Editing Fonterra Co-operative Group Limited
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== Valuations == | == Valuations == | ||
Discounted cash flow (DCF) modelling was used to value Fonterra. | |||
=== DCF === | === DCF === | ||
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|1.158 | |1.158 | ||
|} | |} | ||
{| class="wikitable" | {| class="wikitable" | ||
|Sum FCF | |Sum FCF | ||
|5.585 | |5.585 | ||
|- | |- | ||
|Terminal growth rate | |Terminal growth rate | ||
| | |0% | ||
|- | |- | ||
|Terminal value | |Terminal value | ||
| | |11.005 | ||
|- | |- | ||
|Enterprise value | |Enterprise value | ||
| | |16.590 | ||
|- | |- | ||
| | | | ||
| | | | ||
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|Net debt | |Net debt | ||
|4.931 | |4.931 | ||
|- | |- | ||
|Equity value | |Equity value | ||
| | |11.659 | ||
|- | |- | ||
|Shares | |Shares | ||
|1.61 | |1.61 | ||
|- | |- | ||
|'''Fair share price in NZD''' | |'''Fair share price in NZD''' | ||
| | |7.24 | ||
|- | |- | ||
|'''Current share price in NZD''' | |'''Current share price in NZD''' | ||
|3.12 | |3.12 | ||
|} | |} | ||
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|- | |- | ||
|'''Fonterra''' | |'''Fonterra''' | ||
| | |0.2 | ||
| | |6.6 | ||
| | |4.3 | ||
| | |6.5 | ||
| | |69.1% | ||
| | |6.2% | ||
| | |9.6 | ||
| | |69.2 | ||
|- | |- | ||
|Nestle SA | |'''Nestle SA''' | ||
|3 | |3 | ||
|31 | |31 | ||
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| - | | - | ||
|- | |- | ||
|Mondelez International | |'''Mondelez International''' | ||
|3 | |3 | ||
|25.1 | |25.1 | ||
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|106.7 | |106.7 | ||
|- | |- | ||
|Hershey | |'''Hershey''' | ||
|4.5 | |4.5 | ||
|28.2 | |28.2 | ||
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|32.4 | |32.4 | ||
|- | |- | ||
|Kraft Heinz | |'''Kraft Heinz''' | ||
|1.7 | |1.7 | ||
|18.3 | |18.3 | ||
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|36.1 | |36.1 | ||
|- | |- | ||
|General Mills | |'''General Mills''' | ||
|2.2 | |2.2 | ||
|17 | |17 | ||
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|64.8 | |64.8 | ||
|- | |- | ||
|Danone SA | |'''Danone SA''' | ||
|1.3 | |1.3 | ||
|38 | |38 | ||
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|28.3 | |28.3 | ||
|- | |- | ||
|Foshan Haitan Flavourings and Food | |'''Foshan Haitan Flavourings and Food''' | ||
|9.9 | |9.9 | ||
|41.1 | |41.1 | ||
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| - | | - | ||
|- | |- | ||
|Muyuan Foods | |'''Muyuan Foods''' | ||
|1.8 | |1.8 | ||
|13.5 | |13.5 | ||
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|18.9 | |18.9 | ||
|- | |- | ||
|Yihai Kerry Arawana Holdings | |'''Yihai Kerry Arawana Holdings''' | ||
|0.9 | |0.9 | ||
|59.7 | |59.7 | ||
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| | | | ||
|- | |- | ||
|''' | |'''Medain''' | ||
| | |2.2 | ||
| | |28.2 | ||
| | |16.7 | ||
| | |20.5 | ||
| | |70.0% | ||
| | |111.0% | ||
| | |2.1 | ||
| | |3.1 | ||
|- | |- | ||
|Mean | |'''Mean''' | ||
|3.1 | |3.1 | ||
|30.2 | |30.2 | ||
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|54.8 | |54.8 | ||
|- | |- | ||
|Lower Quartile | |'''Lower Quartile''' | ||
|1.7 | |1.7 | ||
|18.3 | |18.3 | ||
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|30.3 | |30.3 | ||
|- | |- | ||
|Upper Quartile | |'''Upper Quartile''' | ||
|3.0 | |3.0 | ||
|38.0 | |38.0 | ||
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|80.5 | |80.5 | ||
|- | |- | ||
|Min | |'''Min''' | ||
|0.2 | |0.2 | ||
|6.6 | |6.6 | ||
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|18.9 | |18.9 | ||
|- | |- | ||
|Max | |'''Max''' | ||
|9.9 | |9.9 | ||
|59.7 | |59.7 | ||
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P/E – Price to Earnings ratio shows how much an investor is willing to pay per dollar of earnings generated. It portrays an investor’s expectation of the future earnings of the company. The average P/E ratio in the industry is 28.2 while the P/S ratio of Fonterra is 6.6. A low P/E ratio suggests that the investors are willing to pay a lower price per dollar of EPS generated implying an overvaluation. | |||
P/E – Price to Earnings ratio shows how much an investor is willing to pay per dollar of earnings generated. It portrays an investor’s expectation of the future earnings of the company. The average P/E ratio in the industry is 28.2 while the P/S ratio of Fonterra is 6.6. A low P/E ratio suggests that the investors are willing to pay a lower price per dollar of EPS generated implying an | |||
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== Risk Assessment == | == Risk Assessment == | ||
=== Dairy Industry | === Dairy Industry Restructing Act (DIRA) === | ||
The initial implementation of DIRA in 2001 lifted controls on exporting NZ dairy, effectively opening up competition of NZ dairy internationally. However, the near monopsony state of Fonterra Co-op with farmers decrease competition domestically. DIRA sets out requirements, specifically section 4(f) of the Act specifically states to regulate Fonterra to push overall contestability and efficiency of NZ dairy<ref name=":1" />. | The initial implementation of DIRA in 2001 lifted controls on exporting NZ dairy, effectively opening up competition of NZ dairy internationally. However, the near monopsony state of Fonterra Co-op with farmers decrease competition domestically. DIRA sets out requirements, specifically section 4(f) of the Act specifically states to regulate Fonterra to push overall contestability and efficiency of NZ dairy<ref name=":1" />. | ||