C&D International Investment Group's estimated fair value is HK$21.66 based on Dividend Discount Model
C&D International Investment Group's HK$12.90 share price signals that it might be 40% undervalued
Analyst price target for 1908 is CN¥18.88 which is 13% below our fair value estimate
Today we'll do a simple run through of a valuation method used to estimate the attractiveness of C&D International Investment Group Limited (HKG:1908) as an investment opportunity by taking the expected future cash flows and discounting them to their present value. We will use the Discounted Cash Flow (DCF) model on this occasion. Before you think you won't be able to understand it, just read on! It's actually much less complex than you'd imagine.
Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model.
Crunching The Numbers
As C&D International Investment Group operates in the real estate sector, we need to calculate the intrinsic value slightly differently. In this approach dividends per share (DPS) are used, as free cash flow is difficult to estimate and often not reported by analysts. Unless a company pays out the majority of its FCF as a dividend, this method will typically underestimate the value of the stock. We use the Gordon Growth Model, which assumes dividend will grow into perpetuity at a rate that can be sustained. The dividend is expected to grow at an annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.3%. We then discount this figure to today's value at a cost of equity of 8.8%. Relative to the current share price of HK$12.9, the company appears quite good value at a 40% discount to where the stock price trades currently. 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.
Value Per Share = Expected Dividend Per Share / (Discount Rate - Perpetual Growth Rate)
= CN¥1.3 / (8.8% – 2.3%)
= HK$21.7
The Assumptions
Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual 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 C&D International Investment Group 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 8.8%, which is based on a levered beta of 1.351. 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 C&D International Investment Group
Strength
Earnings growth over the past year exceeded the industry.
Debt is not viewed as a risk.
Dividends are covered by earnings and cash flows.
Dividend is in the top 25% of dividend payers in the market.
Dividend information for 1908.
Weakness
Earnings growth over the past year is below its 5-year average.
Shareholders have been diluted in the past year.
Opportunity
Annual earnings are forecast to grow faster than the Hong Kong market.
Good value based on P/E ratio and estimated fair value.
Threat
Annual revenue is forecast to grow slower than the Hong Kong market.
What else are analysts forecasting for 1908?
Next Steps:
Whilst important, the DCF calculation shouldn't be the only metric you look at when researching a company. DCF models are not the be-all and end-all of investment valuation. Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation. For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. Why is the intrinsic value higher than the current share price? For C&D International Investment Group, we've compiled three relevant elements you should explore:
Risks: Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with C&D International Investment Group , and understanding them should be part of your investment process.
Future Earnings: How does 1908's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.
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.
キーインサイト
C&D International Investment Groupの予想される公正価値は、配当ディスカウントモデルに基づいてHK$21.66です。
C&D International Investment GroupのHK$12.90の株価が40%割安であることを示唆しています。
1908のアナリスト価格目標はCN¥18.88であり、当社の公正価値評価より13%低いです。
今日は、将来のキャッシュフローを予想し、現在価値に割引するために使用される評価方法を実行して、C&D International Investment Group Limited(HKG:1908)の魅力的な投資機会を見積もります。 この場合、割引キャッシュフロー(DCF)モデルを使用します。 理解できないと思う前に、読み続けてください! 実際のところ、想像以上に複雑ではありません。
ディスカウントキャッシュフローの最も重要な入力は割引率、そしてもちろん、実際のキャッシュフローです。 これらの結果に同意しない場合は、計算を自分でやって前提条件を変えてみてください。 DCFは産業の可能性の循環性や、会社の将来の資金需要を考慮していないため、会社の潜在的なパフォーマンスの完全な像を描くことはできません。 C&D International Investment Groupを潜在的な株主として見る場合、割引率として資本コスト(または加重平均資本コスト、WACC)ではなく、自己資本コストが使用されます。これは、負債を考慮していないためです。 この計算では、レバレッジされたベータが1.351に基づく8.8%を使用しました。 ベータは、市場全体に対する株式の価格変動の測定値です。 一般的に、安定したビジネスの合理的な範囲内で0.8から2.0の間に制限される、グローバルに比較して同等の会社の業界平均ベータから取得します。
C&D International Investment GroupのSWOt分析
強み
過去1年間の収益成長は業界を上回っています。
負債はリスクとして見られていません。
配当金は収益やキャッシュフローで十分カバーされています。
配当は市場の配当支払い企業の上位25%に入ります。
1908の配当金情報
弱み
過去1年間の収益成長は5年平均を下回っています。
株主は過去1年間に希薄化後されています。
機会
年間の収益は香港市場よりも速い成長が予想されています。
P/E比と見積もり公正価値に基づいて、よい価値があります。
脅威
年間売上高は香港市場よりも遅く成長する見込みです。
アナリストが1908について予測している他のことは何ですか?
次のステップ:
DCF計算は調査する際に見るべき唯一の指標ではありません。DCFモデルは投資価値評価の全てではありません。好ましくは、異なる場合や前提条件を適用し、企業の評価にどのように影響するかを見てみることができます。 たとえば、企業の自己資本コストまたはリスクフリーレートの変化は、評価に大きく影響する可能性があります。なぜ内在価値が現在の株価よりも高いのですか?C&D International Investment Groupの場合、次の3つの関連要素をまとめて調べる必要があります:
リスク:たとえば、常に存在する投資リスクの兆候を考慮してください。 C&D International Investment Groupで3つの警告サインが特定されており、それらを理解することはあなたの投資プロセスの一部である必要があります。
オーストラリアでは、moomooの投資商品及びサービスはMoomoo Securities Australia Limitedによって提供され、オーストラリア証券投資委員会(ASIC)の管理を受けております(AFSL No. 224663)。「金融サービスガイド」、「利用規約」、「プライバシーポリシー」などの詳細は、Moomoo Securities Australia Limitedのウェブサイトhttps://www.moomoo.com/auでご確認いただけます。
オーストラリアでは、moomooの投資商品及びサービスはMoomoo Securities Australia Limitedによって提供され、オーストラリア証券投資委員会(ASIC)の管理を受けております(AFSL No. 224663)。「金融サービスガイド」、「利用規約」、「プライバシーポリシー」などの詳細は、Moomoo Securities Australia Limitedのウェブサイトhttps://www.moomoo.com/auでご確認いただけます。