Are Investors Undervaluing Singapore Telecommunications Limited (SGX:Z74) By 43%?
Are Investors Undervaluing Singapore Telecommunications Limited (SGX:Z74) By 43%?
In this article we are going to estimate the intrinsic value of Singapore Telecommunications Limited (SGX:Z74) by projecting its future cash flows and then discounting them to today's 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.
We generally believe that a company's value is the present value of all of the cash it will generate in the future. However, a DCF is just one valuation metric among many, and it is not without flaws. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model.
View our latest analysis for Singapore Telecommunications
Is Singapore Telecommunications Fairly Valued?
We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. In the first stage we need to estimate the cash flows to the business over the next ten years. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.
Generally we assume that a dollar today is more valuable than a dollar in the future, so we discount the value of these future cash flows to their estimated value in today's dollars:
10-year free cash flow (FCF) forecast
2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | |
Levered FCF (SGD, Millions) | S$2.12b | S$2.03b | S$3.15b | S$3.34b | S$3.51b | S$3.65b | S$3.77b | S$3.88b | S$3.98b | S$4.07b |
Growth Rate Estimate Source | Analyst x3 | Analyst x3 | Analyst x3 | Est @ 6.18% | Est @ 4.88% | Est @ 3.98% | Est @ 3.34% | Est @ 2.90% | Est @ 2.59% | Est @ 2.37% |
Present Value (SGD, Millions) Discounted @ 6.3% | S$2.0k | S$1.8k | S$2.6k | S$2.6k | S$2.6k | S$2.5k | S$2.5k | S$2.4k | S$2.3k | S$2.2k |
("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = S$23b
We now need to calculate the Terminal Value, which accounts for all the future cash flows after this ten year period. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (1.9%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 6.3%.
Terminal Value (TV)= FCF2032 × (1 + g) ÷ (r – g) = S$4.1b× (1 + 1.9%) ÷ (6.3%– 1.9%) = S$93b
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= S$93b÷ ( 1 + 6.3%)10= S$50b
The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is S$74b. The last step is to then divide the equity value by the number of shares outstanding. Compared to the current share price of S$2.6, the company appears quite undervalued at a 43% discount to where the stock price trades currently. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out.
SGX:Z74 Discounted Cash Flow December 26th 2022Important Assumptions
We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own 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 Singapore Telecommunications 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 6.3%, which is based on a levered beta of 0.800. 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 Singapore Telecommunications
- 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 information for Z74.
- Dividend is low compared to the top 25% of dividend payers in the Telecom market.
- Annual earnings are forecast to grow faster than the Singaporean market.
- Good value based on P/E ratio and estimated fair value.
- Annual revenue is forecast to grow slower than the Singaporean market.
- What else are analysts forecasting for Z74?
Moving On:
Whilst important, the DCF calculation ideally won't be the sole piece of analysis you scrutinize for a company. It's not possible to obtain a foolproof valuation with a DCF model. Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued. 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 Singapore Telecommunications, we've compiled three important elements you should explore:
- Risks: Take risks, for example - Singapore Telecommunications has 1 warning sign we think you should be aware of.
- Future Earnings: How does Z74'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 High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!
PS. Simply Wall St updates its DCF calculation for every Singaporean 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.
在本文中,我們將通過預測新加坡電信有限公司(SGX:Z74)未來的現金流並將其折現為今天的價值來估計其內在價值。在這種情況下,我們將使用貼現現金流(DCF)模型。在你認為你將無法理解它之前,只需繼續閲讀!它實際上比你想象的要簡單得多。
我們通常認為,一家公司的價值是它未來將產生的所有現金的現值。然而,貼現現金流只是眾多估值指標中的一個,它也並非沒有缺陷。如果你想了解更多關於貼現現金流的信息,可以在Simply Wall St.分析模型中詳細閲讀這種計算背後的原理。
查看我們對新加坡電信的最新分析
新加坡電信的估值公平嗎?
