Fonterra Co-operative Group Limited - Revision history

>Ihl22: /* Discounted Cash Flow Statement */

2023-07-31T02:55:46Z

Discounted Cash Flow Statement

← Older revision		Revision as of 03:55, 31 July 2023
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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%		\|4%
			\|Average perpetuity growth rate<ref>https://finbox.com/NZSE:FCG/models/ddm-sg/</ref>
	\|-		\|-
	\|Terminal value		\|Terminal value
	\|11.~~005~~		\|17.070
			\|
	\|-		\|-
	\|Enterprise value		\|Enterprise value
	\|16.~~590~~		\|22.655
			\|
	\|-		\|-
			\|
	\|		\|
	\|		\|
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	\|Net debt		\|Net debt
	\|4.931		\|4.931
			\|
	\|-		\|-
	\|Equity value		\|Equity value
	\|11.~~659~~		\|17.724
			\|
	\|-		\|-
	\|Shares		\|Shares
	\|1.61		\|1.61
			\|
	\|-		\|-
	\|'''Fair share price in NZD'''		\|'''Fair share price in NZD'''
	\|7.24		\|11.01
			\|
	\|-		\|-
	\|'''Current share price in NZD'''		\|'''Current share price in NZD'''
	\|3.12		\|3.12
			\|
	\|}		\|}

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	\|		\|
	\|-		\|-
	\|'''~~Medain~~'''		\|'''Median'''
	\|'''2.2'''		\|'''2.2'''
	\|'''28.2'''		\|'''28.2'''

>Vraj Agarwal: /* Relative Valuation */

2023-07-29T00:06:50Z

Relative Valuation

← Older revision		Revision as of 01:06, 29 July 2023
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	\|-		\|-
	\|'''Fonterra'''		\|'''Fonterra'''
	\|0.2		\|'''0.2'''
	\|6.6		\|'''6.6'''
	\|4.3		\|'''4.3'''
	\|6.5		\|'''6.5'''
	\|69.1%		\|'''69.1%'''
	\|6.2%		\|'''6.2%'''
	\|9.6		\|'''9.6'''
	\|69.2		\|'''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'''		\|'''Medain'''
	\|2.2		\|'''2.2'''
	\|28.2		\|'''28.2'''
	\|16.7		\|'''16.7'''
	\|20.5		\|'''20.5'''
	\|70.0%		\|'''70.0%'''
	\|111.0%		\|'''111.0%'''
	\|2.1		\|'''2.1'''
	\|3.1		\|'''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 undervaluation.


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	== Risk Assessment ==		== Risk Assessment ==

	=== Dairy Industry ~~Restructing~~ Act (DIRA) ===		=== Dairy Industry Restructuring 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" />.

>Vraj Agarwal: /* Financial */

2023-07-29T00:05:23Z

Financial

@@ Line 202: / Line 202: @@
 From the revenue profile of market segments, it can be seen that ingredients supply are driving most of the revenue of Fonterra. In the 2030 prospect, Fonterra does claim plan to expand its foodservices channels in existing key markets in Asia Pacific. In Asia pacific regions, particularly Indonesia and Malaysia where general income is increasing and dairy products been viewed as premium products, Fonterra aims to double its efforts to expand these foodservice channels (such as local bakeries) to meet growing demands.
-== Financial ==
+== Financials ==
 Discounted cash flow (DCF) modelling was used to value Fonterra.

>Vraj Agarwal: /* Valuation */

2023-07-28T23:34:37Z

Valuation

Show changes

>Ihl22: /* WACC */

2023-07-27T01:26:18Z

WACC

← Older revision		Revision as of 02:26, 27 July 2023
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	==== WACC ====		==== WACC ====
	{\| class="wikitable"		{\| class="wikitable"
	\| colspan~~="2" rowspan~~="2" \|'''WACC'''		\| colspan="2" \|'''WACC'''
	\|'''Reasons'''		\|'''Reasons'''
	\|-
	\|-		\|-
	\|Risk free rate		\|Risk free rate
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	\|-		\|-
	\|		\|
			\|
	\|		\|
	\|-		\|-

>Ihl22: /* Valuation */

2023-07-27T01:22:22Z

Valuation

← Older revision		Revision as of 02:22, 27 July 2023
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	{\| class="wikitable"		{\| class="wikitable"
	\|Sum FCF		\|Sum FCF
	\|5.~~603~~		\|5.585
	\|
	\|-		\|-
	\|Terminal growth rate		\|Terminal growth rate
	\|0%		\|0%
	~~\|Base case used<ref>https://www.alphaspread.com/security/nzx/fcg/dcf-valuation/base-case</ref>~~
	\|-		\|-
	\|Terminal value		\|Terminal value
	\|16.~~003~~		\|11.005
	\|
	\|-		\|-
	\|Enterprise value		\|Enterprise value
	\|21.~~606~~		\|16.590
	\|
	\|-		\|-
	\|
	\|		\|
	\|		\|
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	\|Net debt		\|Net debt
	\|4.931		\|4.931
	\|
	\|-		\|-
	\|Equity value		\|Equity value
	\|16.~~675~~		\|11.659
	\|
	\|-		\|-
	\|Shares ~~outstanding~~		\|Shares
	\|1.61		\|1.61
	\|
	\|-		\|-
	\|'''Fair share price in NZD'''		\|'''Fair share price in NZD'''
	\|10.36		\|7.24
	\|
	\|-		\|-
	\|'''Current share price in NZD'''		\|'''Current share price in NZD'''
	\|3.12		\|3.12
	\|
	\|}		\|}

