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08-09-2017, 10:12 AM
#1081
Member
Originally Posted by winner69
but the red line has headed down since july
good to see what you want to see eh?
haha maybe
But trading volume have been stale for the past few month, with the amount of liquidity passing through the nzx you really just have to interpret short term price deviance with a grain of salt.
Time will tell though, now that mgmt have taken a conservative approach, it'd be interesting to see what sort of guidance are given for FY18
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08-09-2017, 03:41 PM
#1082
Originally Posted by winner69
but the red line has headed down since july
good to see what you want to see eh?
Having broken out of the year long downward trend, it looks like it is forming a solid base in the 115-130 channel.
I will like to keep the chart up to date whenever the CPI is released and see if there is a solid correlation argument moving forward - the past years underperformance clearly reflects the downward spiral of chicken prices.
Last edited by hardt; 08-09-2017 at 03:45 PM.
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13-09-2017, 11:29 AM
#1083
Originally Posted by hardt
Having broken out of the year long downward trend, it looks like it is forming a solid base in the 115-130 channel.
I will like to keep the chart up to date whenever the CPI is released and see if there is a solid correlation argument moving forward - the past years underperformance clearly reflects the downward spiral of chicken prices.
See price fell from $14.81 in July to $14.21 in August
Hope correlation with TGH share price is weak eh
”When investors are euphoric, they are incapable of recognising euphoria itself “
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13-09-2017, 11:31 AM
#1084
Originally Posted by hardt
Having broken out of the year long downward trend, it looks like it is forming a solid base in the 115-130 channel.
I will like to keep the chart up to date whenever the CPI is released and see if there is a solid correlation argument moving forward - the past years underperformance clearly reflects the downward spiral of chicken prices.
See price fell from $14.81 in July to $14.21 in August
Lower than a year ago
Hope correlation with TGH share price is weak eh
”When investors are euphoric, they are incapable of recognising euphoria itself “
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14-09-2017, 08:17 PM
#1085
Originally Posted by winner69
See price fell from $14.81 in July to $14.21 in August
Lower than a year ago
Hope correlation with TGH share price is weak eh
Makes perfect sense winner, August last year TGH was trading in the 150-170 range.
The next few months Sept - Dec are the important ones to look out for, as we can see in the below chart.
Great pick for a dividend portfolio in my opinion.
TEGEL GROUP |
|
FY13A |
|
FY14A |
|
FY15A |
|
FY16A |
|
FY17A |
|
FY18F |
|
FY19F |
|
FY20F |
|
FY17A-FY20F CAGR% |
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|
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|
|
OPERATING REVENUES GENERATED - NZDm |
|
484.5 |
|
517.2 |
|
562.7 |
|
582.4 |
|
613.9 |
|
646.0 |
|
686.0 |
|
721.0 |
|
5.51% |
Domestic market revenues |
|
421.5 |
|
430.2 |
|
474.7 |
|
480.9 |
|
511.0 |
|
539.5 |
|
576.0 |
|
606.0 |
|
5.85% |
Export market revenues |
|
63.0 |
|
87.0 |
|
88.0 |
|
101.5 |
|
102.9 |
|
106.5 |
|
110.0 |
|
115.0 |
|
3.78% |
OPERATING EXPENSES INCURRED - NZDm |
|
424.7 |
|
473.3 |
|
501.4 |
|
507.5 |
|
538.7 |
|
568.0 |
|
605.0 |
|
637.0 |
|
5.75% |
Cost of goods sold |
|
337.2 |
|
387.5 |
|
411.2 |
|
416.6 |
|
449.4 |
|
472.5 |
|
505.3 |
|
532.0 |
|
|
Logistics expenses incurred |
|
43.5 |
|
48.0 |
|
47.9 |
|
50.5 |
|
53.2 |
|
58.0 |
|
61.2 |
|
65.0 |
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Corporate and other expenses incurred |
|
44.0 |
|
37.8 |
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42.3 |
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40.4 |
|
36.1 |
|
37.5 |
|
38.5 |
|
40.0 |
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UNDERLYING EBITDA GENERATED - NZDm |
|
59.8 |
|
43.9 |
|
61.3 |
|
74.9 |
|
75.6 |
|
78.0 |
|
81.0 |
|
84.0 |
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3.57% |
Depreciation and amortisation incurred |
|
20.8 |
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18.2 |
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18.8 |
|
18.4 |
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19.5 |
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20.0 |
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21.0 |
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21.0 |
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Corporate tax incurred |
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-12.6 |
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-5.8 |
|
2.1 |
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5.4 |
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13.6 |
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15.7 |
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16.7 |
