DCF Studio

    RWC.AX · ASX · Industrials

    Reliance Worldwide Corporation Limited

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD 1.70

    Market price

    AUD 4.59

    Implied upside

    -62.9%

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

    Current EV/EBITDA of 24.4x 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
    AUD 1.70-62.9%
    Exit multiple
    AUD 5.55+21.0%
    Market price
    AUD 4.59

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m78m155mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayUSD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueUSD 1.3bnUSD 1.3bnUSD 1.4bnUSD 1.4bnUSD 1.4bn+1.6%
    EBITUSD 132.2mUSD 134.3mUSD 136.5mUSD 138.8mUSD 141.0m+1.6%
    NOPATUSD 94.1mUSD 95.6mUSD 97.2mUSD 98.8mUSD 100.4m+1.6%
    Add depreciation & amortisationUSD 66.0mUSD 67.1mUSD 68.2mUSD 69.3mUSD 70.5m+1.6%
    Less capital expenditureUSD -35.8mUSD -36.4mUSD -37.0mUSD -37.6mUSD -38.2m+1.6%
    Less increase in working capitalUSD 21.0mUSD 21.3mUSD 21.7mUSD 22.0mUSD 22.4m-1.6%
    Free cashflow to firmUSD 145.3mUSD 147.7mUSD 150.1mUSD 152.6mUSD 155.0m+1.6%
    Discount factor0.95370.86750.78900.71770.6528-
    Present valueUSD 138.6mUSD 128.1mUSD 118.4mUSD 109.5mUSD 101.2m-7.6%
    Present Value Of The ForecastUSD 595.9m

    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
    Beta0.878Reported 0.818, pulled toward 1.0 (Blume)
    Cost of equity10.62%Risk-free + beta x equity risk premium
    Cost of debt5.35%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 3.4bn90.1% of capital
    Total debtUSD 378.3m9.9% of capital, book value as a proxy
    Tax rate28.8%Effective, capped at statutory
    WACC9.94%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 1.21

    53% of EV

    Forecast FCFF, final year
    USD 155.0m
    Capex at depreciation, working capital in reinvestment
    USD 100.4m
    Less reinvestment at g/ROIC (25.1% of NOPAT)
    USD -25.3m
    Capitalised
    USD 75.2m
    ROIC (WACC floor)
    9.9%
    Terminal value, undiscounted
    USD 1.0bn
    Terminal value, discounted
    USD 675.8m
    Enterprise value
    USD 1.3bn
    Less net debt
    USD 349.7m
    Equity value
    USD 922.0m

    Exit at 20.0x EBITDA

    Value per shareUSD 3.95

    82% of EV

    Terminal value, undiscounted
    USD 4.2bn
    Terminal value, discounted
    USD 2.8bn
    Enterprise value
    USD 3.4bn
    Less net debt
    USD 349.7m
    Equity value
    USD 3.0bn

    Spread between methods: 106%.

    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%
    7.94%1.551.561.571.571.58
    8.94%1.361.371.371.381.38
    9.94%1.201.211.211.221.22
    10.94%1.071.081.081.091.09
    11.94%0.970.970.970.980.98

    Outlined: this model. Green text: above today's price of 3.27. 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 year1.6%14.0%+12.3pp
    EBIT margin10.0%24.6%+14.7pp
    Discount rate9.9%4.6%-5.3pp
    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.