Time to update my capitalised averaged eps valuation (excluding special dividends) for Contact, given the subdued outlook for FY2016 and the impending and current share buyback program.
Compared to last year, the special dividend ($367m total) has created an ongoing parcel of extra debt going forwards that must be serviced. Contact doesn't declare in their annual report the interest rate they pay over their whole debt portfolio. But we can:
1/ take last years total interest paid ($90m) AND
2/ divide this by the end of year term debt ($1,219m + $531m) LESS
3/ the capital paid out in the special dividend (because that payout only occurred just before the end of the financial year).
$90m / [($1,219m + $531m) - $367m] = 6.5%
So 6.5% is our indicative interest rate that Contact currently pays.
The extra interest bill because of the capital return is therefore: $367m x 0.065 = $24m
I am estimating that 20m Contact shares will be bought back and cancelled when the current share buyback program is finished.
Given EBITDA is forecast to be little changed from last year, we can now work out the expected NPAT for Contact for FY2016.
|
FY2016 Adjustments |
EBITDA (normalised FY2015) |
$549m |
less DA (FY2015) |
-$204m |
less I |
-($98m+$24m) |
-$233 |
Year |
eps |
2009 |
27.0c |
2010 |
25.3c |
2011 |
22.4c |
2012 |
24.6c |
2013 |
27.5c |
2014 |
27.1c |
2015 |
24.3c |
2016 |
22.6c |
I get an average eps of 25.1c (net) over the eight year representative period.
25.1c (net) is equivalent to 25.1/0.72 = 34.9c (gross).
Using a target 6% gross return figure for 'fair value'.
34.9c/0.06 = $5.82
It is no wonder then that I have been buying and see today's closing price of $4.70 as a bargain. Mr market can do what he likes as far as I am concerned. I have no problem taking advantage of him.
SNOOPY