DCF Studio

    VCT.NZ · NZE · Utilities

    Vector Limited

    Also onConsensus Drift

    Implied value per share

    NZD 0.15

    Market price

    NZD 4.72

    Implied upside

    -96.9%

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

    Wrong toolThis model values the shares at 3.1% of the market price. A gap that size is a modelling failure rather than a view - most often an unusable beta, a currency or units mismatch, or a cashflow base that does not represent the business. Read the figures below as diagnostics, not as a call.
    AdjustedSome line items were not reported and have been derived. Each one is labelled in the workings below.
    AdjustedFree cashflow is negative in at least one forecast year, so terminal value carries most of the valuation.
    AdjustedCapital expenditure runs at 48.4% of revenue against depreciation of 20.5%. 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.
    NoteRisk-free rate is an assumption: NZD assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    NZD 0.15-96.9%
    Exit multiple
    NZD 2.08-56.0%
    Market price
    NZD 4.72

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (NZD). Outflows negative.

    -94616854-473084270FY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayNZD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueNZD 1.2bnNZD 1.2bnNZD 1.2bnNZD 1.2bnNZD 1.2bn+1.0%
    EBITNZD 325.8mNZD 329.0mNZD 332.2mNZD 335.4mNZD 338.7m+1.0%
    NOPATNZD 234.6mNZD 236.9mNZD 239.2mNZD 241.5mNZD 243.9m+1.0%
    Add depreciation & amortisationNZD 240.4mNZD 242.7mNZD 245.1mNZD 247.5mNZD 249.9m+1.0%
    Less capital expenditureNZD -567.7mNZD -573.2mNZD -578.8mNZD -584.4mNZD -590.1m+1.0%
    Less increase in working capitalNZD 1.7mNZD 1.7mNZD 1.7mNZD 1.7mNZD 1.8m-1.0%
    Free cashflow to firmNZD -91.0mNZD -91.9mNZD -92.8mNZD -93.7mNZD -94.6m-1.0%
    Discount factor0.96860.90870.85250.79980.7503-
    Present valueNZD -88.2mNZD -83.5mNZD -79.1mNZD -74.9mNZD -71.0m+5.3%
    Present Value Of The ForecastNZD -396.7m

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.50%NZD assumption - no free live source available for this market (assumption)
    Equity risk premium6.50%Market assumption
    Beta0.574Reported 0.364, pulled toward 1.0 (Blume)
    Cost of equity8.23%Risk-free + beta x equity risk premium
    Cost of debt4.50%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationNZD 4.7bn67.2% of capital
    Total debtNZD 2.3bn32.8% of capital, book value as a proxy
    Tax rate28.0%Effective, capped at statutory
    WACC6.59%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 0.15

    116% of EV

    Forecast FCFF, final year
    NZD -94.6m
    Capex at depreciation, working capital in reinvestment
    NZD 243.9m
    Less reinvestment at g/ROIC (37.9% of NOPAT)
    NZD -92.5m
    Capitalised
    NZD 151.4m
    ROIC (WACC floor)
    6.6%
    Terminal value, undiscounted
    NZD 3.8bn
    Terminal value, discounted
    NZD 2.8bn
    Enterprise value
    NZD 2.4bn
    Less net debt
    NZD 2.3bn
    Equity value
    NZD 146.9m

    Exit at 10.8x EBITDA

    Value per shareNZD 2.08

    109% of EV

    Terminal value, undiscounted
    NZD 6.4bn
    Terminal value, discounted
    NZD 4.8bn
    Enterprise value
    NZD 4.4bn
    Less net debt
    NZD 2.3bn
    Equity value
    NZD 2.1bn

    Spread between methods: 174%.

    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%
    4.59%1.691.711.731.751.77
    5.59%0.760.770.790.810.83
    6.59%0.120.130.150.160.17
    7.59%-0.34-0.33-0.32-0.31-0.30
    8.59%-0.69-0.68-0.67-0.66-0.65

    Outlined: this model. Green text: above today's price of 4.72. 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 year1.0%22.6%+21.6pp
    EBIT margin27.8%60.6%+32.8pp
    Discount rate6.6%3.4%-3.2pp
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    Yahoo Finance and RBA data. General information, not advice. Methodology.