An Intrinsic Calculation For PostNL N.V. (AMS:PNL) Suggests It's 48% Undervalued

PostNL N.V. (AMS:PNL), a leading postal and logistics company based in the Netherlands, has been facing headwinds in recent years due to macroeconomic pressure and regulatory challenges. However, a thorough analysis of the company's intrinsic value suggests that PostNL may be undervalued by as much as 48%. This article will delve into the key factors driving PostNL's intrinsic value calculation and explore the risks and challenges facing the company.

Key Factors Driving PostNL's Intrinsic Value
The intrinsic value of PostNL is primarily based on the Discounted Cash Flow (DCF) model, which takes into account the company's future cash flows and discounts them to their present value. The main factors involved in this calculation are:

1. Free Cash Flow (FCF) Forecast: The DCF model uses a 10-year free cash flow forecast, which is estimated based on analyst projections and historical growth rates. The FCF forecast for PostNL is as follows:
- 2024: €41.9 million
- 2025: €62.9 million
- 2026: €66.9 million
-... (up to 2033)
2. Growth Rate Estimate: The growth rate for each year in the FCF forecast is estimated based on analyst projections. The growth rates for PostNL are:
- 2024: 4.18%
- 2025: 3.09%
- 2026: 2.32%
-... (up to 2033)
3. Discount Rate: The discount rate used in the DCF model is 7.7%, which is based on a levered beta of 1.432. This beta is a measure of the stock's volatility compared to the market as a whole.
4. Terminal Value: After calculating the present value of future cash flows in the initial 10-year period, the Terminal Value is calculated using the Gordon Growth formula. The Terminal Value for PostNL is €1.1 billion.
5. Present Value of Terminal Value (PVTV): The Terminal Value is then discounted to today's value at a cost of equity of 7.7%. The PVTV for PostNL is €519 million.

These factors are used to calculate the intrinsic value of PostNL, which is the sum of the present value of the future cash flows and the present value of the terminal value. In this case, the intrinsic value of PostNL is €977 million.



Risks and Challenges Facing PostNL
Despite the positive intrinsic value calculation, PostNL faces several risks and challenges that could impact its intrinsic value:

1. Macroeconomic Pressure: PostNL's business is facing significant macroeconomic pressure, as mentioned in the article "PostNL Stock Tumbles, Dividend Crashes" from 2 years ago. This pressure could lead to decreased revenue and profitability, negatively impacting the company's intrinsic value.
2. Headwinds in the Industry: The article "PostNL Stock Is A Sell Plagued By Headwinds" from 3 months ago suggests that PostNL is facing headwinds in the industry. These headwinds could include increased competition, regulatory challenges, or changes in consumer behavior, all of which could negatively impact the company's performance and intrinsic value.
3. Regulatory Adjustments: The article "PostNL N.V. reports Q3 results: €(19) million EBIT at Mail in the Netherlands, calls for regulatory adjustments" from 2 months ago indicates that PostNL is facing regulatory challenges in its Mail in the Netherlands segment. These regulatory adjustments could lead to additional costs or reduced revenue, impacting the company's profitability and intrinsic value.
4. Volatility in Parcel Volume and Costs: The article "PostNL Profit Warning: Macroeconomic Sell Story Despite E-Commerce Growth" from 2 years ago highlights the volatility in parcel volume and costs. Fluctuations in parcel volume and increased costs could negatively impact PostNL's profitability and intrinsic value.
5. Financial Distress: The article "Bpost: Uncertainty Makes This Stock Highly Unattractive" from 4 months ago suggests that PostNL could be in financial distress. This could be indicated by the company's low dividend compared to the top 25% of dividend payers in the Logistics market, as mentioned in the SWOT analysis. Financial distress could lead to a decrease in the company's intrinsic value.
6. Slowing Growth: The DCF analysis provided in the materials shows that PostNL's growth rate is expected to slow down over the next 10 years. This slowing growth could lead to a decrease in the company's intrinsic value, as future cash flows are discounted at a higher rate.

These risks and challenges could impact PostNL's intrinsic value by reducing the company's profitability, growth prospects, or financial health. It is essential for investors to consider these factors when evaluating the company's intrinsic value and making investment decisions.

Conclusion
An intrinsic calculation for PostNL N.V. (AMS:PNL) suggests that the company may be undervalued by as much as 48%. While PostNL faces several risks and challenges, its intrinsic value calculation indicates that the company's current share price may not fully reflect its true value. Investors should carefully consider the factors driving PostNL's intrinsic value and the risks and challenges facing the company before making an investment decision.