DCF Studio

    WGX.AX · ASX · Basic Materials

    Westgold Resources Limited

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD -0.34

    Market price

    AUD 5.53

    Implied upside

    -106.1%

    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.
    AdjustedOnly 3 year(s) of history available to anchor assumptions on.
    AdjustedFree cashflow is negative in at least one forecast year, so terminal value carries most of the valuation.
    AdjustedCapital expenditure runs at 31.5% of revenue against depreciation of 8.1%. 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 29.1x 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 -0.34-106.1%
    Exit multiple
    AUD 2.64-52.3%
    Market price
    AUD 5.53

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (AUD). Outflows negative.

    -168191185-840955920FY25FY26FY27FY28FY29
    Nominal FCFFDiscounted to todayAUD
    LineFY25FY26FY27FY28FY29CAGR
    RevenueAUD 753.6mAUD 792.7mAUD 833.8mAUD 877.0mAUD 922.5m+5.2%
    EBITAUD 53.0mAUD 55.7mAUD 58.6mAUD 61.6mAUD 64.8m+5.2%
    NOPATAUD 37.4mAUD 39.3mAUD 41.4mAUD 43.5mAUD 45.8m+5.2%
    Add depreciation & amortisationAUD 61.2mAUD 64.3mAUD 67.7mAUD 71.2mAUD 74.9m+5.2%
    Less capital expenditureAUD -237.1mAUD -249.4mAUD -262.3mAUD -275.9mAUD -290.2m+5.2%
    Less increase in working capitalAUD 1.1mAUD 1.2mAUD 1.2mAUD 1.3mAUD 1.4m-5.2%
    Free cashflow to firmAUD -137.4mAUD -144.5mAUD -152.0mAUD -159.9mAUD -168.2m-5.2%
    Discount factor0.94380.84060.74880.66700.5941-
    Present valueAUD -129.7mAUD -121.5mAUD -113.8mAUD -106.6mAUD -99.9m+6.3%
    Present Value Of The ForecastAUD -571.6m

    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
    Beta1.161Reported 1.240, pulled toward 1.0 (Blume)
    Cost of equity12.31%Risk-free + beta x equity risk premium
    Cost of debt11.40%Interest expense / average total debt
    Market capitalisationAUD 5.2bn99.0% of capital
    Total debtAUD 54.6m1.0% of capital, book value as a proxy
    Tax rate29.4%Effective, capped at statutory
    WACC12.27%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 -0.34

    -66% of EV

    Forecast FCFF, final year
    AUD -168.2m
    Capex at depreciation, working capital in reinvestment
    AUD 45.8m
    Less reinvestment at g/ROIC (20.4% of NOPAT)
    AUD -9.3m
    Capitalised
    AUD 36.5m
    ROIC (WACC floor)
    12.3%
    Terminal value, undiscounted
    AUD 382.5m
    Terminal value, discounted
    AUD 227.3m
    Enterprise value
    AUD -344.3m
    Less net debt
    AUD -181.4m
    Equity value
    AUD -162.9m

    Exit at 20.0x EBITDA

    Value per shareAUD 2.64

    153% of EV

    Terminal value, undiscounted
    AUD 2.8bn
    Terminal value, discounted
    AUD 1.7bn
    Enterprise value
    AUD 1.1bn
    Less net debt
    AUD -181.4m
    Equity value
    AUD 1.3bn

    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%
    10.27%-0.26-0.25-0.25-0.25-0.25
    11.27%-0.31-0.30-0.30-0.30-0.30
    12.27%-0.34-0.34-0.34-0.34-0.33
    13.27%-0.37-0.37-0.37-0.36-0.36
    14.27%-0.39-0.39-0.39-0.39-0.38

    Outlined: this model. Green text: above today's price of 5.53. 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
    EBIT margin7.0%58.9%+51.8pp
    Discount rate12.3%2.6%-9.6pp
    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.