Today we are going to do a simple overview of a valuation method used to estimate the attractiveness of Elektro Maribor dd (LJSE:EMAG) as an investment opportunity by estimating cash flow company’s future and discounting them to their present value. The Discounted Cash Flow (DCF) model is the tool we will apply to do this. Don’t be put off by the jargon, the underlying calculations are actually quite simple.

We draw your attention to the fact that there are many ways to value a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. Anyone interested in learning a little more about intrinsic value should read the Simply Wall St.

Our analysis indicates that EMAG is potentially undervalued!

The calculation

As Elektro Maribor dd operates in the electric utility business, we have to calculate the intrinsic value slightly differently. Instead of using free cash flow, which is difficult to estimate and often not reported by industry analysts, dividend payments per share (DPS) are used. Unless a company pays the majority of its FCF as a dividend, this method will generally underestimate the value of the stock. We use Gordon’s growth model, which assumes that the dividend will grow in perpetuity at a rate that can be sustained. For a number of reasons, a very conservative growth rate is used which cannot exceed that of a company’s Gross Domestic Product (GDP). In this case, we used the 5-year average of the 10-year government bond yield (0.6%). The expected dividend per share is then discounted to its present value at a cost of equity of 5.9%. Compared to the current share price of €2.5, the company appears to be approximately fair value at a 9.4% discount to the current share price. Ratings are imprecise instruments, however, much like a telescope – move a few degrees and end up in another galaxy. Keep that in mind.

Value per share = Expected dividend per share / (Discount rate – Perpetual growth rate)

= €0.1 / (5.9% – 0.6%)

= €2.8

Important assumptions

We emphasize that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows. You don’t have to agree with these entries, I recommend that you redo the calculations yourself and play around with them. The DCF also does not take into account the possible cyclicality of an industry, nor the future capital needs of a company, so it does not give a complete picture of a company’s potential performance. Since we consider Elektro Maribor dd 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 takes debt into account. In this calculation, we used 5.9%, which is based on a leveraged beta of 0.800. Beta is a measure of a stock’s volatility relative to the market as a whole. We derive our beta from the average industry beta of broadly comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable company.

SWOT analysis for Elektro Maribor dd

Next steps:

Although the valuation of a business is important, it will ideally not be the only piece of analysis you will look at for a business. The DCF model is not a perfect stock valuation tool. Instead, the best use of 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, if the terminal value growth rate is adjusted slightly, it can significantly change the overall result. For Elektro Maribor dd, we have compiled three relevant aspects that you should consider:

1. Risks: For example, we spotted 4 warning signs for Elektro Maribor dd you should be aware, and 2 of them don’t suit us too much.
2. Other high-quality alternatives: Do you like a good all-rounder? Explore our interactive list of high-quality actions to get an idea of ​​what you might be missing!
3. Other top analyst picks: Interested to see what the analysts think? Take a look at our interactive list of analysts’ top stock picks to find out what they think could have attractive future prospects!

PS. The Simply Wall St app performs a discounted cash flow valuation for every stock on the LJSE every day. If you want to find the calculation for other stocks, search here.

Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

Crucial’s excellent value DRAM-less QLC SATA SSD, the BX500, is down to £56 on Amazon UK from an RRP of £74. I think that’s a decent saving on a drive that’s ideal for upgrading an older machine or as media/game storage in a new one, where money spent per gigabyte is the primary measure of a suitability reader. (If performance is the goal, then a faster NVMe SSD is the way to go.) And by that measure, this drive is nearly off the scale, costing just 5.6 pence per gigabyte.

In this article, we’ll estimate the intrinsic value of Universal Health Services, Inc. (NYSE: UHS) by estimating the company’s future cash flows and discounting them to their present value. Our analysis will use the discounted cash flow (DCF) model. Patterns like these may seem beyond a layman’s comprehension, but they’re pretty easy to follow.

We generally believe that the value of a company is the present value of all the cash it will generate in the future. However, a DCF is just one of many evaluation metrics, and it is not without its flaws. Anyone interested in learning a little more about intrinsic value should read the Simply Wall St.

Our analysis indicates that UHS is potentially undervalued!

