Cost of a good telescope11/14/2023 ![]() ![]() 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. Beta is a measure of a stock's volatility, compared to the market as a whole. In this calculation we've used 9.0%, which is based on a levered beta of 0.800. Given that we are looking at Able Global Berhad 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. 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. ![]() You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. Valuations are imprecise instruments though, rather like a telescope - move a few degrees and end up in a different galaxy. Compared to the current share price of RM1.3, the company appears reasonably expensive at the time of writing. The expected dividend per share is then discounted to today's value at a cost of equity of 9.0%. In this case we used the 5-year average of the 10-year government bond yield (3.6%). For a number of reasons a very conservative growth rate is used that cannot exceed that of a company's Gross Domestic Product (GDP). We use the Gordon Growth Model, which assumes dividend will grow into perpetuity at a rate that can be sustained. This often underestimates the value of a stock, but it can still be good as a comparison to competitors. In this approach dividends per share (DPS) are used, as free cash flow is difficult to estimate and often not reported by analysts. ![]() View our latest analysis for Able Global Berhad The MethodĪs Able Global Berhad operates in the food sector, we need to calculate the intrinsic value slightly differently. If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model. Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. Models like these may appear beyond the comprehension of a lay person, but they're fairly easy to follow. We will use the Discounted Cash Flow (DCF) model on this occasion. Today we will run through one way of estimating the intrinsic value of Able Global Berhad ( KLSE:ABLEGLOB) by estimating the company's future cash flows and discounting them to their present value. Using the Dividend Discount Model, Able Global Berhad fair value estimate is RM1.00Īble Global Berhad is estimated to be 34% overvalued based on current share price of RM1.34Īnalyst price target for ABLEGLOB is RM1.60, which is 59% above our fair value estimate ![]()
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