Category Archives: Fundamental Analysis

Oct 12

Dapai International Intrinsic Value

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Discounted Cash Flow Model

  • FY2009 Net Operating Cash Flow = S$75.82 Million
  • Discount Rate = 6%
  • Number of Shares Outstanding = 992.3 Million
  • Intrinsic Value
    • Best Case @15% Annual Growth Rate = $1.23
    • Median Case @ 10% Moderate Growth Rate = $0.94
    • Worst Case @ 0% Growth for the next 10 years = $0.56

Discounted EPS Model

  • Rolling EPS = S$0.06459
  • Discount Rate = 6%
  • Intrinsic Value
    • Best Case @15% Annual Growth Rate = $1.04
    • Median Case @ 10% Moderate Growth Rate = $0.80
    • Worst Case @ 0% Growth for the next 10 years = $0.48

 

PE Model

  • Use PE @ 15 as fair value
  • Intrinsic Value = $0.97

 

PEG Ratio

  • Current Price = $0.245
  • Current Rolling PE = 3.79
  • PEG Ratio @ 15% Growth = 0.25 (<< 1) Super Under Value
  • PEG Ratio @ 10% Growth = 0.38 (<< 1) Super Under Value

 

Summary

  • Using MOST CONSERVATIVE Intrinsic Value calculation (ie. 0% Growth for the next 10 years), IV = $0.48 (49% Discount to current price of $0.245)
  • Using a more reasonable 10% Growth Rate for the next 10 years, IV = $0.80 (70% Discount to current price of $0.245)

A potential Multibagger penny stock? You decide……

Nov 05

American Express (AXP) – Fundamental & Intrinsic Value

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Base on TTM (Trailing Twelve Months):

  • Current Price = $35.96
  • PE = 25.32
  • Dividend Yield = 2%
  • Net Earning (TTM) = 6.74% (9.5% in 2008)
  • ROA (TTM) = 1.34% (Not applicable to my criteria of ROA > 10% because Financial institution generally have very low ROA)
  • ROE (TTM) = % 12.5% (23.6% in 2008)
  • EPS (TTM) = $1.42 ($2.33 in 2008)

Intrinsic Value Calculation (DCF Model)

  • Next 10 Year Average Projected Growth Rate = 10.3%
  • Discount Rate = 10% (I use 10% to factor in the USD / SGD currency risk and economy risk in US)
  • Number of Shares = 1,190 million
  • 2008 Free Cash Flow = $7,689 million (Operating Cash Flow minus Capital Expenditure)
  • Intrinsic Value = $65.59

Intrinsic Value Calculation (Discounted EPS Model)

  • Growth Rate = 10.3%
  • Discount Rate = 10%
  • EPS (TTM) = $1.42
  • Intrinsic Value = $14.41

Intrinsic Value Calculation (PE Model)

  • Fair value PE = 15, intrinsic value= $21.30 (base on EPS $1.42)
  • PEG = 2.45 (Current Price is Over value!)

Stock Background

  • Historical High = $65.55
  • 52 Weeks High = $36.44
  • 52 Weeks Low = $10.26

So, which intrinsic value to use?
I will be using the Intrinsic Value ($21.30) derived from the PE Model. My reasons:

  1. Although the Intrinsic Value calculated from DCF Model is $65.59, however AXP may not be going up to this price base on historical high of $65.55.
  2. The intrinsic value ($14.41) derived from the Discounted EPS Model may be too conservative as the 52 weeks historical low is $10.26. Unless there is another big market crash due to financial crisis, it is unlikely AXP going back to this level again.
  3. By doing a comparison between American Express, MasterCard and Visa, the Intrinsic Value ($21.30) derived from the simple PE Model looks more realistic.
  4. The financial sector in generally in a very bad shape and it is safer to take a more conservative approach in valuing a financial institution. We don’t really know how many more banks are there goint to bankcrupt and how much inter-link toxic assets affecting each other. Furthermore, this is potential personal credit risks due to continous high unemployment rate in US. These credit card companies may have lot more undisclosed bad debts if the economy condition worsen.
Oct 18

Mobile One (M1) Fundamental & Intrinsic Value

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Base on Q3 2009 (end of Sept, 2009) financial report:

  • PE = 11.03
  • Current Price = 1.85
  • Dividend Yield = 7.24%
  • NAV = $0.26
  • Net Earning = 20% (21.3% in 2008)
  • Current Ratio = 0.23 (0.48 in 2008, Similar industry is 0.55). M1 borrowed S$292.5M in this financial year.
  • ROA = 18.68% (Base on 2008 Full Year)
  • ROE = 67.3% (base on 2008 Full Year)
 

Stock Background

  •  Historical high = about $2.268
  • Current Price = $1.85

Intrinsic Value Calculation

 PE Model
  • Fair value PE = 15, intrinsic value= $2.52 (base on EPS $0.16771)
  • However, M1’s historical high PE is 11 and never reach PE = 15 before. Thus, it is unrealistic to use PE = 15 to calculate the intrinsic value.
  • Base on PE = 11, intrinsic value (base on EPS $0.16771) = $1.84
  • EPS Growth Rate = 3.6%
  • PEG = 3.09 (Overvalue!)
 DCF Model
  • I am unable to calculate the intrinsic value because M1 Free Cash Flow is very inconsistent and have negative growth for past 3 years.
 Discounted EPS Model
  • EPS Growth Rate = 3.6%
  • Discount Rate = 5%
  • 2008A EPS = $0.16771
  • Intrinsic Value = $1.56
 Regardless of which method to calculate the intrinsic value, M1 is over value (base on Discounted EPS Model and PEG ratio). The top line (Revenue) and the bottom line (Profit) are not growing significantly year over year. M1 is also losing out to her competitors SingTel and StarHub on the TV bundling services. Furthermore, the stock price moves sideway since the IPO.
 

Summary of my reasons for not to buy M1:

  1. No significant competitive advantage to compete with SingTel and StarHub in the long term.
  2. Sales & Profit are not growing significantly.
  3. Stock moves sideway so no great upside potential for capital gain.

I am avoiding M1 after this analysis because there are other better Telco companies to invest in.