>Ihl22: /* WACC */

2023-07-27T01:21:10Z

WACC

← Older revision		Revision as of 02:21, 27 July 2023
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	\|-		\|-
	\|Levered beta		\|Levered beta
	\|0.48		\|1.41
	\|<ref>https://~~valueinvesting~~.io/FCG~~.NZ~~/~~valuation~~/wacc</ref>		\|From average of selected beta range (0.92-1.89)<ref>https://finbox.com/NZSE:FCG/models/wacc/</ref>
	\|-		\|-
	\|Cost of equity		\|'''Cost of equity'''
	\|8.10%		\|14.61%
	\|		\|
	\|-		\|-
	\|		\|
			\|
	\|		\|
	\|-		\|-
	\|Cost of debt		\|'''Cost of debt'''
	\|6.35%		\|6.35%
	\|		\|From average of range<ref>https://valueinvesting.io/FCG.NZ/valuation/wacc</ref>
	\|-		\|-
	\|		\|
			\|
	\|		\|
	\|-		\|-
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	\|		\|
	\|-		\|-
	\|Value of equity (billions)		\|'''Value of equity (billions)'''
	\|5.023		\|5.023
	\|		\|
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	\|		\|
	\|-		\|-
	\|Value of debt		\|'''Value of debt (billions)'''
	\|4.931		\|4.931
	\|Long term ~~debt (4.9B NZD) and short~~ term ~~debt (31M)~~<ref>https://www.marketwatch.com/investing/stock/fcg/financials/balance-sheet?countrycode=nz</ref>		\|Long term + Short term debts<ref>https://www.marketwatch.com/investing/stock/fcg/financials/balance-sheet?countrycode=nz</ref>
	\|-		\|-
	\|		\|
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	\|-		\|-
	\|'''Internal WACC'''		\|'''Internal WACC'''
	\|7.23%		\|10.52%
			\|
	\|}		\|}

>Ihl22 at 17:32, 26 July 2023

2023-07-26T17:32:37Z

Show changes

>Ihl22: /* Transmitted Diseases */

2023-07-23T22:47:45Z

Transmitted Diseases

← Older revision		Revision as of 23:47, 23 July 2023
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	=== Transmitted Diseases ===		=== Transmitted Diseases ===
	In 2013, Fonterra had to recall products worldwide to contamination of food-borne botulism disease. This lead to the temporary banning of NZ dairy imported into markets, including key market in Asia Pacific such as China and Vietnam<ref>https://www.theguardian.com/world/2013/aug/05/fonterra-botulism-import-ban</ref>.		In 2013, Fonterra had to recall products worldwide to contamination of food-borne botulism disease. This lead to the temporary banning of NZ dairy imported into markets, including key market in Asia Pacific such as China and Vietnam<ref>https://www.theguardian.com/world/2013/aug/05/fonterra-botulism-import-ban</ref>. It was not until 2020 were reports stated that the contamination was due to ''C. sporogenes'' which is incapable of producing the botulism toxin<ref>https://www.nzherald.co.nz/business/fonterra-botulism-crisis-was-false-alarm/EFYWUIQZSJP5LW36HOZDONOV6A/</ref>. It can be seen that market takes great notice when it comes to food safety where the whole milk industry at the time took a hit, including French dairy firm Danone<ref>https://www.ft.com/content/ba16c570-d648-11e7-8c9a-d9c0a5c8d5c9</ref>.

	Other disease that affect cows include Bovine Tuberculosis, which has also been reported such as that affecting herd in the westcoast of NZ in 2021<ref>https://www.nzherald.co.nz/the-country/news/tb-outbreak-affects-west-coast-herds/V2P3PSWNUBW6AUETNMDLH757HM/</ref>.		Other disease that affect cows include Bovine Tuberculosis, which has also been reported such as that affecting herd in the westcoast of NZ in 2021<ref>https://www.nzherald.co.nz/the-country/news/tb-outbreak-affects-west-coast-herds/V2P3PSWNUBW6AUETNMDLH757HM/</ref>. These cattle-borne disease take a direct hit on milk yield.

	=== ESG analysis ===		=== ESG analysis ===

>Ihl22: /* Risk Assessment */

2023-07-23T22:36:44Z

Risk Assessment

← Older revision		Revision as of 23:36, 23 July 2023
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	As of July 2020, amendments of the act mostly relaxed certain regulation on Fonterra. However, as set out in the amended DIRA, Fonterra is required to supply milk to Goodman Fielder (main milk distribution competitor in NZ) that can support half of the total supply of the NZ domestic dairy market. These amendments are reviewed every 4 to 6 years and could be changed accordingly<ref name=":1" />.		As of July 2020, amendments of the act mostly relaxed certain regulation on Fonterra. However, as set out in the amended DIRA, Fonterra is required to supply milk to Goodman Fielder (main milk distribution competitor in NZ) that can support half of the total supply of the NZ domestic dairy market. These amendments are reviewed every 4 to 6 years and could be changed accordingly<ref name=":1" />.

			=== Transmitted Diseases ===
			In 2013, Fonterra had to recall products worldwide to contamination of food-borne botulism disease. This lead to the temporary banning of NZ dairy imported into markets, including key market in Asia Pacific such as China and Vietnam<ref>https://www.theguardian.com/world/2013/aug/05/fonterra-botulism-import-ban</ref>.

			Other disease that affect cows include Bovine Tuberculosis, which has also been reported such as that affecting herd in the westcoast of NZ in 2021<ref>https://www.nzherald.co.nz/the-country/news/tb-outbreak-affects-west-coast-herds/V2P3PSWNUBW6AUETNMDLH757HM/</ref>.

	=== ESG analysis ===		=== ESG analysis ===