DCF Studio

    SFR.AX · ASX · Basic Materials

    Sandfire Resources Limited

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD 13.09

    Market price

    AUD 21.98

    Implied upside

    -40.4%

    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.

    Value Per Share

    Perpetuity growth
    AUD 13.09-40.4%
    Exit multiple
    AUD 51.95+136.4%
    Market price
    AUD 21.98

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m383m766mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayUSD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueUSD 2.1bnUSD 2.7bnUSD 3.5bnUSD 4.4bnUSD 5.7bn+28.1%
    EBITUSD 295.2mUSD 378.2mUSD 484.5mUSD 620.7mUSD 795.2m+28.1%
    NOPATUSD 206.6mUSD 264.7mUSD 339.2mUSD 434.5mUSD 556.7m+28.1%
    Add depreciation & amortisationUSD 597.4mUSD 765.4mUSD 980.6mUSD 1.3bnUSD 1.6bn+28.1%
    Less capital expenditureUSD -506.9mUSD -649.4mUSD -831.9mUSD -1.1bnUSD -1.4bn+28.1%
    Less increase in working capitalUSD -13.0mUSD -16.6mUSD -21.3mUSD -27.3mUSD -34.9m+28.1%
    Free cashflow to firmUSD 284.3mUSD 364.2mUSD 466.5mUSD 597.7mUSD 765.7m+28.1%
    Discount factor0.93740.82380.72390.63620.5591-
    Present valueUSD 266.5mUSD 300.0mUSD 337.8mUSD 380.3mUSD 428.1m+12.6%
    Present Value Of The ForecastUSD 1.7bn

    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
    Beta1.413Reported 1.616, pulled toward 1.0 (Blume)
    Cost of equity13.82%Risk-free + beta x equity risk premium
    Cost of debt7.35%Implied cost of debt of 16.1% is not a credible funding cost, so risk-free + 2bp is assumed instead. Interest expense and reported debt are measuring different things - common for banks, whose interest expense includes deposits that total debt excludes.
    Market capitalisationUSD 10.3bn99.6% of capital
    Total debtUSD 36.4m0.4% of capital, book value as a proxy
    Tax rate30.0%Effective, capped at statutory
    WACC13.79%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 9.32

    57% of EV

    Forecast FCFF, final year
    USD 765.7m
    Capex at depreciation, working capital in reinvestment
    USD 556.7m
    Less reinvestment at g/ROIC (18.1% of NOPAT)
    USD -100.9m
    Capitalised
    USD 455.8m
    ROIC (WACC floor)
    13.8%
    Terminal value, undiscounted
    USD 4.1bn
    Terminal value, discounted
    USD 2.3bn
    Enterprise value
    USD 4.0bn
    Less net debt
    USD -316.2m
    Equity value
    USD 4.3bn

    Exit at 11.3x EBITDA

    Value per shareUSD 37.00

    90% of EV

    Terminal value, undiscounted
    USD 27.2bn
    Terminal value, discounted
    USD 15.2bn
    Enterprise value
    USD 16.9bn
    Less net debt
    USD -316.2m
    Equity value
    USD 17.2bn

    Spread between methods: 119%.

    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%
    11.79%10.7710.8010.8310.8610.89
    12.79%9.969.9910.0210.0410.07
    13.79%9.279.309.329.359.37
    14.79%8.688.708.728.748.76
    15.79%8.168.188.208.228.24

    Outlined: this model. Green text: above today's price of 15.65. 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 year28.1%45.6%+17.5pp
    EBIT margin14.0%25.6%+11.6pp
    Discount rate13.8%8.1%-5.7pp
    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.