The discount rate can be the WACC if you want to calculate the book value but we aren't (and that would take too long to calculate). I use, roughly, the 10 year bond yield plus 10% as my price of equity. So 10.75% is my discount rate. This is because I would want at least 10% above the risk free rate to invest. You can discount cashflows at whatever rate you want but lower than the rate the company is borrowing at is too low and equity is more expensive than debt. (They should be borrowing at around 6%) Terminal value with formula here. https://www.investopedia.com/terms/t/terminalvalue.asp
Myer did a one-off reduction of inventory last year which resuted in an increase to their FCF. This can't be replicated.
It is a judgement call on what you believe their working capital movements will be. Simply, you can use historic (prior to last year) but it may change slightly if the company changes its product mix and/or store strategy. it isn't meant to be easy and everyone ends up with a different answer, hence the analysts with their different valuations.
Yes $0.47 is my valuation. Everyone will probably disagree with me and so they should as that is my number. I won't be buying at 14c as I see the company as too risky and this crisis as severe to the company, and that valuation could easily be hit by a capital raising or other event. But that is only my opinion.
MYR Price at posting:
14.0¢ Sentiment: Sell Disclosure: Not Held
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