RE: Q120 May 2018 10:16
Mike, it is indeed Discounted Cash Flow.
Revenue=Vanity, Profit=Sanity and Cash Flow=Reality.
I personally tend to look at the DCF when valuing companies in a takeover/take private situation.
The �5.25 was arrived at using data from a uni computer using revenues updated from the Q1 results. Just had a look at a publicly available DCF from the Simply Wally Street website which gives a good description of how to calculate it but comes out with a DCF of �4.62 which is I believe is based on revenues/forecasts prior to Q1, and uses forecasts from brokers that are different from the ones we used.
There are liars, damned liars and statisticians - changing forecasts/revenues/brokers/currency exchange rates means you can alter the figures significantly in either direction. The range of broker forecasts is very wide, removing the more pessimistic ones means the DCF shoots up significantly. On balance, I believe �5.25 is about right.
FYI - Simply Wall Street calculated it as below :
Discounted cash flow (2 Stage Free Cash Flow to Equity)
The calculations below outline how an intrinsic value for Inmarsat is arrived at by discounting future cash flows to their present value. We use analyst's estimates of cash flows going forward 5 years.
5 year cash flow forecast 2018 2019 2020 2021 2022
Levered FCF (USD, Millions)
$26.20 $-7.71 $67.04 $161.37 $249.60
Source Analyst x8 Analyst x9 Analyst x7 Analyst x3 Analyst x2
Present Value
Discounted (@ 8.3%)
$24.19 $-6.57 $52.78 $117.31 $167.55
Present value of next 5 years cash flows: $355
Terminal Value
Terminal Value = FCF2022 � (1 + g) � (Discount Rate � g)
Terminal Value = $250 � (1 + 1.49%) � (8.3% � 1.49%)
Terminal value based on the Perpetuity Method where growth (g) = 1.49%:
$3,721
Present value of terminal value: $2,498
Equity Value
Equity Value (Total value) = Present value of next 5 years cash flows + terminal value
$2,853 = $355 + $2,498
Value = Total value / Shares Outstanding ($2,853 / 458)
Discount to Share Price
Currency Adjustment (from reporting currency to currency of LSE:ISAT Ordinary Shares)
Exchange rate USD/GBP = 0.742
Value per share (LSE:ISAT) : �4.62 = $6.22 x 0.742 (USD/GBP)
Value per share (GBP): �4.62
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