DCF Studio

    VSL.NZ · NZE · Basic Materials

    Vulcan Steel Limited

    Also onConsensus Drift

    Implied value per share

    NZD -0.22

    Market price

    NZD 6.35

    Implied upside

    -103.5%

    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.
    AdjustedReported capital expenditure averages 2.22% of revenue against depreciation and amortisation of 7.20%. A business cannot depreciate more than it invests indefinitely. Capex has been set to 7.20% 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.
    NoteRisk-free rate is an assumption: NZD assumption - no free live source available for this market.

    Current EV/EBITDA of 23.4x 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
    NZD -0.22-103.5%
    Exit multiple
    NZD 9.39+47.9%
    Market price
    NZD 6.35

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (NZD). Outflows negative.

    0m25m51mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayNZD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueNZD 1.1bnNZD 1.1bnNZD 1.1bnNZD 1.1bnNZD 1.0bn-2.4%
    EBITNZD 56.4mNZD 55.1mNZD 53.8mNZD 52.5mNZD 51.3m-2.4%
    NOPATNZD 40.6mNZD 39.7mNZD 38.7mNZD 37.8mNZD 36.9m-2.4%
    Add depreciation & amortisationNZD 81.5mNZD 79.5mNZD 77.7mNZD 75.8mNZD 74.0m-2.4%
    Less capital expenditureNZD -81.5mNZD -79.5mNZD -77.7mNZD -75.8mNZD -74.0m-2.4%
    Less increase in working capitalNZD 10.3mNZD 10.0mNZD 9.8mNZD 9.6mNZD 9.4m+2.4%
    Free cashflow to firmNZD 50.9mNZD 49.7mNZD 48.6mNZD 47.4mNZD 46.3m-2.4%
    Discount factor0.96230.89120.82530.76420.7077-
    Present valueNZD 49.0mNZD 44.3mNZD 40.1mNZD 36.2mNZD 32.8m-9.6%
    Present Value Of The ForecastNZD 202.4m

    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
    Beta1.031Reported 1.047, pulled toward 1.0 (Blume)
    Cost of equity11.20%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 930.5m59.6% of capital
    Total debtNZD 631.4m40.4% of capital, book value as a proxy
    Tax rate28.0%Effective, capped at statutory
    WACC7.98%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 -0.22

    64% of EV

    Forecast FCFF, final year
    NZD 46.3m
    Capex at depreciation, working capital in reinvestment
    NZD 36.9m
    Less reinvestment at g/ROIC (25.2% of NOPAT)
    NZD -9.3m
    Capitalised
    NZD 27.6m
    ROIC (reported)
    9.9%
    Terminal value, undiscounted
    NZD 516.3m
    Terminal value, discounted
    NZD 365.4m
    Enterprise value
    NZD 567.8m
    Less net debt
    NZD 600.7m
    Equity value
    NZD -32.9m

    Exit at 20.0x EBITDA

    Value per shareNZD 9.39

    90% of EV

    Terminal value, undiscounted
    NZD 2.5bn
    Terminal value, discounted
    NZD 1.8bn
    Enterprise value
    NZD 2.0bn
    Less net debt
    NZD 600.7m
    Equity value
    NZD 1.4bn

    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%
    5.99%1.071.311.612.012.57
    6.98%0.230.350.490.670.89
    7.99%-0.35-0.29-0.22-0.15-0.05
    8.98%-0.78-0.75-0.72-0.69-0.66
    9.98%-1.10-1.10-1.09-1.08-1.07

    Outlined: this model. Green text: above today's price of 6.35. 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 year-2.4%50.3%+52.7pp
    EBIT margin5.0%14.1%+9.1pp
    Discount rate8.0%4.3%-3.7pp
    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.