DCF Studio

    SCG.AX · ASX · Real Estate

    Scentre Group

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD 1.67

    Market price

    AUD 3.44

    Implied upside

    -51.4%

    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.
    AdjustedCapital expenditure runs at 8.9% of revenue against depreciation of 0.5%. 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 1.67-51.4%
    Exit multiple
    AUD 3.35-2.6%
    Market price
    AUD 3.44

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (AUD). Outflows negative.

    0bn1bn2bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayAUD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueAUD 2.8bnAUD 2.8bnAUD 2.9bnAUD 3.0bnAUD 3.1bn+3.0%
    EBITAUD 1.8bnAUD 1.9bnAUD 1.9bnAUD 2.0bnAUD 2.0bn+3.0%
    NOPATAUD 1.7bnAUD 1.8bnAUD 1.8bnAUD 1.9bnAUD 1.9bn+3.0%
    Add depreciation & amortisationAUD 14.5mAUD 15.0mAUD 15.4mAUD 15.9mAUD 16.4m+3.0%
    Less capital expenditureAUD -246.3mAUD -253.6mAUD -261.2mAUD -269.0mAUD -277.0m+3.0%
    Less increase in working capitalAUD -17.7mAUD -18.2mAUD -18.7mAUD -19.3mAUD -19.9m+3.0%
    Free cashflow to firmAUD 1.5bnAUD 1.5bnAUD 1.6bnAUD 1.6bnAUD 1.6bn+3.0%
    Discount factor0.96120.88810.82060.75820.7005-
    Present valueAUD 1.4bnAUD 1.3bnAUD 1.3bnAUD 1.2bnAUD 1.2bn-4.8%
    Present Value Of The ForecastAUD 6.4bn

    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
    Beta0.918Reported 0.877, pulled toward 1.0 (Blume)
    Cost of equity10.85%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 18.0bn54.5% of capital
    Total debtAUD 15.0bn45.5% of capital, book value as a proxy
    Tax rate4.8%Effective, capped at statutory
    WACC8.23%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 1.67

    72% of EV

    Forecast FCFF, final year
    AUD 1.6bn
    Capex at depreciation, working capital in reinvestment
    AUD 1.9bn
    Less reinvestment at g/ROIC (30.4% of NOPAT)
    AUD -586.3m
    Capitalised
    AUD 1.3bn
    ROIC (WACC floor)
    8.2%
    Terminal value, undiscounted
    AUD 24.0bn
    Terminal value, discounted
    AUD 16.8bn
    Enterprise value
    AUD 23.2bn
    Less net debt
    AUD 14.5bn
    Equity value
    AUD 8.7bn

    Exit at 17.9x EBITDA

    Value per shareAUD 3.35

    80% of EV

    Terminal value, undiscounted
    AUD 36.6bn
    Terminal value, discounted
    AUD 25.6bn
    Enterprise value
    AUD 32.0bn
    Less net debt
    AUD 14.5bn
    Equity value
    AUD 17.5bn

    Spread between methods: 67%.

    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%
    6.23%3.093.113.133.163.18
    7.23%2.262.282.302.322.34
    8.23%1.641.661.671.691.70
    9.23%1.151.171.181.191.21
    10.23%0.760.770.780.800.81

    Outlined: this model. Green text: above today's price of 3.44. 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 year3.0%11.2%+8.2pp
    EBIT margin65.2%90.0%+24.8pp
    Discount rate8.2%5.9%-2.3pp
    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.