Running The Numbers - Freightways ($FRE.NZ)
Freightways ($FRE.NZ) is a New Zealand company that operates in the express package, business mail and information management markets. $FRE.NZ closed yesterday at their 52-week low. How is this in relation to the intrinsic value of the company’s shares?
Valuecruncher valuation model of $FRE.NZ with interactive assumptions
Valuecruncher produces a valuation of NZ$2.71 for $FRE.NZ. This is a current valuation (an estimate of intrinsic value using a discounted cash flow model) not a target price. This valuation is 3.2% below the current share price of NZ$2.80.
Assumptions
- Revenue: Reuters aggregates six analysts covering $FRE.NZ and the mean estimate of 2009 and 2010 revenues are NZ$352.9 million and NZ$372.3 million respectively. For our analysis we have used NZ$350.0 million in 2009, NZ$370.0 million in 2010 and NZ$380.0 million in 2011.
- Profitability: We have used an EBITDA margin of 20.0% in 2009 rising to 21.5% in 2011. Reuters has $FRE.NZ‘s EBITD margin at 21.1% last year and an average of 22.6% over the last five-years.
- Capital Expenditure: We have assumed capital expenditures of NZ$20.0 million in 2009 then NZ$15.0 million per annum moving forward.
- Discount Rate: 11.0%. The PwC New Zealand cost of capital report lists $FRE.NZ at 11.2% with the wider market at 9.5%. We believe a discount rate in the 10-12% range is appropriate. We have chosen the middle of this range.
- Terminal Growth Rate: 3.0%.
Our analysis incorporates the cash and debt on the $FRE.NZ balance sheet – Valuecruncher calculates a net debt number.
Play with our assumptions – what does your analysis say?
Disclosure: None