We have previously looked at Fisher & Paykel Healthcare ($FPH.NZ). Fisher & Paykel Appliances (FPA.NZ) is the original appliances side of the business. The current share price is NZ$1.33 - just above the 52-week low. How is this in relation to the intrinsic value of the company’s shares?

Valuecruncher valuation model of $FPA.NZ with interactive assumptions

Valuecruncher produces a valuation of NZ$1.33 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 right on the current share price of NZ$1.33.

Assumptions

• Revenue: Reuters aggregates seven analysts covering $FPA.NZ and this produces mean estimates of 2009 and 2010 revenues of NZ$1.445 billion and NZ$1.549 billion respectively. For our analysis we have used NZ$1.425 billion in 2009, NZ$1.525 billion in 2010 and NZ$1.60 billion in 2011.
• Profitability: We have used an EBITDA margin of 10% in 2009 rising to 11% in 2011. Reuters has $FPA.NZ‘s EBITD margin at 10.3% last year and an average of 12.8% over the last five-years.
• Capital Expenditure: We have assumed capital expenditures of NZ$85.0 million in 2009 then NZ$65.0 million moving forward.
• Discount Rate: 9.5%. The PwC New Zealand cost of capital report has $FPA.NZ at a WACC of 9.3% with the wider NZ market at 9.5%.
• Terminal Growth Rate: 3.5%.

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

Valuecruncher has placed a value of $4.21 on each F&P Appliances shares, with a range between $2.77 and $5.74. The current share price stands at $3.94.

Revenue Growth

F&P have experienced revenue growth rates of 12.43%, 10.66%, and 16.40% for the past three periods, and with the implementation of a wider variety of products and expansion in the US, it is likely that comparatively high growth rate will be seen in the next few years. We have forecasted growth rates of 16%, 14%, and 12% for the 06/07, 07/08, and 08/09 periods, respectively.

EBIT Margin

EBIT margins have decreased from 13.84% in 2004 to 9.08% in 2006. Margins will continue to be pressured by a strong New Zealand dollar and high raw material prices. “Aggressive cost saving strategies” (as stated in the F&P Appliances 2006 annual report) are currently being implemented to ease this pressure. We have projected EBIT margins of 9% for 2007 and 8% for 2008 and 2009. This is slightly higher than the margins currently seen at Whirlpool of around 6%. However, historically, F&P have operated at higher margins than Whirlpool.

Terminal Growth

Terminal growth has been set at 3%.

Discount Rate (WACC)

A discount rate of 10.1% has been applied (sourced from the PwC Cost of Capital Report).

FP Appliances Valuation