我們使用的是兩階段增長模型,也就是説,我們考慮了公司發展的兩個階段。在初期,公司可能有較高的增長率,而第二階段通常被假設為有一個穩定的增長率。在第一階段,我們需要估計未來十年為企業帶來的現金流。在可能的情況下,我們使用分析師的估計,但當這些估計不可用時,我們會根據上次估計或報告的價值推斷先前的自由現金流(FCF)。我們假設,自由現金流萎縮的公司將減緩收縮速度,而自由現金流增長的公司在這段時間內的增長速度將放緩。我們這樣做是為了反映出,增長在最初幾年往往比後來幾年放緩得更多。
一般來説,我們假設今天的一美元比未來的一美元更有價值,所以我們將這些未來現金流的價值貼現到以今天美元計算的估計價值:
10年自由現金流(FCF)預測
2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | |
槓桿式FCF(新元,百萬) | 21.2億新元 | 20.3億新元 | 31.5億新元 | 33.4億新元 | 35.1億新元 | 36.5億新元 | 37.7億新元 | 38.8億新元 | 39.8億新元 | 40.7億新元 |
增長率預估來源 | 分析師x3 | 分析師x3 | 分析師x3 | Est@6.18% | Est@4.88% | Est@3.98% | Est@3.34% | Est@2.90% | Est@2.59% | Est@2.37% |
現值(新元,百萬)貼現@6.3% | 新元$2.0000 | 180萬新元 | 260萬新元 | 260萬新元 | 260萬新元 | 250萬新元 | 250萬新元 | 240萬新元 | 230萬新元 | 220萬新元 |
(“EST”=Simply Wall St.預估的FCF成長率)
10年期現金流現值(PVCF)=230億新元
我們現在需要計算終端價值,它説明瞭這十年之後的所有未來現金流。出於一些原因,使用了一個非常保守的增長率,不能超過一個國家的國內生產總值增長率。在這種情況下,我們使用了10年期政府債券收益率的5年平均值(1.9%)來估計未來的增長。與10年“增長”期一樣,我們使用6.3%的權益成本將未來現金流貼現至當前價值。
終端值(TV)=FCF2032×(1+g)?(r-g)=新元41億×(1+1.9%)?(6.3%-1.9%)=930億新元
終值現值(PVTV)=TV/(1+r)10=930億新元(1+6.3%)10=500億新元
總價值是未來十年的現金流總和加上貼現的終端價值,得出總股權價值,在本例中為740億新元。最後一步是將股權價值除以流通股數量。與目前2.6新元的股價相比,該公司的估值似乎相當低,較目前的股價有43%的折讓。不過,請記住,這只是一個大致的估值,就像任何複雜的公式一樣--垃圾輸入,垃圾輸出。
新交所:Z74貼現現金流2022年12月26日重要假設
我們要指出,貼現現金流最重要的投入是貼現率,當然還有實際現金流。投資的一部分是你自己對一家公司未來業績的評估,所以你自己試一試計算,檢查你自己的假設。DCF也沒有考慮一個行業可能的週期性,也沒有考慮一家公司未來的資本要求,因此它沒有給出一家公司潛在業績的全貌。鑑於我們將新加坡電信視為潛在股東,我們使用股權成本作為貼現率,而不是考慮債務的資本成本(或加權平均資本成本,WACC)。在這個計算中,我們使用了6.3%,這是基於槓桿率為0.800的測試版。貝塔係數是衡量一隻股票相對於整個市場的波動性的指標。我們的貝塔係數來自全球可比公司的行業平均貝塔係數,強制限制在0.8到2.0之間,這是一個穩定業務的合理範圍。
新加坡電信的SWOT分析
- 過去一年的收益增長超過了行業。
- 債務不被視為一種風險。
- 股息由收益和現金流支付。
- Z74的股利信息。
- 與電信市場上前25%的股息支付者相比,股息很低。
- 據預測,該公司的年度收益增速將超過新加坡市場。
- 基於市盈率和估計公允價值的良好價值。
- 預計該公司的年收入增速將低於新加坡市場。
- 分析師還對Z74做出了什麼預測?
下一步:
雖然很重要,但理想情況下,貼現現金流計算不會是你為一家公司仔細審查的唯一分析。用貼現現金流模型不可能獲得萬無一失的估值。相反,貼現現金流模型的最佳用途是測試某些假設和理論,看看它們是否會導致公司被低估或高估。例如,公司權益成本或無風險利率的變化可能會對估值產生重大影響。為什麼內在價值高於當前股價?對於新加坡電信,我們列出了你應該探索的三個重要元素:
- 風險:例如,承擔風險-新加坡電信1個警告標誌我們認為你應該意識到。
- 未來收益:與同行和更廣泛的市場相比,Z74的增長速度如何?通過與我們的免費分析師增長預期圖表互動,更深入地挖掘分析師對未來幾年的共識數字。
- 其他高質量替代產品:你喜歡一個好的全能運動員嗎?瀏覽我們的高質量股票互動列表,瞭解您可能會錯過的其他股票!
PS.Simply Wall St.每天更新每隻新加坡股票的貼現現金流計算,所以如果你想找出任何其他股票的內在價值,只需搜索此處。
對這篇文章有什麼反饋嗎?擔心內容嗎? 保持聯繫直接與我們聯繫。或者,也可以給編輯組發電子郵件,地址是implywallst.com。
本文由Simply Wall St.撰寫,具有概括性。我們僅使用不偏不倚的方法提供基於歷史數據和分析師預測的評論,我們的文章並不打算作為財務建議。它不構成買賣任何股票的建議,也沒有考慮你的目標或你的財務狀況。我們的目標是為您帶來由基本面數據驅動的長期重點分析。請注意,我們的分析可能不會將最新的對價格敏感的公司公告或定性材料考慮在內。Simply Wall St.對上述任何一隻股票都沒有持倉。
譯文內容由第三人軟體翻譯。
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