DCF Studio

    STAN.L · LSE · Financial Services

    Standard Chartered PLC

    Also onConsensus Drift

    Implied value per share

    GBp 2693.51

    Market price

    GBp 2280.00

    Implied upside

    +18.1%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · USD model at 0.7466

    Wrong toolThis is a financial. Banks and insurers report no meaningful operating income, and capex and working capital do not mean what a free-cashflow model assumes, so a DCF will misprice it. The model below runs on best-effort numbers - treat it as an illustration, not a valuation.
    AdjustedReports in USD, trades in GBp. Modelled in USD, converted at the end.
    AdjustedCapital expenditure runs at 8.2% of revenue against depreciation of 6.2%. 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.

    Value Per Share

    Perpetuity growth
    GBp 2693.51+18.1%
    Exit multiple
    GBp 2097.59-8.0%
    Market price
    GBp 2280.00

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn4bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 22.3bnUSD 24.1bnUSD 26.1bnUSD 28.3bnUSD 30.7bn+8.4%
    EBITUSD 6.7bnUSD 7.2bnUSD 7.8bnUSD 8.5bnUSD 9.2bn+8.4%
    NOPATUSD 5.0bnUSD 5.4bnUSD 5.9bnUSD 6.4bnUSD 6.9bn+8.4%
    Add depreciation & amortisationUSD 1.4bnUSD 1.5bnUSD 1.6bnUSD 1.8bnUSD 1.9bn+8.4%
    Less capital expenditureUSD -1.8bnUSD -2.0bnUSD -2.2bnUSD -2.3bnUSD -2.5bn+8.4%
    Less increase in working capitalUSD -1.7bnUSD -1.9bnUSD -2.0bnUSD -2.2bnUSD -2.4bn+8.4%
    Free cashflow to firmUSD 2.8bnUSD 3.1bnUSD 3.3bnUSD 3.6bnUSD 3.9bn+8.4%
    Discount factor0.97110.91580.86370.81450.7681-
    Present valueUSD 2.7bnUSD 2.8bnUSD 2.9bnUSD 2.9bnUSD 3.0bn+2.2%
    Present Value Of The ForecastUSD 14.3bn

    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
    Beta0.729Reported 0.595, pulled toward 1.0 (Blume)
    Cost of equity8.51%Risk-free + beta x equity risk premium
    Cost of debt6.50%Implied cost of debt of 18.4% 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 49.7bn32.0% of capital
    Total debtUSD 105.4bn68.0% of capital, book value as a proxy
    Tax rate25.0%Effective, capped at statutory
    WACC6.04%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 36.08

    87% of EV

    Forecast FCFF, final year
    USD 3.9bn
    Capex at depreciation, working capital in reinvestment
    USD 7.7bn
    Less reinvestment at g/ROIC (41.4% of NOPAT)
    USD -3.2bn
    Capitalised
    USD 4.5bn
    ROIC (WACC floor)
    6.0%
    Terminal value, undiscounted
    USD 130.2bn
    Terminal value, discounted
    USD 100.0bn
    Enterprise value
    USD 114.3bn
    Less net debt
    USD 27.6bn
    Equity value
    USD 86.7bn

    Exit at 9.5x EBITDA

    Value per shareUSD 28.09

    85% of EV

    Terminal value, undiscounted
    USD 105.2bn
    Terminal value, discounted
    USD 80.8bn
    Enterprise value
    USD 95.2bn
    Less net debt
    USD 27.6bn
    Equity value
    USD 67.5bn

    Spread between methods: 25%.

    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%
    4.04%61.8862.2162.5562.8863.21
    5.04%46.1446.4046.6546.9147.16
    6.04%35.6735.8736.0836.2836.48
    7.04%28.2128.3828.5528.7128.88
    8.04%22.6522.7922.9323.0723.21

    Outlined: this model. Green text: above today's price of 30.54. 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 year8.4%4.9%-3.5pp
    EBIT margin29.9%26.4%-3.5pp
    Discount rate6.0%6.7%+0.7pp
    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.