The method

We use the 2-stage growth model, which simply means that we consider two stages of business growth. In the initial period, the company may have a higher growth rate, and the second stage is generally assumed to have a stable growth rate. In the first step, we need to estimate the company’s cash flow over the next ten years. Wherever possible, we use analysts’ estimates, but where these are not available, we extrapolate the previous free cash flow (FCF) from the latest estimate or reported value. We assume that companies with decreasing free cash flow will slow their rate of contraction and companies with increasing free cash flow will see their growth rate slow during this period. We do this to reflect the fact that growth tends to slow more in early years than in later years.

A DCF is based on the idea that a dollar in the future is worth less than a dollar today, 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

(“East” = FCF growth rate estimated by Simply Wall St)
10-year discounted cash flow (PVCF) = $5.4 billion

We now need to calculate the terminal value, which represents all future cash flows after this ten-year period. The Gordon Growth formula is used to calculate the terminal value at a future annual growth rate equal to the 5-year average 10-year government bond yield of 2.0%. We discount terminal cash flows to present value at a cost of equity of 7.2%.

Terminal value (TV)= FCF₂₀₃₂ × (1 + g) ÷ (r – g) = $1.1 billion × (1 + 2.0%) ÷ (7.2%–2.0%) = $21 billion

Present value of terminal value (PVTV)= TV / (1 + r)^ten= $21 billion ÷ (1 + 7.2%)^ten= $10 billion

The total value is the sum of the cash flows for the next ten years plus the present terminal value, which gives the total equity value, which in this case is $16 billion. To get the intrinsic value per share, we divide it by the total number of shares outstanding. Compared to the current share price of US$112, the company looks quite undervalued at a 50% discount to the current share price. Ratings are imprecise instruments, however, much like a telescope – move a few degrees and end up in a different galaxy. Keep that in mind.

Important assumptions

Now, the most important inputs to a discounted cash flow are the discount rate and, of course, the actual cash flows. You don’t have to agree with these entries, I recommend that you redo the calculations yourself and play around with them. The DCF also does not take into account the possible cyclicality of an industry, nor the future capital needs of a company, so it does not give a complete picture of a company’s potential performance. Since we consider Universal Health Services 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 takes debt into account. In this calculation, we used 7.2%, which is based on a leveraged beta of 1.024. Beta is a measure of a stock’s volatility relative to the market as a whole. We derive our beta from the average industry beta of broadly comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable company.

SWOT analysis for universal health services

Let’s move on :

Although a business valuation is important, it is only one of many factors you need to assess for a business. DCF models are not the be-all and end-all of investment valuation. Rather, it should be seen as a guide to “what assumptions must be true for this stock to be under/overvalued?” For example, changes in the company’s cost of equity or the risk-free rate can have a significant impact on the valuation. Can we understand why the company is trading at a discount to its intrinsic value? For universal health services, there are three essential elements to consider:

1. Risks: For example, we found 2 warning signs for universal health services that you must consider before investing here.
2. Future earnings: How does UHS’ growth rate compare to its peers and the broader market? Dive deeper into the analyst consensus figure for the coming years by interacting with our free analyst growth forecast chart.
3. Other high-quality alternatives: Do you like a good all-rounder? Explore our interactive list of high-quality actions to get an idea of ​​what you might be missing!

PS. Simply Wall St updates its DCF calculation for every US stock daily, so if you want to find the intrinsic value of any other stock, do a search here.

Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

NASHUA, NH – Wondering what to do in the Nashua area this weekend? Patch has you covered with the latest upcoming events taking place this week across Nashua. Check out what’s going on and what might interest you before you make any plans.

Got an event you’d like to see in the next roundup? You can add it to the calendar using this form. You can also spread the word to nearby communities by promoting your event. The cost is $2 per day per community.

