DCF Studio

ARB.AX · ASX · Consumer Cyclical

ARB Corporation Limited

Implied value per share

AUD 14.05

Market price

AUD 20.35

Implied upside

-30.9%

5y forecast · perpetuity growth TV · mid-year discounting · base case

AdjustedSome line items were not reported and have been derived. Each one is labelled in the workings below.
AdjustedCapital expenditure runs at 7.6% of revenue against depreciation of 4.0%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

Value Per Share

Perpetuity growth
AUD 14.05-30.9%
Exit multiple
AUD 19.47-4.3%
Market price
AUD 20.35

Same forecast, different terminal treatment. Percentages vs price.

Forecast Cashflows

Reporting currency (AUD). Outflows negative.

0m43m87mFY26FY27FY28FY29FY30
Nominal FCFFDiscounted to todayAUD
LineFY26FY27FY28FY29FY30CAGR
RevenueAUD 742.2mAUD 754.6mAUD 767.2mAUD 780.0mAUD 793.0m+1.7%
EBITAUD 147.9mAUD 150.4mAUD 152.9mAUD 155.4mAUD 158.0m+1.7%
NOPATAUD 107.3mAUD 109.1mAUD 110.9mAUD 112.7mAUD 114.6m+1.7%
Add depreciation & amortisationAUD 29.7mAUD 30.2mAUD 30.7mAUD 31.2mAUD 31.7m+1.7%
Less capital expenditureAUD -56.7mAUD -57.6mAUD -58.6mAUD -59.6mAUD -60.6m+1.7%
Less increase in working capitalAUD 712.8kAUD 724.8kAUD 736.9kAUD 749.2kAUD 761.7k-1.7%
Free cashflow to firmAUD 81.0mAUD 82.4mAUD 83.7mAUD 85.1mAUD 86.6m+1.7%
Discount factor0.95220.86320.78260.70950.6432-
Present valueAUD 77.1mAUD 71.1mAUD 65.5mAUD 60.4mAUD 55.7m-7.8%
Present Value Of The ForecastAUD 329.8m

Discount Rate

Source shown per component. All overridable above.

Risk-free rate4.93%Australian Government 10-year (RBA F2)
Equity risk premium6.00%Market assumption
Beta0.924As reported
Cost of equity10.48%Risk-free + beta x equity risk premium
Cost of debt5.43%Interest expense / average total debt
Market capitalisationAUD 1.7bn97.3% of capital
Total debtAUD 46.6m2.7% of capital, book value as a proxy
Tax rate27.5%Effective, capped at statutory
WACC10.30%E/V x Re + D/V x Rd x (1 - t)

Terminal Value

Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

Perpetuity growth at 2.50%

Value per shareAUD 14.05

71% of EV

Forecast FCFF, final year
AUD 86.6m
Capex reset to depreciation
AUD 115.4m
Less reinvestment at g/ROIC (16.8% of NOPAT)
AUD -19.2m
Capitalised
AUD 96.1m
ROIC (reported)
14.9%
Terminal value, undiscounted
AUD 1.3bn
Terminal value, discounted
AUD 812.4m
Enterprise value
AUD 1.1bn
Less net debt
AUD -22.6m
Equity value
AUD 1.2bn

Exit at 10.3x EBITDA

Value per shareAUD 19.47

79% of EV

Terminal value, undiscounted
AUD 2.0bn
Terminal value, discounted
AUD 1.3bn
Enterprise value
AUD 1.6bn
Less net debt
AUD -22.6m
Equity value
AUD 1.6bn

Spread between methods: 32%.

Sensitivity

Value per share (AUD) by discount rate and long-run growth.

Long-run growth
Discount rate1.50%2.00%2.50%3.00%3.50%
8.30%17.4818.0618.7419.5320.49
9.30%15.2615.6316.0516.5317.09
10.30%13.5413.7814.0514.3514.69
11.30%12.1812.3412.5112.7012.91
12.30%11.0711.1711.2811.4011.53

Outlined: this model. Green text: above today's price of 20.35. Shading: distance from this model's own value.

Priced In

Each input solved to today's price, holding the others. Alternatives, not a set.

InputModelImpliedGap
Revenue growth, every year1.7%9.8%+8.1pp
EBIT margin19.9%28.3%+8.4pp
Discount rate10.3%7.8%-2.5pp

Yahoo Finance and RBA data. General information, not advice. Methodology.