With the launch of our new interactive analyst reports we complete a monthly review of the approximately 750 valuations in our data-set.  This involves a review of the assumptions we are using in the valuations. We use consensus analyst estimates as the basis of our assumptions.  For example – consensus analyst estimates of revenues for New Zealand’s largest listed company Telecom New Zealand ($TEL.NZ).  Valuecruncher uses these numbers and our own assessments of other valuation assumptions such as the discount rate and terminal growth rate.

At Valuecruncher we then pull all of these variables together and place a valuation on the shares of the companies in our data-set and provide a recommendation.  You can either simply look at our valuations – or for all the experts out there, you can change the assumptions we have used and modify the valuation.  Modified valuations can be saved and shared.

With the completion of our monthly review of the companies on the NZX (New Zealand stock exchange) we decided to outline what we at Valuecruncher see as the most undervalued (the best buys).

We should note that you can always find a list of the Valuecruncher buy recommendations for the NZX from the most undervalued using our filters.  The following list highlights the top five buys based on the latest review of the valuation assumptions.

Valuecruncher’s Top Five Buys On The NZX – March 2009

Number 1

Michael Hill International ($MHI.NZ) is a New Zealand-based jewelry retailer and manufacturer.  Valuecruncher currently values $MHI.NZ at NZ$0.71 – 39% above the current share price.

Valuecruncher Interactive Analyst Report For $MHI.NZ

Number 2

Sky Network Television ($SKT.NZ) is a provider of pay and free-to-air television services in New Zealand.  Valuecruncher currently values $SKT.NZ at NZ$5.06 – 33% above the current share price.

Valuecruncher Interactive Analyst Report For $SKT.NZ

Number 3

Hallenstein Glasson Holdings ($HLG.NZ) is a NZX-listed clothing retailer.  Valuecruncher currently values $HLG.NZ at NZ$2.49 – 26% above the current share price.

Valuecruncher Interactive Analyst Report For $HLG.NZ

Number 4

Air New Zealand ($AIR.NZ) is an international and domestic airline based in New Zealand.  Valuecruncher currently values $AIR.NZ at NZ$1.11 – 24% above the current share price.

Valuecruncher Interactive Analyst Report For $AIR.NZ

Number 5

Methven ($MVN.NZ) is a New Zealand company that designs and supplies taps and shower-ware.  Valuecruncher currently values $MVN.NZ at NZ$1.27 – 18% above the current share price.

Valuecruncher Interactive Analyst Report For $MVN.NZ

Those are our top five buys for March 2009.  You can also always find a list of the Valuecruncher sell recommendations for the NZX from most overvalued up using our filters.

Disclosure: None

Hallenstein Glasson Holdings ($HLG.NZ) is a NZX-listed retailer of mens and womans clothing. $HLG.NZ is trading just above their 52-week low. How is this in relation to the intrinsic value of the company’s shares?

Valuecruncher valuation model of $HLG.NZ with interactive assumptions

Valuecruncher produces a valuation of NZ$2.51 for $HLG.NZ. This is a current valuation (an estimate of intrinsic value using a discounted cash flow model) not a target price. This valuation is 11.6% above the current share price of NZ$2.25.

Assumptions

• Revenue: Reuters aggregates six analysts covering $HLG.NZ and the mean estimate of 2009 revenues are NZ$201.6 million. For our analysis we have used NZ$180.0 million in 2009, NZ$185.0 million in 2010 and NZ$200.0 million in 2011.
• Profitability: We have used an EBITDA margin of 11.0% in 2009 rising to 12.0% in 2011. Reuters has $HLG.NZ‘s EBITD margin at 14.3% last year and an average of 16.6% over the last five-years.
• Capital Expenditure: We have assumed capital expenditures of NZ$8.0 million per annum moving forward.
• Discount Rate: 10.0%. The PwC New Zealand cost of capital report lists $HLG.NZ at 10.1% with the wider market at 9.5%. We believe a discount rate in the 9-11% range is appropriate.
• Terminal Growth Rate: 2.0%. The New Zealand economy has grown at an average rate of 2.6% over the last five-years. We see $HLG.NZ growing slightly below this level moving forward.

Our analysis incorporates the cash on the $HLG.NZ balance sheet – Valuecruncher calculates a net debt number.

Play with our assumptions – what does your analysis say? We think the assumptions underlying our analysis are pretty conservative.

Disclosure: None