The only conceptual problem I see with your reasoning is that you are implicitly assuming that SKT’s debt will remain in place, and will keep getting serviced. The reason why I’m saying this is that you are looking at Owner Earnings after Interest Expense, and you are also solving for the (negative) growth rate in Owner Earnings that equalises the PV of future earnings to the current Market Cap, not to the current Enterprise Value.
This is all fine, as long as you recognise that your assumption of no-default on debt is not risk-free. And, for that matter, the probability of default is indeed measured by the spread between SKT’s cost of debt and the prevailing level of government bond yields. Because the current market yield of SKT’s bonds is ~3.8% (see page 10 of yesterday’s HY financial report), I think the discount rate in your DCF exercise should be at least that (plus an extra yield premium to reflect equity risk).
On a separate note, if you look at the recent dynamics of Net Cash From Operations (after Interest and Tax), you can see that it amounted to 178mNZ$ for the 12-month period to June 2019; on the other hand, the corresponding amount for the six months to December 2019 was only 42mNZ$ and (once adjusted for the timing of Interest and Tax payments) my best guess is that its current underlying run rate is ~100mNZ$ pa. That would be a year-on-year drop to the tune of -40%/-45%, therefore your -35% pa negative growth assumption does not look overly conservative to me.
Finally, I think it should be assumed that, at least in the short term, Owner Earnings will not translate into surplus capital but will be reinvested into growth (this is what is happening right now). From a DCF perspective, this means that the short-term weight of those Owner Earnings should be either zero or a much lower weight than 100%, and the future payout of that investment should also be risk-weighted.
Just my thoughts, I do like the idea of the reverse DCF as a general principle.
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