Here are all of this weekend’s events in and around Nashua:

Featured event: Seacoast doll, bear and miniature show

• When: Sunday, November 6 at 10 a.m.
• Where: 35 Lafayette Road
• What: Seacoast Doll Bear and Miniature ShowSunday, November 6, 202210:00am 3:00pm Lafayette Crossing Mall35 Lafayette Road Hampton, NH, 03842 USA Admission: $5.00 Children 12 and under free. Mention the show for a discounted rate at the Quality Inn Portsmouth. 603-433-333… Learn more

Featured event: Sage Farm Antiques Autumn Glow November 1

• When: Sunday, November 6 at 10 a.m.
• Where: 5 Exeter Road
• What: Sage Farm Antiques Autumn Glow 1st November ShowFriday, November 4 to November 6 5 Exeter Road North Hampton and NHFFriday 10-7Saturday 10-5Sunday 10-4This autumn show reminds us of Thanksgiving gatherings and holiday parties. We will have fall and Christmas items for… Read more

Play it forward

• When: Sunday, November 6 at 1:00 p.m.
• Where: Budweiser Brewery Experience
• What: Play It Forward is back and better than ever! Join us for this great event in support of the Nashua Community Music School. Featuring live music by the NCMS House Band and Nashua Legends Aces & Eights. Join us at the Anheuser-Busch Biergarten for an afternoon of live music and… Read more

Sweeney Todd

• When: Sunday, November 6 at 2:00 p.m.
• Where: Keefe Center for the Arts
• What: The actor-singers perform the musical Sweeney Todd, The Demon Barber of Fleet Street, Sunday, Nov. 6 at 2 p.m. at the Keefe Center for the Arts, 117 Elm St., Nashua. Tickets on Actorsingers.org Learn more

NH Symphony Brass Ensemble

• When: Sunday, November 6 at 4:00 p.m.
• Where: 214 Main Street
• What: Tuba player Takatsugu Hagiwara joins trumpeters Richard Watson and Richard Kelly to create a Symphony NH brass ensemble that will feature a selection of pop-style horns. Come and hear what the Boston Globe called “gifted” with these musicians who… Read more

Events next week

Tax Basics with 603 Legal Aid – Virtual Event

• When: Monday, November 7 at 7:00 p.m.
• Where: Nashua Public Library
• What: Join us for a free tax clinic with the experts at 603 Legal Aid, featuring a presentation followed by a Q&A. Register via the Zoom link. Learn more

Create your own board game

• When: Tuesday, November 8 at 3:30 p.m.
• Where: Nashua Public Library
• What: For grades 6-12. Have you ever wanted to design your own card or board game? Now is your chance! Choose from a variety of game building supplies to design, build and play your own game. Registration is required. Learn more

Know your rights! An ACLU of NH Workshop on Being Stopped by the Police

• When: Wednesday, November 9 at 7:00 p.m.
• Where: Nashua Public Library
• What: Getting arrested by the police is a stressful experience that can quickly go sour. In this workshop, ACLU NH Staff Attorney Henry Klementowicz will discuss your rights and responsibilities when encountering law enforcement, what to do when your rights are violated, and offer… Read more

Peacock Players presents 9 to 5 the musical

• When: Friday, November 11 at 7:00 p.m.
• Where: 14 court street
• What: 9 to 5 The Musical, with music and lyrics by Dolly Parton and book by Patricia Resnick, is based on the seminal 1980 film. Set in the late 1970s, this hilarious tale of friendship and revenge PG- 13 in the Rolodex era is outrageous, thought-provoking and even a bit romantic… Read More

Check out other awesome local events or add your own to the Nashua Patch Community Calendar.

Editor’s Note: This article was auto-generated from event information provided primarily by community members. Patch has not independently verified much of this information, always check with organizers to confirm that published events are going as planned. Click on any event in the list for more details. You can also contact [email protected] with any questions or other comments regarding this article.

We understand the bad feelings created by a proposed $50 arrival tax for visitors to Hawaii. But for us, the exorbitant costs of accommodation in Hawaii cause insults and injuries, breaking the bank. Here is our recent case related to Honolulu hotels.

Your editors regularly travel around the state for the Beat of Hawaii and will be in Honolulu working on an upcoming off-season weekend. That should be relatively easy, right? Well, read on.

While car rentals have improved in Honolulu…

We were able to get a mid-size Hertz car for $27/day plus tax using Priceline. It was a surprise, about the same as we would have paid in 2019 or even less.

And the plane ticket was great!

Airfare was also great at $39 each way, and we had a choice of Hawaiian or Southwest.

The prices for lodging in Hawaii, however, were absolutely ridiculous!

