DCF Studio

    SGH.AX · ASX

    SGH Limited

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD 11.61

    Market price

    AUD 36.91

    Implied upside

    -68.5%

    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 6.8% of revenue against depreciation of 4.9%. 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 11.61-68.5%
    Exit multiple
    AUD 29.45-20.2%
    Market price
    AUD 36.91

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (AUD). Outflows negative.

    0m307m614mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayAUD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueAUD 10.9bnAUD 11.3bnAUD 11.6bnAUD 12.0bnAUD 12.4bn+3.2%
    EBITAUD 1.3bnAUD 1.3bnAUD 1.3bnAUD 1.4bnAUD 1.4bn+3.2%
    NOPATAUD 877.8mAUD 906.1mAUD 935.4mAUD 965.5mAUD 996.7m+3.2%
    Add depreciation & amortisationAUD 538.1mAUD 555.4mAUD 573.4mAUD 591.9mAUD 611.0m+3.2%
    Less capital expenditureAUD -743.4mAUD -767.4mAUD -792.2mAUD -817.8mAUD -844.2m+3.2%
    Less increase in working capitalAUD -131.3mAUD -135.5mAUD -139.9mAUD -144.4mAUD -149.0m+3.2%
    Free cashflow to firmAUD 541.2mAUD 558.6mAUD 576.6mAUD 595.3mAUD 614.5m+3.2%
    Discount factor0.95600.87360.79830.72950.6667-
    Present valueAUD 517.3mAUD 488.0mAUD 460.4mAUD 434.3mAUD 409.7m-5.7%
    Present Value Of The ForecastAUD 2.3bn

    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
    Beta1.000As reported
    Cost of equity11.35%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 15.0bn74.8% of capital
    Total debtAUD 5.1bn25.2% of capital, book value as a proxy
    Tax rate30.0%Effective, capped at statutory
    WACC9.43%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 11.61

    76% of EV

    Forecast FCFF, final year
    AUD 614.5m
    Capex at depreciation, working capital in reinvestment
    AUD 996.7m
    Less reinvestment at g/ROIC (26.2% of NOPAT)
    AUD -261.3m
    Capitalised
    AUD 735.4m
    ROIC (reported)
    9.5%
    Terminal value, undiscounted
    AUD 10.9bn
    Terminal value, discounted
    AUD 7.3bn
    Enterprise value
    AUD 9.6bn
    Less net debt
    AUD 4.8bn
    Equity value
    AUD 4.7bn

    Exit at 10.7x EBITDA

    Value per shareAUD 29.45

    86% of EV

    Terminal value, undiscounted
    AUD 21.8bn
    Terminal value, discounted
    AUD 14.5bn
    Enterprise value
    AUD 16.8bn
    Less net debt
    AUD 4.8bn
    Equity value
    AUD 12.0bn

    Spread between methods: 87%.

    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%
    7.43%19.6220.3621.2422.3023.60
    8.43%14.9115.2415.6116.0316.52
    9.43%11.4011.5111.6111.7211.83
    10.43%8.939.009.089.159.23
    11.43%6.936.997.067.137.19

    Outlined: this model. Green text: above today's price of 36.91. 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 year3.2%29.2%+25.9pp
    EBIT margin11.5%22.2%+10.8pp
    Discount rate9.4%5.9%-3.6pp
    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.