We are all familiar with First Berlin's (paid analysis) valuations and the concerns raised with them, although they do seem to use reasonable assumtions and processes.
This is not a paid valuation, and it runs out to 10 years in the future. Interesting figures that I think present a reasonable arguement, as long as they deliver as promised.
Share Price vs. Fair ValueBelow are the data sources, inputs and calculation used to determine the intrinsic value for Kleos Space.
ASX:KSS Discounted Cash Flow Data Sources Data Point Source Value Valuation Model 2 Stage Free Cash Flow to Equity Levered Free Cash Flow Up to 1 Analyst Estimates on Average (S&P Global) See below Discount Rate (Cost of Equity) See below 6.5% Perpetual Growth Rate 5-Year Average of AU Long-Term Govt Bond Rate 1.9% An important part of a discounted cash flow is the discount rate, below we explain how it has been calculated.
Calculation of Discount Rate/ Cost of Equity for ASX:KSS Data Point Calculation/ Source Result Risk-Free Rate 5-Year Average of AU Long-Term Govt Bond Rate 1.9% Equity Risk Premium S&P Global 5.6% Professional Services Unlevered Beta Simply Wall St/ S&P Global 0.74 Re-levered Beta = 0.33 + [(0.66 * Unlevered beta) * (1 + (1 - tax rate) (Debt/Market Equity))]
= 0.33 + [(0.66 * 0.738) * (1 + (1 - 24.9%) (1.58%))]0.830 Levered Beta Levered Beta limited to 0.8 to 2.0
(practical range for a stable firm)0.8 Discount Rate/ Cost of Equity = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)
= 1.87% + (0.830 * 5.57%)6.49%
Discounted Cash Flow Calculation forASX:KSSusing2 Stage Free Cash Flow to Equity
The calculations below outline how an intrinsic value for Kleos Space is arrived at by discounting future cash flows to their present value using the 2 stage method. We use analyst's estimates of cash flows going forward 10 years for the 1st stage, the 2nd stage assumes the company grows at a stable rate into perpetuity.
ASX:KSS DCF 1st Stage: Next 10 years cash flow forecast Levered FCF (EUR, Millions) Source Present Value
Discounted (@ 6.49%)2023 -2.72 Analyst x1 -2.55 2024 -1.25 Analyst x1 -1.1 2025 10.03 Analyst x1 8.31 2026 19.67 Est @ 96.06% 15.29 2027 33.01 Est @ 67.81% 24.1 2028 48.86 Est @ 48.03% 33.49 2029 65.56 Est @ 34.18% 42.2 2030 81.61 Est @ 24.49% 49.33 2031 96.05 Est @ 17.70% 54.52 2032 108.49 Est @ 12.95% 57.83 Present value of next 10 years cash flows €281.42
ASX:KSS DCF 2nd Stage: Terminal Value Calculation Result Terminal Value FCF2032× (1 + g) ÷ (Discount Rate – g)
= €108.495 x (1 + 1.87%) ÷ (6.49% - 1.87% )€2,390.09 Present Value of Terminal Value = Terminal Value ÷ (1 + r)10
€2,390 ÷ (1 + 6.49%)10€1,273.95
ASX:KSS Total Equity Value Calculation Result Total Equity Value = Present value of next 10 years cash flows + Terminal Value
= €281 + €1,274€1,555.37 Equity Value per Share
(EUR)= Total value / Shares Outstanding
= €1,555 / 179€8.71
ASX:KSS Discount to Share Price Calculation Result Exchange Rate EUR/AUD
(Reporting currency to currency of ASX:KSS)1.573 Value per Share
(AUD)= Value per Share in EUR x Exchange Rate (EUR / AUD)
= €8.71 x 1.57A$13.7 Value per share (AUD) From above. A$13.7 Current discount Discount to share price of A$0.20
= (A$13.7 - A$0.20) / A$13.798.5%
