DCF Studio

    TWE.AX · ASX · Consumer Defensive

    Treasury Wine Estates Limited

    Also onConsensus Drift

    Implied value per share

    AUD -0.02

    Market price

    AUD 5.15

    Implied upside

    -100.5%

    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.

    Current EV/EBITDA of 26.7x 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 -0.02-100.5%
    Exit multiple
    AUD 4.95-3.9%
    Market price
    AUD 5.15

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (AUD). Outflows negative.

    0m65m130mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayAUD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueAUD 2.6bnAUD 2.7bnAUD 2.7bnAUD 2.8bnAUD 2.8bn+1.9%
    EBITAUD 189.0mAUD 192.5mAUD 196.1mAUD 199.7mAUD 203.4m+1.9%
    NOPATAUD 132.3mAUD 134.7mAUD 137.3mAUD 139.8mAUD 142.4m+1.9%
    Add depreciation & amortisationAUD 159.6mAUD 162.6mAUD 165.6mAUD 168.7mAUD 171.8m+1.9%
    Less capital expenditureAUD -171.6mAUD -174.8mAUD -178.0mAUD -181.3mAUD -184.7m+1.9%
    Less increase in working capitalAUD 468.3kAUD 477.0kAUD 485.9kAUD 494.9kAUD 504.2k-1.9%
    Free cashflow to firmAUD 120.8mAUD 123.0mAUD 125.3mAUD 127.7mAUD 130.0m+1.9%
    Discount factor0.96120.88800.82030.75790.7001-
    Present valueAUD 116.1mAUD 109.2mAUD 102.8mAUD 96.7mAUD 91.0m-5.9%
    Present Value Of The ForecastAUD 515.9m

    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
    Beta0.565Reported 0.351, pulled toward 1.0 (Blume)
    Cost of equity8.74%Risk-free + beta x equity risk premium
    Cost of debt10.30%Interest expense / average total debt
    Market capitalisationAUD 4.2bn67.6% of capital
    Total debtAUD 2.0bn32.4% of capital, book value as a proxy
    Tax rate30.0%Effective, capped at statutory
    WACC8.24%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 -0.02

    71% of EV

    Forecast FCFF, final year
    AUD 130.0m
    Capex at depreciation, working capital in reinvestment
    AUD 142.4m
    Less reinvestment at g/ROIC (30.3% of NOPAT)
    AUD -43.2m
    Capitalised
    AUD 99.2m
    ROIC (WACC floor)
    8.2%
    Terminal value, undiscounted
    AUD 1.8bn
    Terminal value, discounted
    AUD 1.2bn
    Enterprise value
    AUD 1.8bn
    Less net debt
    AUD 1.8bn
    Equity value
    AUD -19.3m

    Exit at 20.0x EBITDA

    Value per shareAUD 4.95

    91% of EV

    Terminal value, undiscounted
    AUD 7.5bn
    Terminal value, discounted
    AUD 5.3bn
    Enterprise value
    AUD 5.8bn
    Less net debt
    AUD 1.8bn
    Equity value
    AUD 4.0bn

    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%
    6.24%0.650.660.670.690.70
    7.24%0.260.270.280.290.29
    8.24%-0.04-0.03-0.02-0.02-0.01
    9.24%-0.27-0.27-0.26-0.25-0.25
    10.24%-0.46-0.45-0.45-0.44-0.44

    Outlined: this model. Green text: above today's price of 5.15. 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 year1.9%32.9%+31.0pp
    EBIT margin7.2%24.0%+16.8pp
    Discount rate8.2%2.7%-5.5pp
    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.