What is BCPT.L's Intrinsic value?

BMO Commercial Property Trust Ltd (BCPT.L) Intrinsic Value Analysis

Executive Summary

As of May 23, 2025, BMO Commercial Property Trust Ltd's estimated intrinsic value ranges from $48.59 to $70.14 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $70.14 -26.8%
Discounted Cash Flow (5Y) $64.91 -32.2%
Earnings Power Value $48.59 -49.3%

Is BMO Commercial Property Trust Ltd (BCPT.L) undervalued or overvalued?

With the current market price at $95.80, the stock appears to be significantly overvalued.

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 BMO Commercial Property Trust 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 0.86 0.91
Cost of equity 9.1% 11.3%
Cost of debt 4.0% 5.7%
Tax rate 0.7% 0.9%
Debt/Equity ratio 0.43 0.43
After-tax WACC 7.6% 9.6%

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: 8.6% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $59 (FY12-2023) to $73 (FY12-2033)
  • Net profit margin expansion from -44% to -44%
  • Capital expenditures maintained at approximately 0% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $65 $648M 74.4%
10-Year Growth $70 $685M 54.5%
5-Year EBITDA $54 $568M 70.8%
10-Year EBITDA $61 $622M 50.0%

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 $45M
Discount Rate (WACC) 9.6% - 7.6%
Enterprise Value $470M - $597M
Net Debt $193M
Equity Value $277M - $405M
Outstanding Shares 7M
Fair Value $40 - $58
Selected Fair Value $48.59

Key Financial Metrics

Metric Value
Market Capitalization $672M
Enterprise Value $865M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 12.85
Current Dividend Yield 538.64%
Dividend Growth Rate (5Y) -7.90%
Debt-to-Equity Ratio 0.43

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% $21.04
Discounted Cash Flow (5Y) 38% $16.23
Earnings Power Value 15% $4.86
Weighted Average 100% $64.81

Investment Conclusion

Based on our comprehensive valuation analysis, BMO Commercial Property Trust Ltd's weighted average intrinsic value is $64.81, which is approximately 32.3% below the current market price of $95.80.

Key investment considerations:

  • Strong projected earnings growth (-44% to -44% margin)
  • Consistent cash flow generation

Given these factors, we believe BMO Commercial Property Trust Ltd is currently significantly overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.