What is SIXH.L's Intrinsic value?

600 Group PLC (SIXH.L) Intrinsic Value Analysis

Executive Summary

As of June 9, 2025, 600 Group PLC's estimated intrinsic value ranges from $0.91 to $10.10 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $5.47 +106.5%
Discounted Cash Flow (5Y) $3.36 +26.7%
Dividend Discount Model (Multi-Stage) $0.91 -65.6%
Earnings Power Value $10.10 +281.3%

Is 600 Group PLC (SIXH.L) undervalued or overvalued?

With the current market price at $2.65, the stock appears to be significantly 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 600 Group PLC's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments
  3. 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 0.79 0.83
Cost of equity 8.7% 10.8%
Cost of debt 7.0% 7.1%
Tax rate 19.0% 19.0%
Debt/Equity ratio 3.95 3.95
After-tax WACC 6.3% 6.8%

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: 6.5% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $32 (FY03-2022) to $50 (FY03-2032)
  • Net profit margin expansion from 2% to 1%
  • Capital expenditures maintained at approximately 3% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $5 $10M 118.8%
10-Year Growth $7 $13M 88.4%
5-Year EBITDA $2 $6M 128.1%
10-Year EBITDA $4 $9M 82.8%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 9.7%
  • Long-term growth rate: 0.5%
  • Fair value: $0.91 (-65.6% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 10.8% (Low) to 8.7% (High)
  • Long-term growth rate: 0.0% (Low) to 1.0% (High)
  • Fair value range: $(5) to $(9)
  • Selected fair value: $-5.10 (-292.5% from current price)

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 $1M
Discount Rate (WACC) 6.8% - 6.3%
Enterprise Value $21M - $22M
Net Debt $4M
Equity Value $17M - $18M
Outstanding Shares 1M
Fair Value $13 - $14
Selected Fair Value $10.10

Key Financial Metrics

Metric Value
Market Capitalization $3M
Enterprise Value $6M
Trailing P/E 0.00
Forward P/E 26.24
Trailing EV/EBITDA 4.35
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 3.95

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) 35% $1.64
Discounted Cash Flow (5Y) 29% $0.84
Dividend Discount Model (Multi-Stage) 24% $0.18
Earnings Power Value 12% $1.01
Weighted Average 100% $4.32

Investment Conclusion

Based on our comprehensive valuation analysis, 600 Group PLC's weighted average intrinsic value is $4.32, which is approximately 63.1% above the current market price of $2.65.

Key investment considerations:

  • Strong projected earnings growth (2% to 1% margin)

Given these factors, we believe 600 Group PLC is currently significantly undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.