DCF Studio

    TNE.AX · ASX · Technology

    Technology One Limited

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD 10.68

    Market price

    AUD 29.00

    Implied upside

    -63.2%

    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.
    AdjustedCapital expenditure runs at 18.8% of revenue against depreciation of 12.5%. 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.

    Current EV/EBITDA of 36.3x 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
    AUD 10.68-63.2%
    Exit multiple
    AUD 25.04-13.7%
    Market price
    AUD 29.00

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (AUD). Outflows negative.

    0m105m209mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayAUD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueAUD 703.7mAUD 827.4mAUD 972.8mAUD 1.1bnAUD 1.3bn+17.6%
    EBITAUD 205.1mAUD 241.1mAUD 283.5mAUD 333.3mAUD 391.9m+17.6%
    NOPATAUD 160.3mAUD 188.4mAUD 221.5mAUD 260.5mAUD 306.3m+17.6%
    Add depreciation & amortisationAUD 87.8mAUD 103.2mAUD 121.3mAUD 142.6mAUD 167.7m+17.6%
    Less capital expenditureAUD -132.5mAUD -155.8mAUD -183.2mAUD -215.4mAUD -253.2m+17.6%
    Less increase in working capitalAUD -5.9mAUD -7.0mAUD -8.2mAUD -9.6mAUD -11.3m+17.6%
    Free cashflow to firmAUD 109.6mAUD 128.8mAUD 151.5mAUD 178.1mAUD 209.4m+17.6%
    Discount factor0.95490.87070.79400.72400.6601-
    Present valueAUD 104.6mAUD 112.2mAUD 120.3mAUD 128.9mAUD 138.2m+7.2%
    Present Value Of The ForecastAUD 604.3m

    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
    Beta0.725Reported 0.589, pulled toward 1.0 (Blume)
    Cost of equity9.70%Risk-free + beta x equity risk premium
    Cost of debt6.21%Interest expense / average total debt
    Market capitalisationAUD 9.5bn99.4% of capital
    Total debtAUD 53.4m0.6% of capital, book value as a proxy
    Tax rate21.9%Effective, capped at statutory
    WACC9.67%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 10.68

    81% of EV

    Forecast FCFF, final year
    AUD 209.4m
    Capex at depreciation, working capital in reinvestment
    AUD 306.3m
    Less reinvestment at g/ROIC (8.2% of NOPAT)
    AUD -25.2m
    Capitalised
    AUD 281.1m
    ROIC (reported)
    30.4%
    Terminal value, undiscounted
    AUD 4.0bn
    Terminal value, discounted
    AUD 2.7bn
    Enterprise value
    AUD 3.3bn
    Less net debt
    AUD -266.3m
    Equity value
    AUD 3.5bn

    Exit at 20.0x EBITDA

    Value per shareAUD 25.04

    92% of EV

    Terminal value, undiscounted
    AUD 11.2bn
    Terminal value, discounted
    AUD 7.4bn
    Enterprise value
    AUD 8.0bn
    Less net debt
    AUD -266.3m
    Equity value
    AUD 8.3bn

    Spread between methods: 80%.

    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%
    7.67%13.1513.9214.8515.9717.36
    8.67%11.2811.8112.4313.1514.00
    9.67%9.8810.2610.6811.1711.74
    10.67%8.799.069.379.7210.11
    11.67%7.928.128.358.618.89

    Outlined: this model. Green text: above today's price of 29.00. 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 year17.6%47.0%+29.4pp
    EBIT margin29.1%78.9%+49.8pp
    Discount rate9.7%5.2%-4.5pp
    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.