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……

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Are these penny stocks really cheap?

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Today penny stocks occupied most of the top 30 most active stocks spots. I took a quick look at those stocks I highlighted in red (e.g. Digiland, Unifiber, Infinio, Sapphire, etc) and found that most of them are losing money as expected. The stock price looks cheap (only a few cents) but in fact they are very expensive and risky. The upside of Rewards vs Risks is limited because the company is not going to pay dividend & the fund managers are not interested in investing in these companies, thus we should not put too high expectation that the stock price will go up. Anything can happen if the company is not making money because the company may go bankcrupt anytime, delisted or issue new rights (which dilute the stock price even more).

There are only two things will move the stock price, i.e. Earnings and News. The stock price will not move if the earning is bad or the company is losing money. Unless there is big news like Merger or Acquisition, win new businesses, company successfully launches new product, etc, don’t expect upside price movement which is sustainable for long term.

History always repeat itself, I am seeing people are making the same mistakes as mine previously and they are going to lose lots of money! I doubt they know what they are doing.

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