Today we will run through one way of estimating the intrinsic value of Grand Ming Group Holdings Limited (HKG:1271) by estimating the company's future cash flows and discounting them to their present value. We will use the Discounted Cash Flow (DCF) model on this occasion. Don't get put off by the jargon, the math behind it is actually quite straightforward.
Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model.
Check out our latest analysis for Grand Ming Group Holdings
The Method
We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. In the first stage we need to estimate the cash flows to the business over the next ten years. Seeing as no analyst estimates of free cash flow are available to us, we have extrapolate the previous free cash flow (FCF) from the company's last reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.
Generally we assume that a dollar today is more valuable than a dollar in the future, so we discount the value of these future cash flows to their estimated value in today's dollars:
10-year free cash flow (FCF) forecast
| 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 |
Levered FCF (HK$, Millions) | HK$706.0m | HK$625.2m | HK$578.2m | HK$550.6m | HK$534.8m | HK$526.7m | HK$523.7m | HK$524.2m | HK$527.0m | HK$531.6m |
Growth Rate Estimate Source | Est @ -17.03% | Est @ -11.44% | Est @ -7.52% | Est @ -4.78% | Est @ -2.86% | Est @ -1.51% | Est @ -0.57% | Est @ 0.08% | Est @ 0.54% | Est @ 0.87% |
Present Value (HK$, Millions) Discounted @ 10% | HK$641 | HK$515 | HK$432 | HK$374 | HK$330 | HK$295 | HK$266 | HK$242 | HK$220 | HK$202 |
("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = HK$3.5b
After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 1.6%. We discount the terminal cash flows to today's value at a cost of equity of 10%.
Terminal Value (TV)= FCF2032 × (1 + g) ÷ (r – g) = HK$532m× (1 + 1.6%) ÷ (10%– 1.6%) = HK$6.3b
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= HK$6.3b÷ ( 1 + 10%)10= HK$2.4b
The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is HK$5.9b. In the final step we divide the equity value by the number of shares outstanding. Compared to the current share price of HK$4.4, the company appears around fair value at the time of writing. Valuations are imprecise instruments though, rather like a telescope - move a few degrees and end up in a different galaxy. Do keep this in mind.
SEHK:1271 Discounted Cash Flow December 23rd 2022
The Assumptions
The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. If you don't agree with these result, have a go at the calculation yourself and play with the assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Grand Ming Group Holdings as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 10%, which is based on a levered beta of 1.346. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business.
SWOT Analysis for Grand Ming Group Holdings
Strength - Earnings growth over the past year exceeded the industry.
- Debt is well covered by earnings.
- Dividends are covered by earnings and cash flows.
- Dividend information for 1271.
Weakness - Dividend is low compared to the top 25% of dividend payers in the Construction market.
- Current share price is above our estimate of fair value.
Opportunity - 1271's financial characteristics indicate limited near-term opportunities for shareholders.
- Lack of analyst coverage makes it difficult to determine 1271's earnings prospects.
Threat- Debt is not well covered by operating cash flow.
- Is 1271 well equipped to handle threats?
Looking Ahead:
Whilst important, the DCF calculation is only one of many factors that you need to assess for a company. The DCF model is not a perfect stock valuation tool. Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued. For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. For Grand Ming Group Holdings, we've compiled three pertinent factors you should further examine:
- Risks: Be aware that Grand Ming Group Holdings is showing 3 warning signs in our investment analysis , and 1 of those is significant...
- Management:Have insiders been ramping up their shares to take advantage of the market's sentiment for 1271's future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors.
- Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered!
