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.
今天我們將介紹一種評估宏明集團控股有限公司(HKG:1271)內在價值的方法,即估計公司未來的現金流並將其折現為現值。在這種情況下,我們將使用貼現現金流(DCF)模型。不要被行話嚇跑了,它背後的數學實際上是相當簡單的。
不過請記住,有很多方法可以評估一家公司的價值,貼現現金流只是其中一種方法。如果你想了解更多關於貼現現金流的信息,可以在Simply Wall St.分析模型中詳細閲讀這種計算背後的原理。
查看我們對大明集團控股的最新分析
該方法
我們使用的是兩階段增長模型,也就是説,我們考慮了公司發展的兩個階段。在初期,公司可能有較高的增長率,而第二階段通常被假設為有一個穩定的增長率。在第一階段,我們需要估計未來十年為企業帶來的現金流。由於沒有分析師對自由現金流的估計,我們根據公司最近報告的價值推斷出了之前的自由現金流(FCF)。我們假設,自由現金流萎縮的公司將減緩收縮速度,而自由現金流增長的公司在這段時間內的增長速度將放緩。我們這樣做是為了反映出,增長在最初幾年往往比後來幾年放緩得更多。
一般來説,我們假設今天的一美元比未來的一美元更有價值,所以我們將這些未來現金流的價值貼現到以今天美元計算的估計價值:
10年自由現金流(FCF)預測
| 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 |
槓桿FCF(港幣,百萬元) | 7.06億港元 | 6.252億港元 | 5.782億港元 | 5.506億港元 | 5.348億港元 | 港幣5.267億元 | 5.237億港元 | 港幣5.242億元 | 港幣5.27億元 | 港幣5.316億元 |
增長率預估來源 | 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% |
現值(港幣,百萬元)折現@10% | 港幣641元 | 港幣515元 | 港幣432元 | 港幣374元 | 港幣330元 | 港幣295元 | 港幣266元 | 港幣242元 | 港幣220元 | 港幣202元 |
(“EST”=Simply Wall St.預估的FCF成長率)
10年期現金流現值(PVCF)=港幣35億元
在計算了最初10年內未來現金流的現值後,我們需要計算終止值,它考慮了第一階段之後的所有未來現金流。戈登增長公式用於計算終端價值,其未來年增長率等於10年期政府債券收益率1.6%的5年平均水平。我們以10%的權益成本將終端現金流貼現到今天的價值。
終端值(TV)=FCF2032×(1+g)?(r-g)=港幣5.32億×(1+1.6%)?(10%-1.6%)=港幣63億
終值現值(PVTV)=TV/(1+r)10=港幣63億?(1+10%)10=港幣24億元
那麼,總價值或股權價值就是未來現金流的現值之和,在這種情況下,未來現金流的現值為59億港元。在最後一步,我們用股本價值除以流通股的數量。與目前4.4港元的股價相比,該公司在撰寫本文時似乎接近公允價值。然而,估值是不精確的工具,更像是一臺望遠鏡--移動幾度,就會到達另一個星系。一定要記住這一點。
聯交所:1271貼現現金流2022年12月23日
假設
上述計算在很大程度上取決於兩個假設。第一個是貼現率,另一個是現金流。如果你不同意這些結果,你可以自己試一試計算,並玩弄一下假設。DCF也沒有考慮一個行業可能的週期性,也沒有考慮一家公司未來的資本要求,因此它沒有給出一家公司潛在業績的全貌。鑑於我們將大明集團視為潛在股東,股權成本被用作折現率,而不是計入債務的資本成本(或加權平均資本成本,WACC)。在這個計算中,我們使用了10%,這是基於槓桿率為1.346的測試版。貝塔係數是衡量一隻股票相對於整個市場的波動性的指標。我們的貝塔係數來自全球可比公司的行業平均貝塔係數,強制限制在0.8到2.0之間,這是一個穩定業務的合理範圍。
大明集團控股的SWOT分析
機會 - 由於缺乏分析師的報道,很難確定1271的盈利前景。
展望未來:
雖然貼現現金流的計算很重要,但它只是一家公司需要評估的眾多因素之一。貼現現金流模型並不是一個完美的股票估值工具。相反,貼現現金流模型的最佳用途是測試某些假設和理論,看看它們是否會導致公司被低估或高估。例如,公司權益成本或無風險利率的變化可能會對估值產生重大影響。對於大明集團控股,我們收集了三個相關因素,你應該進一步研究一下:
- 風險:請注意,大明集團控股正在展示我們的投資分析中的3個警告信號,其中一條意義重大……
- 管理:內部人士是否一直在增持股票,以利用市場對1271未來前景的情緒?查看我們的管理層和董事會分析,瞭解對CEO薪酬和治理因素的見解。
- 其他穩固的企業:低債務、高股本回報率和良好的過去業績是強勁業務的基礎。為什麼不探索我們具有堅實商業基本面的股票的互動列表,看看是否有其他您可能沒有考慮過的公司!
PS.Simply Wall St.每天更新每隻香港股票的貼現現金流計算,所以如果你想找出任何其他股票的內在價值,只需搜索此處。
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本文由Simply Wall St.撰寫,具有概括性。我們僅使用不偏不倚的方法提供基於歷史數據和分析師預測的評論,我們的文章並不打算作為財務建議。它不構成買賣任何股票的建議,也沒有考慮你的目標或你的財務狀況。我們的目標是為您帶來由基本面數據驅動的長期重點分析。請注意,我們的分析可能不會將最新的對價格敏感的公司公告或定性材料考慮在內。Simply Wall St.對上述任何一隻股票都沒有持倉。