spreadsheet valuation

FYI, I repeat here a post that I have made in another place.

G'day all,

I've taken advantage of a couple of hours of "downtime" (retirement is surprisingly busy - I don't know how I used to have time to work) to fire up the ol' spreadsheet.

I've attached a copy here. Feel free to do whatever you wish with it. As always, I offer no guarantees and I am not making any prediction about the future that you should rely on. Nevertheless, it is quite a useful tool to play with.

A couple of notes.

1. I have changed the selling price from $US15 to $US20 on the assumption that within a short time all sales will be of the In-Tube version.

2. I have not included any income for any products other QFTG. No doubt, at some point the company will start making revenue from other products in the pipeline.

3. I have increased the "overheads" figure from previous iterations. I have started at $A5m, being twice the overheads for the first six months of the current FY. I have increased them only modestly as sales volumes increase as I can't really see CST ever needing massive overheads to support their sales.

4. I have increased the $US/$A conversion rate to 80%. It is interesting to play with this figure to see the impact that the exchange rate has on our profits. Of course it is not as simple as that because of hedging etc but we have to start somewhere.

5. I have increased the number of shares on issue to 100m (previously 95m). I know that we are not quite that high (even taking options into account) but it is close enough for our puposes.

6. I have now included three rows for PE values.

7. I have increased the projected future sales in the DCF table. Perhaps this is a little "aggressive" but personally I feel quite achievable over the ten year time span.

8. I have run with a discount rate of 6% (approximately the current cash rate). Often people like to put in a higher value (from memory Lodge ran at 11%) to try to quantify risk. I feel that is incorrect (so does WB) because it is impossible to really quantify risk. It is much better to run with the true value and purchase with a "margin of safety".

If you want to play with the spreadsheet, start by playing with the numbers in the bright blue boxes.

Have fun and feel free to let me know of any comments.

http://tinyurl.com/39dzqf