PS. Simply Wall St updates its DCF calculation for every Hong Kong stock every day, so if you want to find the intrinsic value of any other stock just search here.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
今天我们将介绍一种评估宏明集团控股有限公司(HKG:1271)内在价值的方法,即估计公司未来的现金流并将其折现为现值。在这种情况下,我们将使用贴现现金流(DCF)模型。不要被行话吓跑了,它背后的数学实际上是相当简单的。
不过请记住,有很多方法可以评估一家公司的价值,贴现现金流只是其中一种方法。如果你想了解更多关于贴现现金流的信息,可以在Simply Wall St.分析模型中详细阅读这种计算背后的原理。
查看我们对大明集团控股的最新分析
该方法
我们使用的是两阶段增长模型,也就是说,我们考虑了公司发展的两个阶段。在初期,公司可能有较高的增长率,而第二阶段通常被假设为有一个稳定的增长率。在第一阶段,我们需要估计未来十年为企业带来的现金流。由于没有分析师对自由现金流的估计,我们根据公司最近报告的价值推断出了之前的自由现金流(FCF)。我们假设,自由现金流萎缩的公司将减缓收缩速度,而自由现金流增长的公司在这段时间内的增长速度将放缓。我们这样做是为了反映出,增长在最初几年往往比后来几年放缓得更多。
一般来说,我们假设今天的一美元比未来的一美元更有价值,所以我们将这些未来现金流的价值贴现到以今天美元计算的估计价值:
10年自由现金流(FCF)预测
| 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 |
杠杆FCF(港币,百万元) | 7.06亿港元 | 6.252亿港元 | 5.782亿港元 | 5.506亿港元 | 5.348亿港元 | 港币5.267亿元 | 5.237亿港元 | 港币5.242亿元 | 港币5.27亿元 | 港币5.316亿元 |
增长率预估来源 | Est@-17.03% | Est@-11.44% | Est@-7.52% | Est@-4.78% | Est@-2.86% | Est@-1.51% | Est@-0.57% | Est@0.08% | Est@0.54% | Est@0.87% |
现值(港币,百万元)折现@10% | 港币641元 | 港币515元 | 港币432元 | 港币374元 | 港币330元 | 港币295元 | 港币266元 | 港币242元 | 港币220元 | 港币202元 |
(“EST”=Simply Wall St.预估的FCF成长率)
10年期现金流现值(PVCF)=港币35亿元
在计算了最初10年内未来现金流的现值后,我们需要计算终止值,它考虑了第一阶段之后的所有未来现金流。戈登增长公式用于计算终端价值,其未来年增长率等于10年期政府债券收益率1.6%的5年平均水平。我们以10%的权益成本将终端现金流贴现到今天的价值。
终端值(TV)=FCF2032×(1+g)?(r-g)=港币5.32亿×(1+1.6%)?(10%-1.6%)=港币63亿
终值现值(PVTV)=TV/(1+r)10=港币63亿?(1+10%)10=港币24亿元
那么,总价值或股权价值就是未来现金流的现值之和,在这种情况下,未来现金流的现值为59亿港元。在最后一步,我们用股本价值除以流通股的数量。与目前4.4港元的股价相比,该公司在撰写本文时似乎接近公允价值。然而,估值是不精确的工具,更像是一台望远镜--移动几度,就会到达另一个星系。一定要记住这一点。
联交所:1271贴现现金流2022年12月23日
假设
上述计算在很大程度上取决于两个假设。第一个是贴现率,另一个是现金流。如果你不同意这些结果,你可以自己试一试计算,并玩弄一下假设。DCF也没有考虑一个行业可能的周期性,也没有考虑一家公司未来的资本要求,因此它没有给出一家公司潜在业绩的全貌。鉴于我们将大明集团视为潜在股东,股权成本被用作折现率,而不是计入债务的资本成本(或加权平均资本成本,WACC)。在这个计算中,我们使用了10%,这是基于杠杆率为1.346的测试版。贝塔系数是衡量一只股票相对于整个市场的波动性的指标。我们的贝塔系数来自全球可比公司的行业平均贝塔系数,强制限制在0.8到2.0之间,这是一个稳定业务的合理范围。
大明集团控股的SWOT分析
机会 - 由于缺乏分析师的报道,很难确定1271的盈利前景。
展望未来:
虽然贴现现金流的计算很重要,但它只是一家公司需要评估的众多因素之一。贴现现金流模型并不是一个完美的股票估值工具。相反,贴现现金流模型的最佳用途是测试某些假设和理论,看看它们是否会导致公司被低估或高估。例如,公司权益成本或无风险利率的变化可能会对估值产生重大影响。对于大明集团控股,我们收集了三个相关因素,你应该进一步研究一下:
- 风险:请注意,大明集团控股正在展示我们的投资分析中的3个警告信号,其中一条意义重大……
- 管理:内部人士是否一直在增持股票,以利用市场对1271未来前景的情绪?查看我们的管理层和董事会分析,了解对CEO薪酬和治理因素的见解。
- 其他稳固的企业:低债务、高股本回报率和良好的过去业绩是强劲业务的基础。为什么不探索我们具有坚实商业基本面的股票的互动列表,看看是否有其他您可能没有考虑过的公司!
PS.Simply Wall St.每天更新每只香港股票的贴现现金流计算,所以如果你想找出任何其他股票的内在价值,只需搜索此处。
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本文由Simply Wall St.撰写,具有概括性。我们仅使用不偏不倚的方法提供基于历史数据和分析师预测的评论,我们的文章并不打算作为财务建议。它不构成买卖任何股票的建议,也没有考虑你的目标或你的财务状况。我们的目标是为您带来由基本面数据驱动的长期重点分析。请注意,我们的分析可能不会将最新的对价格敏感的公司公告或定性材料考虑在内。Simply Wall St.对上述任何一只股票都没有持仓。