DCF Studio

    PLD · NYQ · Real Estate

    Prologis, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 22.66

    Market price

    USD 134.84

    Implied upside

    -83.2%

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

    AdjustedReported capital expenditure averages just 0.00% 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 30.66% 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.

    Current EV/EBITDA of 27.4x 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
    USD 22.66-83.2%
    Exit multiple
    USD 137.07+1.7%
    Market price
    USD 134.84

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn3bn5bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 10.0bnUSD 11.4bnUSD 12.9bnUSD 14.7bnUSD 16.7bn+13.7%
    EBITUSD 3.8bnUSD 4.4bnUSD 5.0bnUSD 5.6bnUSD 6.4bn+13.7%
    NOPATUSD 3.6bnUSD 4.2bnUSD 4.7bnUSD 5.4bnUSD 6.1bn+13.7%
    Add depreciation & amortisationUSD 3.1bnUSD 3.5bnUSD 4.0bnUSD 4.5bnUSD 5.1bn+13.7%
    Less capital expenditureUSD -3.1bnUSD -3.5bnUSD -4.0bnUSD -4.5bnUSD -5.1bn+13.7%
    Less increase in working capitalUSD -400.7mUSD -455.7mUSD -518.3mUSD -589.6mUSD -670.6m+13.7%
    Free cashflow to firmUSD 3.2bnUSD 3.7bnUSD 4.2bnUSD 4.8bnUSD 5.4bn+13.7%
    Discount factor0.95270.86460.78470.71210.6463-
    Present valueUSD 3.1bnUSD 3.2bnUSD 3.3bnUSD 3.4bnUSD 3.5bn+3.2%
    Present Value Of The ForecastUSD 16.5bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.212Reported 1.316, pulled toward 1.0 (Blume)
    Cost of equity11.66%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 131.1bn78.6% of capital
    Total debtUSD 35.7bn21.4% of capital, book value as a proxy
    Tax rate4.7%Effective, capped at statutory
    WACC10.19%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 22.66

    71% of EV

    Forecast FCFF, final year
    USD 5.4bn
    Capex at depreciation, working capital in reinvestment
    USD 6.1bn
    Less reinvestment at g/ROIC (24.5% of NOPAT)
    USD -1.5bn
    Capitalised
    USD 4.6bn
    ROIC (WACC floor)
    10.2%
    Terminal value, undiscounted
    USD 61.5bn
    Terminal value, discounted
    USD 39.7bn
    Enterprise value
    USD 56.2bn
    Less net debt
    USD 34.5bn
    Equity value
    USD 21.7bn

    Exit at 20.0x EBITDA

    Value per shareUSD 137.07

    90% of EV

    Terminal value, undiscounted
    USD 230.8bn
    Terminal value, discounted
    USD 149.2bn
    Enterprise value
    USD 165.7bn
    Less net debt
    USD 34.5bn
    Equity value
    USD 131.2bn

    Spread between methods: 143%.

    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%
    8.19%37.5337.8038.0838.3538.62
    9.19%29.0529.2829.5229.7529.99
    10.19%22.2622.4622.6622.8623.07
    11.19%16.7016.8717.0517.2317.41
    12.19%12.0712.2212.3812.5412.69

    Outlined: this model. Green text: above today's price of 134.84. 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 year13.7%45.0%+31.3pp
    Discount rate10.2%3.7%-6.5pp
    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.