DCF Analysis

[winner69]

ok so I'm looking at the 2012 report because that seems to be what I have in my download folder,

I get an:

NPAT of 38.50m
CAPEX of (11.03m)
and change in working cap of (15.19m)

so these items summed together would be our FCF? for that year which would be 12.28m? if this is correct would this be FCFE or FCFF?

Almost there - except depreciation is non cash and has to added back to profit

Here's the 2013 report

http://www.arb.com.au/media/investor...eport-2013.pdf

Look at that NOTE 18 --- to see the non cash adjustments and movement in working capital

What you calculated is what I would call Free Cash Flow (FCF) and be the basis of DCF analysis (ie Operating less Investing Cash Flows)

Keep at it

[samdaman]

Depreciation and ammortisation or just depreciation?

would I just add the whole non cash column back onto my NPAT after the deduction of tax? or just the depreciation and ammortisation figure?

I just added those figures back on.

With that I get

2012 2013
FCF 18.65m 22.12m

which is an 18.57% increase

Just for the sake of this practise DCF I'll just say that it continues to grow at 18% for 5 years (just being rough for practise sake)

which gives:

1	2	3	4	5
26.1016	30.79989	36.34387	42.88576	50.60520158

the next step is to calculate the discount rate, with the first step in that being to calculate an appropriate cost of equity which would be done with the capital asset pricing model if I'm not mistaken?

This is another step where I run into a hiccup, how do I get values such as beta, risk free rate for NZ and a risk premium?

[samdaman]

Since I didn't know how to calculate WACC I went with 12% just to show my calcs.

I used a long term rate of 6% and with those I got a terminal value of 894m.

Then I discounted the cashflows added them up and divided by outstanding ordinary shares to get a share price of $8.78

Anything you can see wrong? and any light for calculating the long term rate and WACC more accurately? those were just guesses

[winner69]

I reckon 2012 FCF should be about 20.5m and 2013 about 29.6m

A bit higher than yours Sam

I have a look at your workings later

[winner69]

Maybe take the 13 annual report to drink ids with moosie and work on it together !!!
,

[samdaman]

okey dokey, lemme know how you got those values when you get the chance I'm itchn to get this right

[samdaman]

Maybe take the 13 annual report to drink ids with moosie and work on it together !!!
,

haha I'll take it along, whether he wants to spend some of his down time running some numbers with a newbie is his choice though

[winner69]

Sam

For what it is worth here are my numbers taken from 2013 Annual Accounts

[winner69]

Samdaman the bits in yellow is change in working capital