NZX-listed The New Zealand Refining Company ($NZR.NZ) has fluctuated between NZ$8.35 and NZ$5.75 over the last 12 months. The current share price is NZ$5.80. How is this in relation to the intrinsic value of the company’s shares?

Valuecruncher valuation model of $NZR.NZ with interactive assumptions

Valuecruncher produces a valuation of NZ$5.59 for $NZR.NZ. This is a current valuation (an estimate of intrinsic value using a discounted cash flow model) not a target price. This valuation is 3.6% below the current share price of NZ$5.80.

Assumptions

• Revenue: Reuters aggregates three analysts covering $NZR.NZ and the mean estimate of 2009 revenues is NZ$389.6 million. For our analysis we have used NZ$385.0 million in 2009, NZ$400.0 million in 2010 and NZ$415.0 million in 2011.
• Profitability: We have used an EBITDA margin of 60.0% to 2011. Reuters has $NZR.NZ‘s EBITD margin at 59.5% last year and an average of 62.7% over the last five-years.
• Capital Expenditure: We have assumed capital expenditures of NZ$125.0 million in 2009, NZ$100 million in 2010 then NZ$75.0 million per annum moving forward.
• Discount Rate: 11.0%. The PwC New Zealand cost of capital report lists $NZR.NZ at 11.2% with the wider market at 9.5%.
• Terminal Growth Rate: 3.0%. The New Zealand economy has grown at an average rate of 2.6% over the last five-years. Our assumption is $NZR.NZ growing broadly in line with this.

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

Play with our assumptions – what does your analysis say?

Disclosure: None

Tags: NZR, NZX

This entry was posted on Monday, January 5th, 2009 at 9:25 am and is filed under NZX, New Zealand Refining. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.