Axiom European Financial Debt Fund Ltd (AXI.L) Intrinsic Value Analysis

Executive Summary

As of May 29, 2025, Axiom European Financial Debt Fund Ltd's estimated intrinsic value ranges from $43.49 to $117.11 per share, depending on the valuation methodology applied.

Valuation Method	Fair Value (USD)	Implied Upside/Downside
Discounted Cash Flow (10Y)	$117.11	+37.0%
Discounted Cash Flow (5Y)	$100.88	+18.0%
Earnings Power Value	$43.49	-49.1%

Is Axiom European Financial Debt Fund Ltd (AXI.L) undervalued or overvalued?

With the current market price at $85.50, the stock appears to be moderately undervalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Axiom European Financial Debt Fund Ltd's intrinsic value, including:

1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
2. Earnings Power Value (EPV): Values the company based on its current earnings power, assuming no growth

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component	Low	High
Long-term bond rate	4.0%	4.5%
Equity market risk premium	6.0%	7.0%
Adjusted beta	0.66	0.69
Cost of equity	7.9%	9.8%
Cost of debt	7.1%	63.5%
Tax rate	19.0%	19.0%
Debt/Equity ratio	0.03	0.03
After-tax WACC	7.9%	11.0%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

• Forecast Period: 5-year DCF and 10-year DCF
• Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
• Discount Rate: 9.4% (range: 0.0% - 9.3%)

Key Projections:

• Revenue growth from $7 (FY12-2022) to $12 (FY12-2032)
• Net profit margin expansion from -90% to -73%
• Capital expenditures maintained at approximately 0% of revenue

DCF Model	Fair Value	Enterprise Value	% from Terminal Value
5-Year Growth	$101	$94M	69.9%
10-Year Growth	$117	$110M	51.8%
5-Year EBITDA	$107	$100M	71.6%
10-Year EBITDA	$122	$114M	53.7%

3. Earnings Power Value (EPV)

EPV assesses a company's value based on its current normalized earnings power, assuming no growth.

EPV Component	Value
Normalized Earnings	$4M
Discount Rate (WACC)	11.0% - 7.9%
Enterprise Value	$33M - $47M
Net Debt	$(1)M
Equity Value	$35M - $48M
Outstanding Shares	1M
Fair Value	$37 - $50
Selected Fair Value	$43.49

Key Financial Metrics

Metric	Value
Market Capitalization	$81M
Enterprise Value	$80M
Trailing P/E	0.00
Forward P/E	0.00
Trailing EV/EBITDA	18.10
Current Dividend Yield	681.80%
Dividend Growth Rate (5Y)	2.73%
Debt-to-Equity Ratio	0.03

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method	Weight	Weighted Value
Discounted Cash Flow (10Y)	46%	$35.13
Discounted Cash Flow (5Y)	38%	$25.22
Earnings Power Value	15%	$4.35
Weighted Average	100%	$99.54

Investment Conclusion

Based on our comprehensive valuation analysis, Axiom European Financial Debt Fund Ltd's weighted average intrinsic value is $99.54, which is approximately 16.4% above the current market price of $85.50.

Key investment considerations:

• Strong projected earnings growth (-90% to -73% margin)
• Consistent cash flow generation
• Conservative capital structure (Debt/Equity of 0.03)
• Historical dividend growth of 2.73%

Given these factors, we believe Axiom European Financial Debt Fund Ltd is currently moderately undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.