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17.5 |
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NET DEBT - NZDm |
|
361.2 |
|
267.7 |
|
268.5 |
|
253.0 |
|
106.6 |
|
100.0 |
|
100.0 |
|
100.0 |
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Debt interest incurred |
|
40.2 |
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35.2 |
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35.0 |
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28.2 |
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6.2 |
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3.1 |
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2.9 |
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2.9 |
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Operating Free Cashflows |
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- |
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- |
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- |
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24.1 |
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45.3 |
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49.8 |
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52.5 |
|
55 |
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6.68% |
ADJUSTED NPAT - NZDm |
|
11.7 |
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-3.6 |
|
5.5 |
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23.7 |
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36.1 |
|
39.2 |
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40.4 |
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42.6 |
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5.67% |
Underlying EPS - Cents per share |
|
3.29 |
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nil |
|
1.55 |
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6.66 |
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10.14 |
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11.01 |
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11.35 |
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11.97 |
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Payout Ratio % |
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0 |
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0 |
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0 |
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0 |
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0.74 |
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0.75 |
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0.76 |
|
0.77 |
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Net dividend payment - Cents per share |
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nil |
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nil |
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nil |
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nil |
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7.55 |
|
8.26 |
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8.63 |
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9.22 |
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6.42% |
Last edited by hardt; 25-09-2017 at 01:17 AM.
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25-09-2017, 10:48 AM
#1086
Originally Posted by hardt
TV |
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EV |
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2017 |
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45.3*1.10 |
= |
49.83 |
(49.83/1.105^1) |
= |
45.10 |
2018 |
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50*1.05 |
= |
52.50 |
(52.5/1.105^2) |
= |
43.00 |
2019 |
|
52.5*1.05 |
= |
55.13 |
(55.13/1.105^3) |
= |
40.86 |
2020 |
|
55.13*1.05 |
= |
57.89 |
(57.89/1.105^4) |
= |
38.83 |
57.89*(1.05)/(0.105-0.05) |
= |
1,105.17 |
(1,105/1.105^5) |
= |
670.73 |
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Net DEBT |
= |
106.60 |
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Enterprise V |
= |
731.92 |
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Shares Issued |
= |
355.91 |
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DCF TGH |
= |
$2.06 |
Graham Valuation = (10.15*(8.5+(2*3.5))*4.4/4.5)/100 |
= |
$1.54 |
Been drinking a bit, I am sure I have skewed it one way or another.
Discount rate at 10.5%
FCF growth rate set at 5%
LT earnings growth rate at 3.5%
No doubt the drink fine tuned your analytical skills to get a good result
I assume your starting point of $45.3m is the Operating Cash Flow in the 2017 accounts. If not ignore the rest of the post
No capex in your calsc? Alllow for some modest capex of $10m pa (last year $20m and forecasts seem higher than $10m) and your equity value drops to $1.50. I also adjusted for your sneaky move of growing the final years cash flow by 5% before doing the TV calculation
And isn't 5% pa growth forever a bit outrageous. Wind that back to 2.5% and equity value is $1.07
No doubt a realistic number is somewhere in between - maybe $1.30 ...now that's spooky eh
Might need to change the discount rate to get what you want eh
Last edited by winner69; 25-09-2017 at 12:23 PM.
