DCF Studio

    RGN.AX · ASX · Real Estate

    Region Group

    Also onConsensus Drift

    Implied value per share

    AUD 1.70

    Market price

    AUD 2.23

    Implied upside

    -23.8%

    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 0.00% 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 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.
    AdjustedCapital expenditure runs at 1.0% of revenue against depreciation of 0.0%. 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 1.70-23.8%
    Exit multiple
    AUD 2.29+2.5%
    Market price
    AUD 2.23

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (AUD). Outflows negative.

    0m119m238mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayAUD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueAUD 398.8mAUD 407.6mAUD 416.7mAUD 426.0mAUD 435.4m+2.2%
    EBITAUD 228.4mAUD 233.5mAUD 238.7mAUD 244.0mAUD 249.4m+2.2%
    NOPATAUD 227.7mAUD 232.8mAUD 238.0mAUD 243.3mAUD 248.7m+2.2%
    Add depreciation & amortisationAUD 0.00AUD 0.00AUD 0.00AUD 0.00AUD 0.00-
    Less capital expenditureAUD -4.0mAUD -4.1mAUD -4.2mAUD -4.3mAUD -4.4m+2.2%
    Less increase in working capitalAUD -5.3mAUD -5.5mAUD -5.6mAUD -5.7mAUD -5.8m+2.2%
    Free cashflow to firmAUD 218.4mAUD 223.3mAUD 228.2mAUD 233.3mAUD 238.5m+2.2%
    Discount factor0.96210.89050.82420.76290.7061-
    Present valueAUD 210.1mAUD 198.8mAUD 188.1mAUD 178.0mAUD 168.4m-5.4%
    Present Value Of The ForecastAUD 943.4m

    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
    Beta0.736Reported 0.606, pulled toward 1.0 (Blume)
    Cost of equity9.76%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 2.6bn61.1% of capital
    Total debtAUD 1.6bn38.9% of capital, book value as a proxy
    Tax rate0.3%Effective, capped at statutory
    WACC8.04%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 1.70

    74% of EV

    Forecast FCFF, final year
    AUD 238.5m
    Capex at depreciation, working capital in reinvestment
    AUD 248.7m
    Less reinvestment at g/ROIC (18.5% of NOPAT)
    AUD -45.9m
    Capitalised
    AUD 202.8m
    ROIC (reported)
    13.5%
    Terminal value, undiscounted
    AUD 3.8bn
    Terminal value, discounted
    AUD 2.6bn
    Enterprise value
    AUD 3.6bn
    Less net debt
    AUD 1.6bn
    Equity value
    AUD 2.0bn

    Exit at 18.9x EBITDA

    Value per shareAUD 2.29

    78% of EV

    Terminal value, undiscounted
    AUD 4.7bn
    Terminal value, discounted
    AUD 3.3bn
    Enterprise value
    AUD 4.3bn
    Less net debt
    AUD 1.6bn
    Equity value
    AUD 2.7bn

    Spread between methods: 29%.

    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%
    6.04%2.722.993.333.794.42
    7.04%2.002.152.342.562.85
    8.04%1.511.591.701.821.97
    9.04%1.141.191.261.331.41
    10.04%0.860.890.930.971.02

    Outlined: this model. Green text: above today's price of 2.23. 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 year2.2%6.2%+3.9pp
    EBIT margin57.3%67.0%+9.7pp
    Discount rate8.0%7.2%-0.9pp
    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.