Jun 30 2013, 12:42 PM
QUOTE(V-Zero @ Jun 30 2013, 11:43 AM)
Ok here's my DCF valuation for Apollo.
I consider data from past 6 years. (07-12).
The average free cash flow for 6 years are $28,628.
I forecast 5 years of 5% growth ahead before getting into perpetuity rate of 2.5%.
Discount rate I vary according to the company's market cap size.
Then you discount them to present value using: (Future Value / (1 + Discount Rate) ^ Years Ahead)
Adding them up you have the enterprise value.
Take away the total debt then divide by the share outstanding, you will have the share fair price according to your valuation.
So my case, Apollo is worth RM3.93.
[ADDED]
For reference, here's dividend discount model valuation aka gordon growth model.
Formula: (Dividend per Share) / (Discount Rate - Dividend Growth Rate)
0.2 / (11% - 5.65%) = RM3.74
So now.
Sell Apollo.
How you get the discount rate 11%? DCF is very dependent on your assumptions, even a small change in discount rate will have a great impact on your fair value. The better way to do it is to use a sensitivities analysis... hopefully I don't sound too technical here.I consider data from past 6 years. (07-12).
The average free cash flow for 6 years are $28,628.
I forecast 5 years of 5% growth ahead before getting into perpetuity rate of 2.5%.
Discount rate I vary according to the company's market cap size.
Then you discount them to present value using: (Future Value / (1 + Discount Rate) ^ Years Ahead)
Adding them up you have the enterprise value.
Take away the total debt then divide by the share outstanding, you will have the share fair price according to your valuation.
So my case, Apollo is worth RM3.93.
[ADDED]
For reference, here's dividend discount model valuation aka gordon growth model.
Formula: (Dividend per Share) / (Discount Rate - Dividend Growth Rate)
0.2 / (11% - 5.65%) = RM3.74
So now.
Sell Apollo.
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