香港中华煤气有限公司（HKG: 3）的内在价管鲍分∩拣交分拣中心值可能比其股价︼高出88％
最佳回答
“管鲍分拣交分拣中心”香港中华煤气有限公司（HKG: 3）的内在价管鲍分拣交分拣中心值可能比其股价高出88％
KeyInsig管鲍分拣交分拣中心hts
HongKongandChinaGas'estimatedfairvalueisHK$10.87basedon2StageFreeCashFlowtoEquity
CurrentsharepriceofHK$5.79suggestsHongKongandChinaGasispotentially47%undervalued
Ourfairvalueestimateis88%higherthanHongKongandChinaGas'analystpricetargetofHK$5.78
TodaywewillrunthroughonewayofestimatingtheintrinsicvalueofTheHongKongandChinaGasCompanyLimited(HKG:3)byestimatingthecompany'sfuturecashflowsanddiscountingthemtotheirpresentvalue.OuranalysiswillemploytheDiscountedCashFlow(DCF)model.There'sreallynotallthatmuchtoit,eventhoughitmightappearquitecomplex.
Rememberthough,thattherearemanywaystoestimateacompany'svalue,andaDCFisjustonemethod.Ifyoustillhavesomeburningquestionsaboutthistypeofvaluation,takealookattheSimplyWallStanalysismodel.
CheckoutourlatestanalysisforHongKongandChinaGas
TheCalculation
Weusewhatisknownasa2-stagemodel,whichsimplymeanswehavetwodifferentperiodsofgrowthratesforthecompany'scashflows.Generallythefirststageishighergrowth,andthesecondstageisalowergrowthphase.Tostartoffwith,weneedtoestimatethenexttenyearsofcashflows.Wherepossibleweuseanalystestimates,butwhenthesearen'tavailableweextrapolatethepreviousfreecashflow(FCF)fromthelastestimateorreportedvalue.Weassumecompanieswithshrinkingfreecashflowwillslowtheirrateofshrinkage,andthatcompanieswithgrowingfreecashflowwillseetheirgrowthrateslow,overthisperiod.Wedothistoreflectthatgrowthtendstoslowmoreintheearlyyearsthanitdoesinlateryears.
Generallyweassumethatadollartodayismorevaluablethanadollarinthefuture,sowediscountthevalueofthesefuturecashflowstotheirestimatedvalueintoday'sdollars:
10-yearfreecashflow(FCF)forecast
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
LeveredFCF(HK$,Millions)
HK$5.02b
HK$6.58b
HK$7.75b
HK$8.77b
HK$9.62b
HK$10.3b
HK$10.9b
HK$11.4b
HK$11.9b
HK$12.3b
GrowthRateEstimateSource
Analystx2
Est@17.86%
Est@13.09%
Est@9.76%
Est@7.42%
Est@5.79%
Est@4.64%
Est@3.84%
Est@3.28%
PresentValue(HK$,Millions)Discounted@6.7%
HK$4.7k
HK$5.8k
HK$6.4k
HK$6.8k
HK$7.0k
HK$6.9k
HK$6.8k
HK$6.6k
HK$6.4k
("Est"=FCFgrowthrateestimatedbySimplyWallSt)
WenowneedtocalculatetheTerminalValue,whichaccountsforallthefuturecashflowsafterthistenyearperiod.Foranumberofreasonsaveryconservativegrowthrateisusedthatcannotexceedthatofacountry'sGDPgrowth.Inthiscasewehaveusedthe5-yearaverageofthe10-yeargovernmentbondyield(2.0%)toestimatefuturegrowth.Inthesamewayaswiththe10-year'growth'period,wediscountfuturecashflowstotoday'svalue,usingacostofequityof6.7%.
Thetotalvalue,orequityvalue,isthenthesumofthepresentvalueofthefuturecashflows,whichinthiscaseisHK$203b.Thelaststepistothendividetheequityvaluebythenumberofsharesoutstanding.ComparedtothecurrentsharepriceofHK$5.8,thecompanyappearsquitegoodvalueata47%discounttowherethestockpricetradescurrently.Valuationsareimpreciseinstrumentsthough,ratherlikeatelescope-moveafewdegreesandendupinadifferentgalaxy.Dokeepthisinmind.
SEHK:3DiscountedCashFlowDecember26th2023
TheAssumptions
Thecalculationaboveisverydependentontwoassumptions.Thefirstisthediscountrateandtheotheristhecashflows.Partofinvestingiscomingupwithyourownevaluationofacompany'sfutureperformance,sotrythecalculationyourselfandcheckyourownassumptions.TheDCFalsodoesnotconsiderthepossiblecyclicalityofanindustry,oracompany'sfuturecapitalrequirements,soitdoesnotgiveafullpictureofacompany'spotentialperformance.GiventhatwearelookingatHongKongandChinaGasaspotentialshareholders,thecostofequityisusedasthediscountrate,ratherthanthecostofcapital(orweightedaveragecostofcapital,WACC)whichaccountsfordebt.Inthiscalculationwe'veused6.7%,whichisbasedonaleveredbetaof0.800.Betaisameasureofastock'svolatility,comparedtothemarketasawhole.Wegetourbetafromtheindustryaveragebetaofgloballycomparablecompanies,withanimposedlimitbetween0.8and2.0,whichisareasonablerangeforastablebusiness.
SWOTAnalysisforHongKongandChinaGas
Earningsgrowthoverthepastyearexceededtheindustry.
Debtiswellcoveredbyearnings.
Balancesheetsummaryfor3.
Dividendislowcomparedtothetop25%ofdividendpayersintheGasUtilitiesmarket.
Annualearningsareforecasttogrowforthenext3years.
Tradingbelowourestimateoffairvaluebymorethan20%.
Debtisnotwellcoveredbyoperatingcashflow.
Dividendsarenotcoveredbyearningsandcashflows.
AnnualearningsareforecasttogrowslowerthantheHongKongmarket.
Is3wellequippedtohandlethreats?
LookingAhead:
Whilstimportant,theDCFcalculationisonlyoneofmanyfactorsthatyouneedtoassessforacompany.It'snotpossibletoobtainafoolproofvaluationwithaDCFmodel.InsteadthebestuseforaDCFmodelistotestcertainassumptionsandtheoriestoseeiftheywouldleadtothecompanybeingundervaluedorovervalued.Forexample,changesinthecompany'scostofequityortheriskfreeratecansignificantlyimpactthevaluation.Whatisthereasonforthesharepricesittingbelowtheintrinsicvalue?ForHongKongandChinaGas,therearethreeadditionalitemsyoushouldfurtherexamine:
PS.TheSimplyWallStappconductsadiscountedcashflowvaluationforeverystockontheSEHKeveryday.Ifyouwanttofindthecalculationforotherstocksjustsearchhere.
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ThisarticlebySimplyWallStisgeneralinnature.Weprovidecommentarybasedonhistoricaldataandanalystforecastsonlyusinganunbiasedmethodologyandourarticlesarenotintendedtobefinancialadvice.Itdoesnotconstitutearecommendationtobuyorsellanystock,anddoesnottakeaccountofyourobjectives,oryourfinancialsituation.Weaimtobringyoulong-termfocusedanalysisdrivenbyfundamentaldata.Notethatouranalysismaynotfactorinthelatestprice-sensitivecompanyannouncementsorqualitativematerial.SimplyWallSthasnopositioninanystocksmentioned.