In the spirit of The Economist’s “Big Mac Index“.  Here at Valuecruncher we decided to repeat an exercise we did earlier in the year - to assess the overall  current valuation of the New Zealand stock exchange (NZSX) - the market as a whole.  Our objective was to assess whether the overall market might be over- or undervalued.

To do this we took a simplified approach.  At Valuecruncher we have completed valuations for 36 of the NZX50 companies.  Four of these companies are not NZ-based so we eliminated them and we have a crazy number coming out of Nuplex ($NPX.NZ) so we also eliminated them.  That leaves us with 31 companies.  These 31 companies have a market capitalisation of NZ$31.8 billion - this represents just over 70% of the NZSX total market capitalisation of NZ$44.5 billion.  We took these 31 companies and compared our valuations to the current share price - determining a percentage under- or overvalued.  We then weighted these percentages by the market capitalisation of the 31 companies.  By summing these weighted averages we came up with an estimate of the valuation of the New Zealand market.

Based on our sample of 31 companies - representing just over 70% of the total NZSX market capitalisation.  Valuecruncher estimates that the New Zealand stock exchange is undervalued by just under 3%.  Valuecruncher is saying that overall the market looks slightly cheap.  Our numbers are included in the table below.

At Valuecruncher we have just completed our most recent review of NZX companies in our dataset.  This involves a review of the assumptions we are using in the valuations. We use consensus analyst estimates as the basis of our assumptions.  For example - consensus analyst estimates of revenues for New Zealand’s largest listed company Telecom New Zealand ($TEL.NZ).  Valuecruncher uses these numbers and our own assessments of other valuation assumptions such as the discount rate and terminal growth rate.

At Valuecruncher we then pull all of these variables together and place a valuation on the shares of the companies in our data-set and provide a recommendation.  You can either simply look at our valuations - or for all the experts out there, you can change the assumptions we have used and modify the valuation.  Modified valuations can be saved and shared.

With the completion of our monthly review of the companies on the NZX (New Zealand stock exchange) we decided to outline what we at Valuecruncher see as the most undervalued (the best buys).

We should note that you can always find a list of the Valuecruncher buy recommendations for the NZX from the most undervalued using our filters.  The following list highlights the top five buys based on the latest review of the valuation assumptions.

Valuecruncher’s Top Five Buys On The NZX - June 2009

Number 1

Rakon ($RAK.NZ) is a New Zealand-based designer and manufacturer of high-performance frequency control technology. Valuecruncher currently values $RAK.NZ at NZ$1.87 - 24% above the current share price.

Valuecruncher Interactive Analyst Report For $RAK.NZ

Number 2

Sky Network Television ($SKT.NZ) is a provider of pay and free-to-air television services in New Zealand.  Valuecruncher currently values $SKT.NZ at NZ$5.156 - 22% above the current share price.

Valuecruncher Interactive Analyst Report For $SKT.NZ

Number 3

Sky City ($SKC.NZ) is a New Zealand-listed gaming, hotel and entertainment company.  Valuecruncher currently values $SKC.NZ at NZ$3.19 - 20% above the current share price.

Valuecruncher Interactive Analyst Report For $SKC.NZ

Number 4

Methven ($MVN.NZ) is a New Zealand company that designs and supplies taps and shower-ware.  Valuecruncher currently values $MVN.NZ at NZ$1.65 - 20% above the current share price.

Valuecruncher Interactive Analyst Report For $MVN.NZ

Number 5

Steel & Tube ($STU.NZ) is a New Zealand-based steel and industrial products company.  Valuecruncher currently values $STU.NZ at NZ$3.29 - 13% above the current share price.

Valuecruncher Interactive Analyst Report For $STU.NZ

Those are our top five buys for June 2009.  You can also always find a list of the Valuecruncher sell recommendations for the NZX from most overvalued up using our filters.

Disclosure: None

At Valuecruncher we have not looked at Apple ($AAPL) since late last year. $AAPL is now trading at US$136.09. We felt it was time to revisit the valuation of $AAPL from an intrinsic value perspective - and most importantly the assumptions that we are using in our valuation.

Valuecruncher interactive analyst report for $AAPL

Valuecruncher produces a valuation of US$140.57 for $AAPL. This is a current valuation (an estimate of intrinsic value using a discounted cash flow model) not a target price. This valuation is 3.3% above the current share price of US$136.09.  $AAPL appears reasonably valued at the moment.

