DCF Studio

    SHL.AX · ASX · Healthcare

    Sonic Healthcare Limited

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD 21.40

    Market price

    AUD 19.24

    Implied upside

    +11.2%

    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.

    Value Per Share

    Perpetuity growth
    AUD 21.40+11.2%
    Exit multiple
    AUD 28.04+45.8%
    Market price
    AUD 19.24

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (AUD). Outflows negative.

    0bn1bn1bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayAUD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueAUD 9.7bnAUD 9.8bnAUD 9.9bnAUD 10.0bnAUD 10.1bn+1.1%
    EBITAUD 1.3bnAUD 1.3bnAUD 1.3bnAUD 1.3bnAUD 1.4bn+1.1%
    NOPATAUD 961.5mAUD 971.6mAUD 981.9mAUD 992.3mAUD 1.0bn+1.1%
    Add depreciation & amortisationAUD 803.3mAUD 811.8mAUD 820.3mAUD 829.0mAUD 837.8m+1.1%
    Less capital expenditureAUD -521.5mAUD -527.0mAUD -532.6mAUD -538.2mAUD -543.9m+1.1%
    Less increase in working capitalAUD -35.8mAUD -36.2mAUD -36.6mAUD -36.9mAUD -37.3m+1.1%
    Free cashflow to firmAUD 1.2bnAUD 1.2bnAUD 1.2bnAUD 1.2bnAUD 1.3bn+1.1%
    Discount factor0.96380.89540.83180.77270.7178-
    Present valueAUD 1.2bnAUD 1.1bnAUD 1.0bnAUD 962.9mAUD 903.9m-6.1%
    Present Value Of The ForecastAUD 5.1bn

    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
    Beta0.719Reported 0.580, pulled toward 1.0 (Blume)
    Cost of equity9.66%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 9.5bn64.8% of capital
    Total debtAUD 5.2bn35.2% of capital, book value as a proxy
    Tax rate26.3%Effective, capped at statutory
    WACC7.65%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 21.40

    65% of EV

    Forecast FCFF, final year
    AUD 1.3bn
    Capex at depreciation, working capital in reinvestment
    AUD 1.0bn
    Less reinvestment at g/ROIC (32.7% of NOPAT)
    AUD -327.9m
    Capitalised
    AUD 674.9m
    ROIC (WACC floor)
    7.6%
    Terminal value, undiscounted
    AUD 13.4bn
    Terminal value, discounted
    AUD 9.7bn
    Enterprise value
    AUD 14.8bn
    Less net debt
    AUD 4.5bn
    Equity value
    AUD 10.3bn

    Exit at 8.1x EBITDA

    Value per shareAUD 28.04

    71% of EV

    Terminal value, undiscounted
    AUD 17.9bn
    Terminal value, discounted
    AUD 12.8bn
    Enterprise value
    AUD 18.0bn
    Less net debt
    AUD 4.5bn
    Equity value
    AUD 13.5bn

    Spread between methods: 27%.

    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%
    5.65%31.9332.5233.2434.1935.51
    6.65%25.4225.5325.6525.7725.88
    7.65%21.2121.3121.4021.5021.60
    8.65%17.9618.0518.1318.2118.30
    9.65%15.3915.4615.5315.6015.67

    Outlined: this model. Green text: above today's price of 19.24. 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 year1.1%-1.2%-2.3pp
    EBIT margin13.4%12.4%-1.0pp
    Discount rate7.6%8.3%+0.6pp
    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.