”When investors are euphoric, they are incapable of recognising euphoria itself “
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25-09-2017, 12:15 PM
#1087
Thanks for sharing your research hardt and critiquing it w69.
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25-09-2017, 08:25 PM
#1088
hardt - a bit bored today so did a TGH DCF valuation using my methodology
For what's it worth using your ebitda growth assumptions (except term growth at 2.5%) and discount 10.5% I get $1.31
Using my assumptions I get $1.42
As amatter of interest Tegal management cash flow forecasts to support ebitda us a 4% ebitda growth and discount rate of 8.8%
”When investors are euphoric, they are incapable of recognising euphoria itself “
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25-09-2017, 11:25 PM
#1089
Originally Posted by winner69
hardt - a bit bored today so did a TGH DCF valuation using my methodology
For what's it worth using your ebitda growth assumptions (except term growth at 2.5%) and discount 10.5% I get $1.31
Using my assumptions I get $1.42
As amatter of interest Tegal management cash flow forecasts to support ebitda us a 4% ebitda growth and discount rate of 8.8%
Excel picked up the pattern and placed a sequential power "^" for this - (Terminal Value/1.105^5)
Should have been to the power of 4 and not 5 for working out the 4th year obviously - this inebriated trash heap puts out a lot of garbage that the sober one has to clean up!
I do believe cash flows will be a % or two above where the below DCF models take it.
Thanks for the work Winner.
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VALUATION AT 2.5% FCF & 10.5% DR |
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TV |
EV |
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2017 |
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45.3*1.025 |
= |
46.43 |
(46.43/1.105^1) |
= |
42.02 |
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2018 |
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46.43*1.025 |
= |
47.59 |
(47.59/1.105^2) |
= |
38.98 |
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2019 |
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47.59*1.025 |
= |
48.78 |
(48.78/1.105^3) |
= |
36.15 |
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2020 |
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48.78*1.025 |
= |
50.00 |
(50/1.105^4) |
= |
33.54 |
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2021 |
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50.00*1.025 |
= |
51.25 |
(51.25/1.105^5) |
= |
31.11 |
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51.25*(1.025)/(0.085-0.025) |
= |
875.52 |
(875.52/1.105^5) |
= |
531.44 |
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DEBT |
= |
106.60 |
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EV |
= |
606.63 |
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|
|
|
|
|
|
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Shares Outstanding |
= |
355.91 |
|
|
|
|
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DCF TGH |
= |
$1.70 |
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VALUATION AT 1.5% FCF & 8.8% DR |
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TV |
EV |
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2017 |
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45.3*1.015 |
= |
45.98 |
(45.98/1.088^1) |
= |
42.26 |
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2018 |
|
45.98*1.015 |
= |
46.67 |
(46.67/1.088^2) |
= |
39.43 |
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|
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2019 |
|
46.67*1.015 |
= |
47.37 |
(47.37/1.088^3) |
= |
36.78 |
|
|
|
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2020 |
|
47.37*1.015 |
= |
48.08 |
(48.08/1.088^4) |
= |
34.31 |
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|
|
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|
2021 |
|
48.08*1.015 |
= |
48.80 |
(48.80/1.088^5) |
= |
32.01 |
|
|
|
|
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48.8*(1.015)/(0.088-0.015) |
= |
678.52 |
(678.52/1.088^5) |
= |
445.06 |
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DEBT |
= |
106.60 |
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EV |
= |
523.25 |
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Shares Outstanding |
= |
355.91 |
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DCF TGH |
= |
$1.47 |
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Last edited by hardt; 25-09-2017 at 11:28 PM.
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26-09-2017, 07:20 PM
#1090
Originally Posted by hardt
Excel picked up the pattern and placed a sequential power "^" for this - (Terminal Value/1.105^5)
Should have been to the power of 4 and not 5 for working out the 4th year obviously - this inebriated trash heap puts out a lot of garbage that the sober one has to clean up!
I do believe cash flows will be a % or two above where the below DCF models take it.