Assumptions

• Revenue: Reuters aggregates 32 analysts covering $AAPL and the mean estimates of 2009 and 2010 revenues are US$35.5 billion and US$41.4 billion respectively. For our analysis we have used US$35.5 billion in 2009, US$41.25 billion in 2010 and US$47.0 billion in 2011.
• Profitability: We have used an EBITDA margin of 20.5% to 2011. Reuters has $AAPL‘s EBITD margin at 21.4% last year and an average of 16.8% over the last five-years.
• Capital Expenditure: We have assumed capital expenditures of US$1.0 billion in 2009, US$1.15 billion in 2010 then US$1.25 billion per annum moving forward.
• Discount Rate: 10.0%.
• Terminal Growth Rate: 4.5%. In our assumptions we have 2010/11 revenue growth at 13.9% - we have assumed that growth eventually slows to a 3.5% long-term stable growth rate.

Our analysis incorporates the cash on the $AAPL balance sheet – Valuecruncher calculates a net debt number.

Play with our assumptions – what does your analysis say?

Disclosure: None

Air New Zealand ($AIR.NZ) is an international and domestic airline based in New Zealand. $AIR.NZ is currently trading at NZ$1.03.  How is this in relation to the intrinsic value of the company’s shares?

Valuecruncher Interactive Analyst Report for $AIR.NZ

Valuecruncher produces a valuation of NZ$1.15 for $AIR.NZ. This is a current valuation (an estimate of intrinsic value using a discounted cash flow model) not a target price. This valuation is 11.7% above the current share price of NZ$1.03.

Our analysis incorporates the cash and debt on the $AIR.NZ balance sheet – Valuecruncher calculates a net debt number.

Play with our assumptions – what does your analysis say?

Disclosure: None

Fisher & Paykel Appliances ($FPA.NZ) is a New Zealand-based designer, manufacturer and marketer of household appliances.  The company has just completed a major recapitalisation. The current share price is NZ$0.69.  How is this in relation to the intrinsic value of the company’s shares?

Valuecruncher Interactive Analyst Report For $FPA.NZ

Valuecruncher produces a valuation of NZ$0.67 for $FPA.NZ. This is a current valuation (an estimate of intrinsic value using a discounted cash flow model) not a target price. This valuation is 2.9% below the current share price of NZ$0.69.

Assumptions

• Revenue: Reuters aggregates seven analysts covering $FPA.NZ and this produces mean estimates of 2010 and 2011 revenues of NZ$1.355 billion and NZ$1.356 billion respectively. For our analysis we have used NZ$1.350 billion in 2010, NZ$1.350 billion in 2011 and NZ$1.375 billion in 2012.
• Profitability: We have used a flat EBITDA margin of 10.5% in 2010 then 12.0% for 2011 and beyond. Reuters has $FPA.NZ‘s EBITD margin at an average of 9.88% over the last five-years.
• Capital Expenditure: We have assumed capital expenditures of NZ$50.0 million per annum moving forward.
• Discount Rate: 8.5%. The PwC New Zealand cost of capital report has $FPA.NZ at a WACC of 7.5% with the wider NZ market at 8.3%.
• Terminal Growth Rate: 3.0%.

Our analysis incorporates the cash and debt the $FPH.NZ balance sheet – Valuecruncher calculates a net debt number.

Play with our assumptions – what does your analysis say?

Disclosure: None

In late April Valuecruncher was one of the companies that presented at the FinovateStartup09 conference in San Francisco. It was a great event and showcased some interesting companies in the finance space.

There are videos of all the presenting companies up on the Finovate site. This includes one for Valuecruncher.

Enjoy.

Methven ($MVN.NZ) is a New Zealand company that designs and supplies taps and shower-ware.  $MVN.NZ has risen over 30% since hitting a low of NZ$0.97 in March. $MVN.NZ is currently trading at NZ$1.30.  How is this in relation to the intrinsic value of the company’s shares?

Valuecruncher Interactive Analyst Report for $MVN.NZ

Valuecruncher produces a valuation of NZ$1.67 for $MVN.NZ. This is a current valuation (an estimate of intrinsic value using a discounted cash flow model) not a target price. This valuation is 28.5% above the current share price of NZ$1.30.

