Yeah agreed. DCF relies on assumptions based on FCF, and FCF is used to determine how much cashflow you can extract out of a capital intensive business. I dont think Shine is particularly capital intensive unless they use the money to expand in which case I'd consider that an expansion more than the cost of doing regular business, so I have based my valuations on overall cashflows rather than FCF.
If you look at the latest Morningstar report it seems they don't know how to forecast how much FCF Shine will generate, which understandably leads to an uncertain valuation. Morningstar and other brokers typically look in the mirror so their 'recommendations' will almost always be behind the 8-ball.
I have my own opinions about all that but I could be wrong. The latest report seems to indicate that Shine management intend to focus on the capital structure of the business which either means refinancing and/or paying down some debt. There was an investor presentation released here semi-recently which seemed to suggest that they were/are in talks with financiers but I'm not sure how much of that is just BAU or part of some kind of strategic move to increase the company's access to capital.
SHJ Price at posting:
68.0¢ Sentiment: Buy Disclosure: Held
(20min delay)
