n New Zealand and Australia. $EBO.NZ is trading just above their 52-week low. How is this in relation to the intrinsic value of the company’s shares?
Valuecruncher produces a valuation of NZ$4.54 for $EBO.NZ. This is a current valuation (an estimate of intrinsic value using a discounted cash flow model) not a target price. This valuation is 9.4% above the current share price of NZ$4.15.
- Revenue: Reuters aggregates three analysts covering $EBO.NZ and the mean estimate of 2009 and 2010 revenues are NZ$1.26 billion and NZ$1.33 billion respectively. For our analysis we have used NZ$1.25 billion in 2009, NZ$1.30 billion in 2010 and NZ$1.35 billion in 2011.
- Profitability: We have used an EBITDA margin of 2.5% in 2009 rising to 3.0% in 2011. Reuters has $EBO.NZ‘s EBITD margin at 3.1% last year and an average of 4.9% over the last five-years.
- Capital Expenditure: We have assumed capital expenditures of NZ$4.0 million per annum moving forward.
- Discount Rate: 11.0%. The PwC New Zealand cost of capital report lists $EBO.NZ at 10.7% 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: 2.5%.
Our analysis incorporates the cash and debt on the $EBO.NZ balance sheet – Valuecruncher calculates a net debt number.
Play with our assumptions – what does your analysis say?