Valuecruncher has valued each Kirkcaldies share at $2.75 with a range between $1.85 and $3.70. The current share price is $2.80.

Key Assumptions

Revenue Growth

Revenue growth has been very unstable in the 03/04, 04/05, and 05/06 periods with growth rates of -1.15%, 4.78% and 0.37%, respectively. The company has recently had a change of management (as of April 2006) and for this reason, along with recent unfavourable trading conditions, it is difficult to predict how revenues will grow in the next three years. We have forecasted growth to be flat for the next year and 2% for the next two periods, in line with terminal growth, which is also assumed to be 2%.

EBIT Margins

EBIT margins have been sliding since 2004, decreasing from 7.96% to 5.13%. With new management in place, it is likely that these margins will improve slowly over time. We have forecasted margins to be 5%, 5.5% and 6% for the next three years.

Discount Rate (WACC)

The discount rate applied is 8%, adjusted upwards from the PwC estimate of 7.5%. Although the discount rate has been adjusted upwards, it is still very low due to Kirkcaldie and Stains’ high debt-to-equity ratio)

Kirkcaldies Valuation