What is SMP.L's Intrinsic value?

St Modwen Properties PLC (SMP.L) Intrinsic Value Analysis

Executive Summary

As of May 29, 2025, St Modwen Properties PLC's estimated intrinsic value ranges from $103.67 to $180.08 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $180.08 -67.8%
Discounted Cash Flow (5Y) $154.17 -72.4%
Earnings Power Value $103.67 -81.5%

Is St Modwen Properties PLC (SMP.L) undervalued or overvalued?

With the current market price at $559.00, 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 St Modwen Properties PLC'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 2.9% 3.4%
Equity market risk premium 5.3% 6.3%
Adjusted beta 0.54 0.79
Cost of equity 5.8% 9.0%
Cost of debt 4.1% 7.8%
Tax rate 15.4% 16.2%
Debt/Equity ratio 0.26 0.26
After-tax WACC 5.3% 8.5%

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: 6.9% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $342 (FY11-2020) to $66 (FY11-2030)
  • Net profit margin expansion from -35% to -15%
  • Capital expenditures maintained at approximately 1% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $154 $642M 45.4%
10-Year Growth $180 $700M 43.1%
5-Year EBITDA $59 $429M 18.2%
10-Year EBITDA $81 $478M 16.6%

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 $35M
Discount Rate (WACC) 8.5% - 5.3%
Enterprise Value $408M - $649M
Net Debt $296M
Equity Value $112M - $353M
Outstanding Shares 2M
Fair Value $50 - $157
Selected Fair Value $103.67

Key Financial Metrics

Metric Value
Market Capitalization $1253M
Enterprise Value $1549M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 9.60
Current Dividend Yield 154.00%
Dividend Growth Rate (5Y) -34.20%
Debt-to-Equity Ratio 0.26

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% $54.02
Discounted Cash Flow (5Y) 38% $38.54
Earnings Power Value 15% $10.37
Weighted Average 100% $158.36

Investment Conclusion

Based on our comprehensive valuation analysis, St Modwen Properties PLC's weighted average intrinsic value is $158.36, which is approximately 71.7% below the current market price of $559.00.

Key investment considerations:

  • Strong projected earnings growth (-35% to -15% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.26)

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