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    RDX.AX · ASX · Basic Materials

    Redox Limited

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD 3.49

    Market price

    AUD 3.50

    Implied upside

    -0.3%

    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.
    AdjustedReported capital expenditure averages just 0.31% 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 1.00% 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.
    AdjustedBeta of -0.444 is not usable in a cost of equity. Clamped to 0.30.
    AdjustedCapital expenditure runs at 1.0% of revenue against depreciation of 0.8%. 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.

    Value Per Share

    Perpetuity growth
    AUD 3.49-0.3%
    Exit multiple
    AUD 3.97+13.4%
    Market price
    AUD 3.50

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (AUD). Outflows negative.

    0m46m91mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayAUD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueAUD 1.4bnAUD 1.4bnAUD 1.4bnAUD 1.4bnAUD 1.5bn+1.9%
    EBITAUD 132.2mAUD 134.7mAUD 137.3mAUD 139.9mAUD 142.5m+1.9%
    NOPATAUD 92.6mAUD 94.3mAUD 96.1mAUD 97.9mAUD 99.8m+1.9%
    Add depreciation & amortisationAUD 10.4mAUD 10.6mAUD 10.8mAUD 11.0mAUD 11.2m+1.9%
    Less capital expenditureAUD -13.6mAUD -13.8mAUD -14.1mAUD -14.3mAUD -14.6m+1.9%
    Less increase in working capitalAUD -5.0mAUD -5.0mAUD -5.1mAUD -5.2mAUD -5.3m+1.9%
    Free cashflow to firmAUD 84.5mAUD 86.1mAUD 87.7mAUD 89.4mAUD 91.1m+1.9%
    Discount factor0.96640.90270.84310.78740.7355-
    Present valueAUD 81.7mAUD 77.7mAUD 74.0mAUD 70.4mAUD 67.0m-4.8%
    Present Value Of The ForecastAUD 370.7m

    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
    Beta0.300Clamped from a reported -0.444
    Cost of equity7.15%Risk-free + beta x equity risk premium
    Cost of debt5.35%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationAUD 1.8bn97.6% of capital
    Total debtAUD 45.5m2.4% of capital, book value as a proxy
    Tax rate30.0%Effective, capped at statutory
    WACC7.07%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 3.49

    79% of EV

    Forecast FCFF, final year
    AUD 91.1m
    Capex at depreciation, working capital in reinvestment
    AUD 99.8m
    Less reinvestment at g/ROIC (15.8% of NOPAT)
    AUD -15.7m
    Capitalised
    AUD 84.0m
    ROIC (reported)
    15.9%
    Terminal value, undiscounted
    AUD 1.9bn
    Terminal value, discounted
    AUD 1.4bn
    Enterprise value
    AUD 1.8bn
    Less net debt
    AUD -77.2m
    Equity value
    AUD 1.8bn

    Exit at 14.5x EBITDA

    Value per shareAUD 3.97

    82% of EV

    Terminal value, undiscounted
    AUD 2.2bn
    Terminal value, discounted
    AUD 1.6bn
    Enterprise value
    AUD 2.0bn
    Less net debt
    AUD -77.2m
    Equity value
    AUD 2.1bn

    Spread between methods: 13%.

    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%
    5.07%4.805.306.007.038.71
    6.07%3.804.064.394.835.44
    7.07%3.163.313.493.724.01
    8.07%2.712.802.913.043.20
    9.07%2.382.442.512.592.68

    Outlined: this model. Green text: above today's price of 3.50. 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 year1.9%2.0%+0.1pp
    EBIT margin9.8%9.8%+0.0pp
    Discount rate7.1%7.1%-0.0pp
    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.