Discount Cash Flow – Want Want 151.HK

This article calculates the fair value using Discount Cash Flow model.

Reuters give the below growth Rate for Want Want. I think it is too optimistic. I have entered different combinations of growth rate and discount rate to the model. The fair value varies considerably. Which is why it is difficult to calculate the fair value.

Today’s closing price is approx 3.49 to give this fair value, the growth rate needs to be 18% – 10%.

LT Growth Rate (%) from Reuters

High Est – 32.81%

Low Est – 26%

http://stocks.us.reuters.com/stocks/estimates.asp?symbol=0151.HK&WTmodLOC=R3-Estimates-1-Estimates

Fair Value using different figures

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Growth Rate	1-5yr	6-10yr	Discount Rate	Fair Value
	18%	15%	9%	4.11
	18%	15%	8%	4.85
	18%	15%	10%	3.54
	32%	10%	9%	5.91
	26%	10%	9%	4.74
	15%	10%	9%	3.09
	18%	10%	9%	3.49

Discount Cash Flow spreadsheet

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FocusInvestor.com: The Focused Few
Initial Cash Flow:	$1,379,000,000
Years:	1-5	6-10
Growth Rate:	18%	15%
Terminal Growth Rate:	1%		Discount Rate:	9%
Shares Outstanding:	13,252,700,000		Margin of Safety:	30%
Debt Level:	$246,000,000
Year	Flows	Growth	Value
1	1,627,220,000	18%	$1,492,862,385
2	1,920,119,600	18%	$1,616,126,252
3	2,265,741,128	18%	$1,749,567,869
4	2,673,574,531	18%	$1,894,027,601
5	3,154,817,947	18%	$2,050,415,202
6	3,628,040,639	15%	$2,163,282,093
7	4,172,246,734	15%	$2,282,361,842
8	4,798,083,745	15%	$2,407,996,438
9	5,517,796,306	15%	$2,540,546,701
10	6,345,465,752	15%	$2,680,393,309
Terminal Year	$6,408,920,410
PV of Year 1-10 Cash Flows:			$20,877,579,693
Terminal Value:			$33,839,965,520
Total PV of Cash Flows:			$54,717,545,213
Number of Shares:			13,252,700,000
Intrinsic Value (IV):			$4.11
Margin of Safety IV:			$2.88
What Percentage of IV comes from			62%
the Terminal Value:

Reference – This very useful spreadsheet is download from www.focusinvestor.com

I have my own spreadsheet which produce similar figure but this one takes into account of debt which is better.