DCF Studio

    WAF.AX · ASX · Basic Materials

    West African Resources Limited

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD 12.72

    Market price

    AUD 3.58

    Implied upside

    +255.3%

    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.
    AdjustedConsensus rests on as few as 2 analyst estimate(s).
    AdjustedFree cashflow is negative in at least one forecast year, so terminal value carries most of the valuation.
    AdjustedCapital expenditure runs at 37.3% of revenue against depreciation of 10.0%. 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.

    Value Per Share

    Perpetuity growth
    AUD 12.72+255.3%
    Exit multiple
    AUD 9.20+157.0%
    Market price
    AUD 3.58

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (AUD). Outflows negative.

    -23007859-115039290FY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayAUD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueAUD 2.1bnAUD 2.8bnAUD 3.9bnAUD 5.3bnAUD 7.2bn+36.3%
    EBITAUD 916.8mAUD 1.2bnAUD 1.7bnAUD 2.3bnAUD 3.2bn+36.3%
    NOPATAUD 648.9mAUD 884.2mAUD 1.2bnAUD 1.6bnAUD 2.2bn+36.3%
    Add depreciation & amortisationAUD 209.2mAUD 285.0mAUD 388.4mAUD 529.3mAUD 721.3m+36.3%
    Less capital expenditureAUD -778.6mAUD -1.1bnAUD -1.4bnAUD -2.0bnAUD -2.7bn+36.3%
    Less increase in working capitalAUD -86.1mAUD -117.3mAUD -159.9mAUD -217.9mAUD -296.9m+36.3%
    Free cashflow to firmAUD -6.7mAUD -9.1mAUD -12.4mAUD -16.9mAUD -23.0m-36.3%
    Discount factor0.94850.85330.76770.69070.6214-
    Present valueAUD -6.3mAUD -7.8mAUD -9.5mAUD -11.7mAUD -14.3m-22.6%
    Present Value Of The ForecastAUD -49.6m

    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
    Beta1.084Reported 1.125, pulled toward 1.0 (Blume)
    Cost of equity11.85%Risk-free + beta x equity risk premium
    Cost of debt6.83%Interest expense / average total debt
    Market capitalisationAUD 4.1bn90.0% of capital
    Total debtAUD 453.1m10.0% of capital, book value as a proxy
    Tax rate29.2%Effective, capped at statutory
    WACC11.15%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 12.72

    100% of EV

    Forecast FCFF, final year
    AUD -23.0m
    Capex at depreciation, working capital in reinvestment
    AUD 2.2bn
    Less reinvestment at g/ROIC (11.9% of NOPAT)
    AUD -267.4m
    Capitalised
    AUD 2.0bn
    ROIC (reported)
    20.9%
    Terminal value, undiscounted
    AUD 23.3bn
    Terminal value, discounted
    AUD 14.5bn
    Enterprise value
    AUD 14.5bn
    Less net debt
    AUD -138.9m
    Equity value
    AUD 14.6bn

    Exit at 4.3x EBITDA

    Value per shareAUD 9.20

    100% of EV

    Terminal value, undiscounted
    AUD 16.8bn
    Terminal value, discounted
    AUD 10.5bn
    Enterprise value
    AUD 10.4bn
    Less net debt
    AUD -138.9m
    Equity value
    AUD 10.6bn

    Spread between methods: 32%.

    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%
    9.15%16.2717.0417.9218.9320.13
    10.15%13.8214.3614.9615.6516.43
    11.15%11.9112.2912.7213.1913.73
    12.15%10.3710.6510.9611.3011.67
    13.15%9.129.339.569.8010.07

    Outlined: this model. Green text: above today's price of 3.58. 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 year36.3%4.0%-32.3pp
    EBIT margin43.9%20.1%-23.8pp
    Discount rate11.2%22.8%+11.6pp
    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.