DCF Studio

    QBE.AX · ASX · Financial Services

    QBE Insurance Group Limited

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD 62.91

    Market price

    AUD 23.39

    Implied upside

    +168.9%

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

    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.
    AdjustedReports in USD, trades in AUD. Modelled in USD, converted at the end.

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

    Value Per Share

    Perpetuity growth
    AUD 62.91+168.9%
    Exit multiple
    AUD 32.15+37.4%
    Market price
    AUD 23.39

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn3bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 22.1bnUSD 25.1bnUSD 28.4bnUSD 32.2bnUSD 36.5bn+13.3%
    EBITUSD 2.4bnUSD 2.8bnUSD 3.1bnUSD 3.6bnUSD 4.0bn+13.3%
    NOPATUSD 1.9bnUSD 2.1bnUSD 2.4bnUSD 2.7bnUSD 3.1bn+13.3%
    Add depreciation & amortisationUSD 189.3mUSD 214.5mUSD 243.1mUSD 275.6mUSD 312.3m+13.3%
    Less capital expenditureUSD -235.3mUSD -266.7mUSD -302.2mUSD -342.5mUSD -388.2m+13.3%
    Less increase in working capitalUSD 0.00USD 0.00USD 0.00USD 0.00USD 0.00-
    Free cashflow to firmUSD 1.8bnUSD 2.1bnUSD 2.4bnUSD 2.7bnUSD 3.0bn+13.3%
    Discount factor0.97250.91980.86990.82270.7781-
    Present valueUSD 1.8bnUSD 1.9bnUSD 2.1bnUSD 2.2bnUSD 2.4bn+7.2%
    Present Value Of The ForecastUSD 10.3bn

    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
    Beta0.412Reported 0.123, pulled toward 1.0 (Blume)
    Cost of equity7.82%Risk-free + beta x equity risk premium
    Cost of debt7.44%Interest expense / average total debt
    Market capitalisationUSD 0.000.0% of capital
    Total debtUSD 3.9bn100.0% of capital, book value as a proxy
    Tax rate23.0%Effective, capped at statutory
    WACC5.73%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 44.80

    86% of EV

    Forecast FCFF, final year
    USD 3.0bn
    Capex at depreciation, working capital in reinvestment
    USD 3.1bn
    Less reinvestment at g/ROIC (20.6% of NOPAT)
    USD -639.4m
    Capitalised
    USD 2.5bn
    ROIC (reported)
    12.1%
    Terminal value, undiscounted
    USD 78.1bn
    Terminal value, discounted
    USD 60.8bn
    Enterprise value
    USD 71.1bn
    Less net debt
    USD 2.1bn
    Equity value
    USD 69.0bn

    Exit at 8.0x EBITDA

    Value per shareUSD 22.89

    72% of EV

    Terminal value, undiscounted
    USD 34.7bn
    Terminal value, discounted
    USD 27.0bn
    Enterprise value
    USD 37.3bn
    Less net debt
    USD 2.1bn
    Equity value
    USD 35.3bn

    Spread between methods: 65%.

    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%
    3.74%73.7189.60118.30185.96541.24
    4.74%50.5256.5065.1178.66103.12
    5.73%38.2941.1144.8049.8157.02
    6.73%30.7332.2334.0736.3939.41
    7.74%25.5926.4427.4428.6330.10

    Outlined: this model. Green text: above today's price of 16.66. 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 year13.3%-7.5%-20.8pp
    EBIT margin11.0%4.3%-6.7pp
    Discount rate5.7%11.0%+5.2pp
    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.