of 14.9% 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 capitalisationUSD 4.4bn96.6% of capital
    Total debtUSD 155.0m3.4% of capital, book value as a proxy
    Tax rate30.0%Effective, capped at statutory
    WACC12.58%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 shareUSD -0.57

    0% of EV

    Terminal value, undiscounted
    USD 0.00
    Terminal value, discounted
    USD 0.00
    Enterprise value
    USD -362.2m
    Less net debt
    USD -110.0m
    Equity value
    USD -252.2m

    Exit at 20.0x EBITDA

    Value per shareUSD 0.99

    211% of EV

    Terminal value, undiscounted
    USD 1.2bn
    Terminal value, discounted
    USD 687.7m
    Enterprise value
    USD 325.5m
    Less net debt
    USD -110.0m
    Equity value
    USD 435.5m

    Sensitivity

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

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    10.58%-0.62-0.62-0.62-0.62-0.62
    11.58%-0.59-0.59-0.59-0.59-0.59
    12.58%-0.57-0.57-0.57-0.57-0.57
    13.58%-0.55-0.55-0.55-0.55-0.55
    14.58%-0.53-0.53-0.53-0.53-0.53

    Outlined: this model. Green text: above today's price of 7.00. 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
    EBIT margin-5.9%29.8%+35.7pp
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    Yahoo Finance and RBA data. General information, not advice. Methodology.