is NZ$6.00. How is this in relation to the intrinsic value of the company’s shares?
Valuecruncher produces a valuation of NZ$5.81 for $POT.NZ. This is a current valuation (an estimate of intrinsic value using a discounted cash flow model) not a target price. This valuation is 3.2% below the current share price of NZ$6.00.
- Revenue: Reuters aggregates four analysts covering $POT.NZ and the mean estimates of 2009 and 2010 revenues are NZ$157.1 million and NZ$167.8 million respectively. For our analysis we have used NZ$155.0 million in 2009, NZ$165.0 million in 2010 and NZ$175.0 million in 2011.
- Profitability: We have used an EBITDA margin of 55.0% to 2011. Reuters has $POT.NZ‘s EBITD margin at 52.7% last year and an average of 52.5% over the last five-years.
- Capital Expenditure: We have assumed capital expenditures of NZ$25.0 million in 2009 then NZ$12.0 million per annum moving forward.
- Discount Rate: 9.5%. The PwC New Zealand cost of capital report lists $POT.NZ at 9.6% with the wider market at 9.5%.
- Terminal Growth Rate: 3.5%. The New Zealand economy has grown at an average rate of 2.6% over the last five-years. Our assumption is $POT.NZ growing at 6.1% in 2010/11 moving to a stable 3.0% growth rate.
Our analysis incorporates the cash and debt on the $POT.NZ balance sheet – Valuecruncher calculates a net debt number.
Play with our assumptions – what does your analysis say?