Vector ($VCT.NZ) is a New Zealand owner and operator of network infrastructure (electricity, gas and communications). $VCT.NZ is one of the few large New Zealand companies that have successfully navigated the recent New Zealand corporate governance controversies. $VCT.NZ is trading in the middle of their 52-week range. How is this in relation to the intrinsic value of the company’s shares?
Valuecruncher produces a valuation of NZ$1.92 for $VCT.NZ. This is a current valuation (an estimate of intrinsic value using a discounted cash flow model) not a target price. This valuation is 4.0% below the current share price of NZ$2.00.
- Revenue: Reuters aggregates seven analysts covering $VCT.NZ and the mean estimates of 2009 revenues are NZ$1.187 billion. For our analysis we have used NZ$1.185 billion in 2009, NZ$1.200 billion in 2010 and NZ$1.215 billion in 2011.
- Profitability: We have used a flat EBITDA margin of 47.0% to 2011. Reuters has $VCT.NZ‘s EBITD margin at 44.7% last year and an average of 49.7% over the last five-years.
- Capital Expenditure: We have assumed capital expenditures of NZ$205.0 million per annum moving forward.
- Discount Rate: 7.0%. The PwC New Zealand cost of capital report has $VCT.NZ at a WACC of 7.2% with the wider NZ market at 9.5%.
- Terminal Growth Rate: 2.5%.
Our analysis incorporates the cash and debt on the $VCT.NZ balance sheet – Valuecruncher calculates a net debt number.
Play with our assumptions – what does your analysis say?