Thanks for the work Winner.
|
|
VALUATION AT 2.5% FCF & 10.5% DR |
|
|
|
|
|
|
|
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|
TV |
EV |
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
2017 |
|
45.3*1.025 |
= |
46.43 |
(46.43/1.105^1) |
= |
42.02 |
|
|
|
|
|
2018 |
|
46.43*1.025 |
= |
47.59 |
(47.59/1.105^2) |
= |
38.98 |
|
|
|
|
|
2019 |
|
47.59*1.025 |
= |
48.78 |
(48.78/1.105^3) |
= |
36.15 |
|
|
|
|
|
2020 |
|
48.78*1.025 |
= |
50.00 |
(50/1.105^4) |
= |
33.54 |
|
|
|
|
|
2021 |
|
50.00*1.025 |
= |
51.25 |
(51.25/1.105^5) |
= |
31.11 |
|
|
|
|
|
51.25*(1.025)/(0.085-0.025) |
= |
875.52 |
(875.52/1.105^5) |
= |
531.44 |
|
|
|
|
|
|
|
|
|
|
|
DEBT |
= |
106.60 |
|
|
|
|
|
|
|
|
|
|
|
EV |
= |
606.63 |
|
|
|
|
|
|
|
|
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Shares Outstanding |
= |
355.91 |
|
|
|
|
|
|
|
|
|
|
|
DCF TGH |
= |
$1.70 |
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VALUATION AT 1.5% FCF & 8.8% DR |
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TV |
EV |
|
|
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|
2017 |
|
45.3*1.015 |
= |
45.98 |
(45.98/1.088^1) |
= |
42.26 |
|
|
|
|
|
2018 |
|
45.98*1.015 |
= |
46.67 |
(46.67/1.088^2) |
= |
39.43 |
|
|
|
|
|
2019 |
|
46.67*1.015 |
= |
47.37 |
(47.37/1.088^3) |
= |
36.78 |
|
|
|
|
|
2020 |
|
47.37*1.015 |
= |
48.08 |
(48.08/1.088^4) |
= |
34.31 |
|
|
|
|
|
2021 |
|
48.08*1.015 |
= |
48.80 |
(48.80/1.088^5) |
= |
32.01 |
|
|
|
|
|
48.8*(1.015)/(0.088-0.015) |
= |
678.52 |
(678.52/1.088^5) |
= |
445.06 |
|
|
|
|
|
|
|
|
|
|
|
DEBT |
= |
106.60 |
|
|
|
|
|
|
|
|
|
|
|
EV |
= |
523.25 |
|
|
|
|
|
|
|
|
|
Shares Outstanding |
= |
355.91 |
|
|
|
|
|
|
|
|
|
|
|
DCF TGH |
= |
$1.47 |
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For the VALUATION AT 2.5% FCF & 10.5% DR valuation, you are calculating Terminal Value based on a 8.5% discount rate. This is having a material impact on your valuation.
Also, this is probably pedantic, but anyway... I am unsure of your valuation date; however, it looks like a while ago. One option is to:
- adjust the first years earnings based on how far through we are;
- discount mid-period;
- adjust net debt for dividends since April (increase debt); and
- adjust net debt for likely earnings since April (reduced debt, lets hope).
EDIT: Also, since you are increasing the cash flows at a constant rate, you should get the same result as if you just applied the Gordon Growth model to your first cash flow. As an example, using your second valuation (1.5% and 8.5%):
Enterprise value = 45.3*(1.015)/(0.088-0.015) = 629.86
Equity value = 629.86 enterprise value – 106.6 debt = 523.26
Share value = 523.26 equity value / 355.9 shares = $1.47 per share.
This is the same result as your DCF.
By undertaking a DCF, you might think you are putting in more 'science' than you actually have. All you have really said is share value is $1.47 at 1.5% perpetual growth and a 8.8% discount rate.
Also, disc. I have ~3-4% of my portfolio in TGH.
Last edited by Te Whetu; 26-09-2017 at 07:52 PM.
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