Assumptions

• Revenue: Reuters aggregates four analysts covering $MVN.NZ and the mean estimates of 2010 and 2011 revenues are NZ$141.6 million and NZ$146.1 million respectively. For our analysis we have used NZ$145.0 million in 2010, NZ$150.0 million in 2011 and NZ$155.0 million in 2012.
• Profitability: We have used a flat EBITDA margin of 14.0% to 2012. Reuters don’t list an EBITD margin for $MVN.NZ.
• Capital Expenditure: We have assumed capital expenditures of NZ$3.0 million per annum moving forward.
• Discount Rate: 11.0%. The PwC New Zealand cost of capital report does not list $MVN.NZ but has the wider market at 8.3%. We believe a discount rate in the 10-12% range is appropriate. We have chosen the middle of this range.
• Terminal Growth Rate: 2.0%.

Our analysis incorporates the cash and debt on the $MVN.NZ balance sheet – Valuecruncher calculates a net debt number.

Play with our assumptions – what does your analysis say?

Disclosure: None

It has been a busy few months for the operator of the New Zealand share market - NZX Limited ($NZX.NZ).  We have seen the sale of the TZ1 registry business.  A good financial result.  Three separate acquisitions.  And finally details of a capital raise to fund the acquisitions.   $NZX.NZ is trading at NZ$8.30.  This is just below the 52-week high for $NZX.NZ of NZ$8.40.  We decided to have a look at the current share price in relation to the intrinsic value of the company’s shares?

Valuecruncher Interactive Analyst Report For $NZX.NZ

Valuecruncher produces a valuation of NZ$9.33 for $NZX.NZ. This is a current valuation (an estimate of intrinsic value using a discounted cash flow model) not a target price. This valuation is 12.4% above the current share price of NZ$8.30.

Assumptions

• Revenue: Reuters aggregates four analysts covering $NZX.NZ and these produce mean estimates of 2009 and 2010 revenues of NZ$36.3 million and NZ$42.6 million respectively. For our analysis we have used NZ$36.0 million in 2009, NZ$42.0 million in 2010 and NZ$46.0 million in 2011.
• Profitability: We have used an EBITDA margin of 52.0% in 2009 dropping to 50.0% in 2010 and beyond. Reuters has $NZX.NZ‘s EBITD margin at 51.8% last year and an average of 42.3% over the last five-years.
• Capital Expenditure: We have assumed capital expenditures of NZ$2.0 million per annum moving forward.
• Discount Rate: 10.5%. The PwC New Zealand cost of capital report has $NZX.NZ at a WACC of 11.1% with the wider NZ market at 8.3%.
• Terminal Growth Rate: 3.8%.  We have assumed our 9.5% growth between 2010 and 2011 gradually decreases to a stable long-term growth rate of 3%.

Our analysis incorporates the cash on the $NZX.NZ balance sheet – Valuecruncher calculates a net debt number.

Play with our assumptions – what does your analysis say?

Disclosure: None

Valuecruncher was at FinovateStartup09 this week in San Francisco.

It was a great event for Valuecruncher.  We met some really interesting people and got to show off what we are doing to a smart connected crowd. We recorded a formal video there which we will link to when it is up on the Finovate site.  But here are some other links and thoughts for now:

Banktastic were providing coverage of the conference and they captured Mark Clare giving a demo of the Valuecruncher service to an attendee.

Mark Clare spent some time talking to Larry Chiang from BusinessWeek.  Larry asked what were the three things he learned at Finovate that he did not learn at business school (the name of his column).  Here is his three - enjoy:

1. To be a successful personal finance management (PFM in the lingo) site you need to have grass on your home page – examples Mint and Rudder (HT: LendingKarma).
2. Speaking of LendingKarma. Even without the MBA I know that LendingKarma and CreditKarma (both participants at FinovateStartup09) should merge for the name synergies alone.
3. That there are sure are a lot of you “English” guys around.  I am from New Zealand.  Literally the other side of the world.

Update: these links are currently down.  We hope to have them back up as soon as possible. 

NZX is the New Zealand stock exchange.  Today NZX placed links to Valuecruncher valuations for the NZX 50 on their website NZX.com.

NZX Summary Page For Telecom New Zealand ($TEL.NZ)

At Valuecruncher we believe research is important for retail investors participating in equity markets.  Retail investors are looking for recommendations and guidance in making investments.  Valuecruncher is very pleased to be making our interactive analyst reports available to a wider audience through our partnership with NZX.