DCF Studio

    SCL.NZ · NZE · Consumer Defensive

    Scales Corporation Limited

    Also onConsensus Drift

    Implied value per share

    NZD 10.73

    Market price

    NZD 6.70

    Implied upside

    +60.1%

    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.
    AdjustedConsensus rests on as few as 2 analyst estimate(s).
    AdjustedCapital expenditure runs at 4.3% of revenue against depreciation of 3.4%. 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.
    NoteRisk-free rate is an assumption: NZD assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    NZD 10.73+60.1%
    Exit multiple
    NZD 9.52+42.0%
    Market price
    NZD 6.70

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (NZD). Outflows negative.

    0m19m39mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayNZD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueNZD 1.0bnNZD 1.2bnNZD 1.3bnNZD 1.5bnNZD 1.7bn+13.8%
    EBITNZD 86.9mNZD 98.9mNZD 112.6mNZD 128.1mNZD 145.9m+13.8%
    NOPATNZD 72.3mNZD 82.4mNZD 93.7mNZD 106.7mNZD 121.5m+13.8%
    Add depreciation & amortisationNZD 34.6mNZD 39.3mNZD 44.8mNZD 51.0mNZD 58.0m+13.8%
    Less capital expenditureNZD -44.7mNZD -50.9mNZD -58.0mNZD -66.0mNZD -75.1m+13.8%
    Less increase in working capitalNZD -39.0mNZD -44.4mNZD -50.6mNZD -57.6mNZD -65.5m+13.8%
    Free cashflow to firmNZD 23.2mNZD 26.4mNZD 30.0mNZD 34.2mNZD 38.9m+13.8%
    Discount factor0.96760.90590.84820.79410.7435-
    Present valueNZD 22.4mNZD 23.9mNZD 25.4mNZD 27.1mNZD 28.9m+6.6%
    Present Value Of The ForecastNZD 127.8m

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.50%NZD assumption - no free live source available for this market (assumption)
    Equity risk premium6.50%Market assumption
    Beta0.481Reported 0.225, pulled toward 1.0 (Blume)
    Cost of equity7.62%Risk-free + beta x equity risk premium
    Cost of debt4.50%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationNZD 982.1m78.9% of capital
    Total debtNZD 262.4m21.1% of capital, book value as a proxy
    Tax rate16.7%Effective, capped at statutory
    WACC6.81%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 shareNZD 10.73

    93% of EV

    Forecast FCFF, final year
    NZD 38.9m
    Capex at depreciation, working capital in reinvestment
    NZD 121.5m
    Less reinvestment at g/ROIC (25.0% of NOPAT)
    NZD -30.3m
    Capitalised
    NZD 91.2m
    ROIC (reported)
    10.0%
    Terminal value, undiscounted
    NZD 2.2bn
    Terminal value, discounted
    NZD 1.6bn
    Enterprise value
    NZD 1.7bn
    Less net debt
    NZD 197.7m
    Equity value
    NZD 1.5bn

    Exit at 9.5x EBITDA

    Value per shareNZD 9.52

    92% of EV

    Terminal value, undiscounted
    NZD 1.9bn
    Terminal value, discounted
    NZD 1.4bn
    Enterprise value
    NZD 1.6bn
    Less net debt
    NZD 197.7m
    Equity value
    NZD 1.4bn

    Spread between methods: 12%.

    Sensitivity

    Value per share (NZD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    4.81%17.4019.4422.3526.8534.77
    5.81%12.6613.5814.7716.3718.65
    6.81%9.7210.1810.7311.4112.30
    7.81%7.737.968.228.538.91
    8.81%6.296.406.526.656.80

    Outlined: this model. Green text: above today's price of 6.70. 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 year13.8%2.2%-11.6pp
    EBIT margin8.4%6.0%-2.4pp
    Discount rate6.8%8.7%+1.9pp
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    Yahoo Finance and RBA data. General information, not advice. Methodology.