Our 12-month target price for ABB is A$4.80/sh based on the average of our DCF and EV/EBITDA valuations.

• DCF valuation at A$4.93/sh with WACC of 10.0%, equity beta of ~0.9 and a real terminal growth of 2%; and

• EV/EBITDA valuation at A$4.70/sh with 10.3x multiple applied to our 12mth forward EBITDA forecast. This is at a ~10% premium to the average multiple of both large and small cap peers across Australia and NZ.

Key downside risks to our positive view and achieving our target price include:


• Highly competitive market;


• Regulatory risks;


• Great-than-expected step up in capex;


• Threat from 5G Wireless; and


• Economic downturn.