USG People NV, Modelling

DCF assessment - Small-Cap DCF

Written by Peter van der Lely

Wednesday, 26 August 2009 21:18

The plus 31% performance over the last 3 months (august 26th) justifies a closer look at the valuation of USG. We arrive at a valuation of EUR 11.14
(adjusted the 29th of august from EUR 13.39, the 25th of august).

We, as well as the market, are still conservative regarding the margins: 2009 and 2010 clearly below average.
A step up in 2011 to a modest 3.5%, after which an unpretentious improvement will occur in the years thereafter.
Also revenue estimates are conservative, short as well as long term, in comparison with historic developments.
The balance sheet shows the year 2008 was worrisome, 2009 shows an improvement and from 2010 onward credit metrics are looking fine.
In that perspective the WACC 9% debt yield is conservative.

all in all valuation delivers no potential anymore
estimates are conservative
current run-up is justified.

We conclude that the current run-up of USG is more than justified, but at a price of EUR 11.96, we have to become more aggressive with estimates to come up with a more attractive targetprice.
Because we are convinced that more value can be discovered somewhere else (while staying conservative), we continue to research other companies instead of looking for reasons to increase the USG estimates.

Please, use your own estimates and convictions.

disclaimer

about Equitycatwalk

the author has no position in this stock at the moment of publishing

changelog: 29th of august: cell M292: W292 Accounts Receivable from around 12% to 16.6% which equals the ratio at the end of 2008.