chael-hill-international-mhinz/”>in November last year. $MHI.NZ is a New Zealand listed jewelry retailer and manufacturer. In November 2008 we placed a value on $MHI.NZ of NZ$0.88 per share. In November $MHI.NZ was trading at NZ$0.66. $MHI.NZ has continued to track downwards – currently trading at NZ$0.51. We decided to review our previous valuation and look at the current share price.
Valuecruncher produces a valuation of NZ$0.70 for $MHI.NZ. This is a current valuation (an estimate of intrinsic value using a discounted cash flow model) not a target price. This valuation is 37.25% above the current share price of NZ$0.51.
- Revenue: Reuters aggregates two analysts covering $MHI.NZ and the mean estimates of 2009 and 2010 revenues are NZ$412.1 million and NZ$426.6 million respectively. For our analysis we have used NZ$410.0 million in 2009, NZ$425.0 million in 2010 and NZ$450.0 million in 2011. Previously we had revenues of NZ$440.0 million in 2010 and NZ$480.0 million in 2011.
- Profitability: We have used a flat EBITDA margin of 11.0% to 2011. Reuters has $MHI.NZ‘s EBITD margin at 10.7% last year and an average of 12.1% over the last five-years. Previously we used a flat 12.0% EBITDA margin.
- Capital Expenditure: We have assumed capital expenditures of NZ$16.0 million per annum moving forward. This is the same as our previous analysis.
- Discount Rate: 10.0%. The PwC New Zealand cost of capital report has $MHI.NZ at a WACC of 10.9% with the wider NZ market at 9.1%. Previously we used 10.0% with PwC giving $MHI.NZ a WACC of 7.8%. We have kept our discount rate at the same level as our previous analysis. The movement in PwC’s cost of capital report is significant.
- Terminal Growth Rate: 3.0%. This is the same as our previous analysis.
Our analysis incorporates the cash and debt on the $MHI.NZ balance sheet – Valuecruncher calculates a net debt number.
Play with our assumptions – what does your analysis say?