DCF Studio

    SUN.AX · ASX · Financial Services

    Suncorp Group Limited

    Also onConsensus Drift

    Implied value per share

    AUD 33.97

    Market price

    AUD 19.31

    Implied upside

    +75.9%

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

    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.
    AdjustedSome line items were not reported and have been derived. Each one is labelled in the workings below.
    AdjustedReported capital expenditure averages just 0.00% of revenue, which is too low to be the company's real investment - property trusts and similar structures invest through lines that are not reported as capex. Capex has been set to 1.30% of revenue so the forecast is not handed free growth. The accounts do not separate depreciation from amortisation, so the combined charge is used - if a large part of it is amortisation of an acquisition, the reported capex is probably right and this substitution is not. Override it if the reported figure is right.

    Current EV/EBITDA of 0.7x sits outside a defensible 3-20x band, so the exit multiple is capped at 3.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    AUD 33.97+75.9%
    Exit multiple
    AUD 27.00+39.8%
    Market price
    AUD 19.31

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (AUD). Outflows negative.

    0bn1bn1bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayAUD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueAUD 15.5bnAUD 15.7bnAUD 16.0bnAUD 16.2bnAUD 16.4bn+1.4%
    EBITAUD 1.8bnAUD 1.8bnAUD 1.8bnAUD 1.9bnAUD 1.9bn+1.4%
    NOPATAUD 1.3bnAUD 1.3bnAUD 1.3bnAUD 1.3bnAUD 1.3bn+1.4%
    Add depreciation & amortisationAUD 201.4mAUD 204.3mAUD 207.2mAUD 210.2mAUD 213.2m+1.4%
    Less capital expenditureAUD -201.4mAUD -204.3mAUD -207.2mAUD -210.2mAUD -213.2m+1.4%
    Less increase in working capitalAUD 0.00AUD 0.00AUD 0.00AUD 0.00AUD 0.00-
    Free cashflow to firmAUD 1.3bnAUD 1.3bnAUD 1.3bnAUD 1.3bnAUD 1.3bn+1.4%
    Discount factor0.96200.89010.82370.76220.7053-
    Present valueAUD 1.2bnAUD 1.1bnAUD 1.1bnAUD 1.0bnAUD 944.0m-6.1%
    Present Value Of The ForecastAUD 5.4bn

    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
    Beta0.464Reported 0.200, pulled toward 1.0 (Blume)
    Cost of equity8.13%Risk-free + beta x equity risk premium
    Cost of debt10.72%Interest expense / average total debt
    Market capitalisationAUD 20.5bn88.5% of capital
    Total debtAUD 2.7bn11.5% of capital, book value as a proxy
    Tax rate29.4%Effective, capped at statutory
    WACC8.07%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 33.97

    69% of EV

    Forecast FCFF, final year
    AUD 1.3bn
    Capex at depreciation, working capital in reinvestment
    AUD 1.3bn
    Less reinvestment at g/ROIC (31.0% of NOPAT)
    AUD -414.8m
    Capitalised
    AUD 923.6m
    ROIC (WACC floor)
    8.1%
    Terminal value, undiscounted
    AUD 17.0bn
    Terminal value, discounted
    AUD 12.0bn
    Enterprise value
    AUD 17.4bn
    Less net debt
    AUD -19.3bn
    Equity value
    AUD 36.7bn

    Exit at 3.0x EBITDA

    Value per shareAUD 27.00

    45% of EV

    Terminal value, undiscounted
    AUD 6.3bn
    Terminal value, discounted
    AUD 4.5bn
    Enterprise value
    AUD 9.8bn
    Less net debt
    AUD -19.3bn
    Equity value
    AUD 29.2bn

    Spread between methods: 23%.

    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%
    6.07%39.8440.3440.9741.7842.88
    7.07%36.1536.2536.3636.4836.63
    8.07%33.8633.9133.9734.0234.08
    9.07%32.1432.1932.2432.2832.33
    10.07%30.7730.8130.8530.8930.93

    Outlined: this model. Green text: above today's price of 19.31. 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 year1.4%-48.8%-50.2pp
    EBIT margin11.6%1.0%-10.5pp
    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.