DCF Studio

    SGRO.L · LSE · Real Estate

    SEGRO Plc

    Also onConsensus Drift

    Implied value per share

    GBp 62.09

    Market price

    GBp 936.80

    Implied upside

    -93.4%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Wrong toolThis model values the shares at 6.6% of the market price. A gap that size is a modelling failure rather than a view - most often an unusable beta, a currency or units mismatch, or a cashflow base that does not represent the business. Read the figures below as diagnostics, not as a call.
    AdjustedConsensus rests on as few as 2 analyst estimate(s).
    AdjustedCapital expenditure runs at 3.2% of revenue against depreciation of 1.4%. 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: GBP assumption - no free live source available for this market.

    Current EV/EBITDA of 35.3x 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
    GBp 62.09-93.4%
    Exit multiple
    GBp 317.51-66.1%
    Market price
    GBp 936.80

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (GBP). Outflows negative.

    0m261m523mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayGBP
    LineFY26FY27FY28FY29FY30CAGR
    RevenueGBP 746.1mGBP 766.7mGBP 787.9mGBP 809.6mGBP 832.0m+2.8%
    EBITGBP 499.2mGBP 513.0mGBP 527.2mGBP 541.8mGBP 556.7m+2.8%
    NOPATGBP 478.7mGBP 492.0mGBP 505.6mGBP 519.5mGBP 533.9m+2.8%
    Add depreciation & amortisationGBP 10.3mGBP 10.6mGBP 10.9mGBP 11.2mGBP 11.5m+2.8%
    Less capital expenditureGBP -23.8mGBP -24.5mGBP -25.1mGBP -25.8mGBP -26.6m+2.8%
    Less increase in working capitalGBP 3.5mGBP 3.6mGBP 3.7mGBP 3.8mGBP 3.9m-2.8%
    Free cashflow to firmGBP 468.7mGBP 481.7mGBP 495.0mGBP 508.7mGBP 522.7m+2.8%
    Discount factor0.95950.88350.81340.74890.6896-
    Present valueGBP 449.8mGBP 425.6mGBP 402.7mGBP 381.0mGBP 360.5m-5.4%
    Present Value Of The ForecastGBP 2.0bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.50%GBP assumption - no free live source available for this market (assumption)
    Equity risk premium5.50%Market assumption
    Beta1.092Reported 1.138, pulled toward 1.0 (Blume)
    Cost of equity10.51%Risk-free + beta x equity risk premium
    Cost of debt4.50%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationGBP 12.7bn69.4% of capital
    Total debtGBP 5.6bn30.6% of capital, book value as a proxy
    Tax rate4.1%Effective, capped at statutory
    WACC8.61%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 shareGBP 0.62

    68% of EV

    Forecast FCFF, final year
    GBP 522.7m
    Capex at depreciation, working capital in reinvestment
    GBP 533.9m
    Less reinvestment at g/ROIC (29.0% of NOPAT)
    GBP -155.0m
    Capitalised
    GBP 378.9m
    ROIC (WACC floor)
    8.6%
    Terminal value, undiscounted
    GBP 6.4bn
    Terminal value, discounted
    GBP 4.4bn
    Enterprise value
    GBP 6.4bn
    Less net debt
    GBP 5.6bn
    Equity value
    GBP 839.6m

    Exit at 20.0x EBITDA

    Value per shareGBP 3.18

    80% of EV

    Terminal value, undiscounted
    GBP 11.4bn
    Terminal value, discounted
    GBP 7.8bn
    Enterprise value
    GBP 9.9bn
    Less net debt
    GBP 5.6bn
    Equity value
    GBP 4.3bn

    Spread between methods: 135%.

    Sensitivity

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

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    6.61%1.992.022.042.062.08
    7.61%1.201.221.241.251.27
    8.61%0.590.610.620.640.65
    9.61%0.110.120.130.150.16
    10.61%-0.28-0.27-0.26-0.25-0.24

    Outlined: this model. Green text: above today's price of 9.37. 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 year2.8%29.4%+26.6pp
    Discount rate8.6%3.0%-5.6pp
    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.