Skellerup Holdings ($SKL.NZ) is a New Zealand company that develops and distributes technical polymer products for a variety of specialist industrial

and agricultural applications. $SKL.NZ closed today at their 52-week low. How is this in relation to the intrinsic value of the company’s shares?

Valuecruncher valuation model of $SKL.NZ with interactive assumptions

Valuecruncher produces a valuation of NZ$0.89 for $SKL.NZ. This is a current valuation (an estimate of intrinsic value using a discounted cash flow model) not a target price. This valuation is 17.1% above the current share price of NZ$0.76.

Assumptions

• Revenue: Reuters aggregates four analysts covering $SKL.NZ and the mean estimate of 2009 revenues is NZ$193.3 million. For our analysis we have used NZ$190.0 million in 2009, NZ$205.0 million in 2010 and NZ$215.0 million in 2011.
• Profitability: We have used an EBITDA margin of 14.0% in 2009 rising to 15% in 2011. Reuters has $SKL.NZ‘s EBITD margin at 16.5% last year and an average of 15.1% over the last five-years.
• Capital Expenditure: We have assumed capital expenditures of NZ$7.5 million per annum moving forward.
• Discount Rate: 11.0%. The PwC New Zealand cost of capital report does not list $SKL.NZ but has 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 $SKL.NZ balance sheet – Valuecruncher calculates a net debt number.

Play with our assumptions – what does your analysis say?

Disclosure: None