DCF Studio

    SPK.AX · ASX · Communication Services

    Spark New Zealand Limited

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD 2.21

    Market price

    AUD 1.60

    Implied upside

    +37.9%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · NZD model at 0.8033

    AdjustedSome line items were not reported and have been derived. Each one is labelled in the workings below.
    AdjustedReports in NZD, trades in AUD. Modelled in NZD, converted at the end.

    Value Per Share

    Perpetuity growth
    AUD 2.21+37.9%
    Exit multiple
    AUD 1.38-13.5%
    Market price
    AUD 1.60

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (NZD). Outflows negative.

    0m208m415mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayNZD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueNZD 3.6bnNZD 3.5bnNZD 3.4bnNZD 3.3bnNZD 3.3bn-2.1%
    EBITNZD 467.0mNZD 457.2mNZD 447.7mNZD 438.3mNZD 429.1m-2.1%
    NOPATNZD 367.3mNZD 359.6mNZD 352.1mNZD 344.7mNZD 337.5m-2.1%
    Add depreciation & amortisationNZD 512.7mNZD 502.0mNZD 491.5mNZD 481.2mNZD 471.1m-2.1%
    Less capital expenditureNZD -450.1mNZD -440.7mNZD -431.5mNZD -422.5mNZD -413.7m-2.1%
    Less increase in working capitalNZD -14.4mNZD -14.1mNZD -13.8mNZD -13.5mNZD -13.3m-2.1%
    Free cashflow to firmNZD 415.4mNZD 406.7mNZD 398.2mNZD 389.9mNZD 381.7m-2.1%
    Discount factor0.96890.90960.85400.80170.7527-
    Present valueNZD 402.5mNZD 369.9mNZD 340.0mNZD 312.6mNZD 287.3m-8.1%
    Present Value Of The ForecastNZD 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
    Beta0.437Reported 0.160, pulled toward 1.0 (Blume)
    Cost of equity7.97%Risk-free + beta x equity risk premium
    Cost of debt5.35%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationNZD 3.0bn61.4% of capital
    Total debtNZD 1.9bn38.6% of capital, book value as a proxy
    Tax rate21.4%Effective, capped at statutory
    WACC6.52%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 2.75

    75% of EV

    Forecast FCFF, final year
    NZD 381.7m
    Capex at depreciation, working capital in reinvestment
    NZD 337.5m
    Less reinvestment at g/ROIC (19.4% of NOPAT)
    NZD -65.5m
    Capitalised
    NZD 272.0m
    ROIC (reported)
    12.9%
    Terminal value, undiscounted
    NZD 6.9bn
    Terminal value, discounted
    NZD 5.2bn
    Enterprise value
    NZD 6.9bn
    Less net debt
    NZD 1.7bn
    Equity value
    NZD 5.2bn

    Exit at 4.9x EBITDA

    Value per shareNZD 1.72

    66% of EV

    Terminal value, undiscounted
    NZD 4.4bn
    Terminal value, discounted
    NZD 3.3bn
    Enterprise value
    NZD 5.0bn
    Less net debt
    NZD 1.7bn
    Equity value
    NZD 3.3bn

    Spread between methods: 46%.

    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%
    4.52%4.375.036.027.6410.87
    5.52%3.133.443.844.405.24
    6.52%2.392.552.753.003.34
    7.52%1.881.982.092.222.38
    8.52%1.521.581.641.721.80

    Outlined: this model. Green text: above today's price of 1.99. 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 year-2.1%-6.6%-4.5pp
    EBIT margin13.1%10.3%-2.8pp
    Discount rate6.5%7.7%+1.2pp
    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.