Valuecruncher has placed a value of $2.26 per Delegat’s share with a range between $1.39 and $3.23.  The mid-point valuation is very close to the current share price of $2.40.

Revenue Growth

Delegat’s has been experiencing very healthy growth in the last few periods, with growths of 80.80% in the 04/05 period and 47.3% in the 05/06 period. The numbers in Delegat’s March 2006 prospectus (http://www.delegatsgroup.co.nz/pdfs/prospectus.pdf) indicated that growth in the 06/07 period was expected to be around 50%. However, as they exceeded expectations during the 05/06 period, it may be that the growth that was projected to occur in the 06/07 period has come a little bit earlier. We have forecasted revenues to grow at 45% during the 06/07 period, steadily decreasing to 25% in the 08/09 period.

EBIT Margins

The EBIT margins have been growing from 7.28% in 2004 to 16.16% in 2006. The March Prospectus indicated that EBIT margins would grow to 25% in 2007. We can see this as being a real possibility, and have also forecasted EBIT margins to remain at 25%.

Terminal Growth

Terminal growth has been forecasted to be 3%.

Discount Rate (WACC)

The discount rate applied in the analysis is 11%.

Delegat’s Valuation