The estimated fair value of the Skycity Entertainment Group is NZ $2.18.
Skycity Entertainment Group’s NZ $1.27 share price signal could be undervalued by 42%
SKC’s NZ $1.69 analyst price target is 23% less than fair value estimates
In this article, we estimate the intrinsic value of Skycity Entertainment Group Limited (NZSE: SKC), estimate the company’s future cash flow and assign it to its current value. This is done using a discounted cash flow (DCF) model. It may sound complicated, but it’s actually very easy!
We generally believe that a company’s value is the current value of all the cash it generates in the future. However, DCF is just one rating metric among many people and is not without flaws. Anyone interested in learning a little more about intrinsic values should read the Simply Wall ST analysis model.
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It uses something called a two-stage model. This means that our cash flow has two different periods of growth. Generally, the first stage is higher growth, while the second stage is lower growth. First of all, you need to get an estimate of your cash flow for the next 10 years. If possible, use analyst estimates, but if these are not available, extrapolate the previous free cash flow (FCF) from the last estimate or reported value. Companies with reduced free cash flow expect to slow down their contraction rates, while companies with growing free cash flow will likely see their growth rates drop during this period. To reflect this, growth reflects that childhood growth tends to be slower than later.
DCF is about the idea that a dollar in the future is less valuable than today’s dollar. Therefore, you should discount the total of these future cash flows to reach an estimate of the present value.
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
Levared FCF (NZ $, millions)
-NZ $158m
NZ $91.5M
NZ $103.7M
NZ $133.7M
NZ $138.5M
NZ $143.0M
NZ $147.5M
NZ $152.2M
NZ $157.1M
NZ $162.0M
Source of growth rate
Analyst X3
Analyst X3
Analyst X3
Analyst X1
Analyst X1
EST @ 3.22%
EST @ 3.20%
EST @ 3.18%
EST @ 3.17%
EST @ 3.17%
Current Value (nz $, millions) @9.8% discount
-NZ $14.4
NZ $75.8
NZ $78.2
NZ $91.9
NZ $86.6
NZ $81.4
NZ $76.5
NZ $71.9
NZ $67.5
NZ $63.4
(“est”=FCF growth rate is simply estimated by wall ST) Current value of 10-year cash flow (PVCF) = NZ $679m
The second stage is also known as terminal values. This is the cash flow of the business after the first phase. For many reasons, highly conservative growth rates are used and cannot exceed the country’s GDP growth rate. In this case, we estimated future growth using a 5-year average of 10-year government bond yields (3.2%). Just like a 10-year “growth” period, we use a 9.8% share cost to discount future cash flows to today’s value.
Current value of terminal value (PVTV)= TV /(1 + r)10= nz $25b billion ÷ (1 + 9.8%)10= NZ $978m
The total amount, or stock value, is the sum of the present value of future cash flows, in this case NZ $17b. The final step is to divide the stock value by the number of shares outstanding. Compared to the current stock price of NZ$1.3, the company appears to be very undervalued at a 42% discount on where the stock price is currently trading. However, don’t forget that this is just a rough assessment and like a complicated formula, there is garbage trash.
NZSE: SKC Discount Cash Flow April 5, 2025
Currently, the most important inputs to discounted cash flow are discount rates and of course actual cash flow. You do not need to agree to these inputs. I recommend you try again and play around with the calculations yourself. DCF also does not provide a complete picture of the potential performance of a company, as it does not take into account the circularity of the industry or the future capital requirements of the company. Given that we are considering Skycity Entertainment Group as a potential shareholder, equity costs are used as discount rates rather than capital costs (or weighted average cost of capital, WACC) that account for the debt. In this calculation, we used 9.8%. This is based on the 1.544 lever beta. The beta version is a measure of stock volatility compared to the overall market. It takes betas from the industry average beta of globally comparable companies, with a limit between 0.8 and 2.0. This is a reasonable range of stable business.
Check out the latest analysis of Skycity Entertainment Group
Strength
Weakness
opportunity
threat
The valuation is only one side of the coin in terms of building an investment paper. It’s not the only indicator that you look at when researching your company. The DCF model is not the perfect stock valuation tool. Rather, it should be seen as a guide to “what assumptions must be true for this stock to be down/overvalued.” For example, if the terminal value growth rate is slightly adjusted, it could dramatically alter the overall outcome. Why is its intrinsic value higher than the current stock price? We’ve put together three good factors to consider for Skycity Entertainment Group.
risk: All companies have them and we found One warning sign for Skycity Entertainment Group You should know.
management: Have insiders increased their stocks to capitalize on market sentiment towards SKC’s future prospects? Get insight into CEO compensation and governance factors and view our management and board analysis.
Other solid business: Low debt, high returns on equities, and good past performance are fundamental to strong business. Why not explore an interactive list of stocks with solid business foundations to see if there are other companies that don’t take into consideration?
The Poem Simply Wall ST App performs a discounted cash flow rating on all stocks on NZSE every day. If you want to find other inventory calculations, search here.
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This article simply by Wall Street is inherently common. We provide commentary based on historical data and analyst forecasts, and use impartial methodologies, and our articles are not intended for financial advice. It is not a recommendation to buy or sell stocks and does not take into account your goals or financial situation. We aim to deliver long-term intensive analysis driven by basic data. Please note that the analysis may not take into account the latest price-sensitive company announcements and qualitative material. Simply put, the Wall ST has no position in the stock mentioned.