We searched for hotels using the same methods as you. Sometimes we’ll start with things like Costco Travel and booking.com, to get a sense of the landscape. It’s always a great idea. Then we look for special offers, directly on the hotel website, Kamaaina (residents) discounts, etc. But what we are seeing is what we would call lamentable.

For seasonal rental aficionados, we have also looked for them. But on a short two night stay, the cleaning fee was too high and prevented us from looking in its wake.

Checking all the hotel categories in Honolulu, none of them fared well.

We understand trying to get the lowest price. Who is not guilty of this? We often sort hotel results by lowest price, to start with. At least to get a reference point and then go from there. And while we can point out that we always get great rates outside of Hawaii, that’s just not the case here.

Taxes and the dreaded “resort fees” add 20% to 50% to your bill.

Many hotels are now eliminating resort fees in response to the unpopularity of these “hidden fees”. Others combine parking and resort fees. Taxes on Hawaii accommodations (hotels and vacation rentals) are approximately 18%, the highest in the United States

US President Joe Biden said on Wednesday his administration would seek to crack down on “surprise fees” facing consumers. Biden cited two examples: resort fees for hotel stays and administrative fees for live events and concert tickets.

The Federal Trade Commission had started working on a rule last week to crack down on “unfair and misleading fees across all industries,” Reuters reported.

A lawsuit against Marriott alleged that the company made hundreds of millions on these largely hidden charges. Booking.com has publicly stated that it opposes resort fees, as has travel agent company ASTA which called them “out of control”.

Back to Honolulu hotels and what we found that gave rise to this article.

We scoured Honolulu and checked out a lot of hotels (remember we think there are about 5,000 hotels in Honolulu) and different room categories for a two night stay, including all taxes and all fees, as well as parking. Here are some of the choices we looked at. As mentioned above, we went no further with vacation rental options due to excessive cleaning fees for a short stay. While Kamaaina’s rates are advertised as deep discounts, the reality is that the savings we found were between 10-15%. This is because Kamaaina is considered a discount off the displayed rates, not the best available selling rates.

1. Hotel Ala Moana. Sea view 1 bedroom. $400/night. U g. Not an all-time favorite hotel, even with its lipstick upgrade in 2020, when the hotel carried out a measly $16 million renovation to its 1,100 rooms. We would say it is usable and the location is excellent. But for $800 for two nights, we felt ripped off. And that was a Kamaaina rate. We booked it but were so happy to cancel it later. somewhat insulting.
2. Queen Kapiolani Hotel. Room with sea view $300/night on reservation. Also, never a favorite property despite its renovation, but it is in a great location at the other end of Waikiki. The middle of Waikiki tends to be very busy, congested, and harder to navigate, especially with a car. Parking was also not included so we would have to park nearby for free or pay big. Not great.
3. Modern Honolulu. Partial ocean view room $350 a night but parking is $25 so it came to $750 for two nights. Found again on Booking. A 15% Kamaaina discount was possible but fucked up about it.
4. Kahala Resort. Jeff had stayed here with his family before and enjoyed the hard product (rooms) and service. The location is very relaxing and easy to get around from there. It was just hard to justify the cost. After four phone calls and multiple site visits, this is the one that came in at $1,000 for two nights, ocean view, parking included, and no resort fees. Expensive, but we perceived this to be a better value proposition. They got the reservation.
5. Alohilani Resort (formerly Pacific Beach Hotel). Partial ocean view room at $404/night for their Kamaaina discounted rate. Parking and resort fees are included. Google reviews weren’t up to snuff, especially when it came to cleanliness and amenities. We took a pass based on both value and other concerns. However, editor Rob is staying there for one night in November on another trip, partly because it’s less than the pagoda and the Ala Moana. Maybe he will report.
6. Hotel Pagoda. An old Kamaaina favorite, though still a bit seedy. The deluxe room with no view was $484 for two nights. Add to that a “resort” fee of $20 per night (you’re kidding) and $35 per night for parking, and you come to about $600 for two nights. Reviews aren’t great, and Oyster’s preview said: “Rooms at this 176-room budget hotel, five minutes from the beach, are spacious enough — but also noisy, tired, and a little grubby. ” Definitely not.

How are you doing with Honolulu hotels these days?

Written by Nick Ackerman, co-produced by Stanford Chemist. This article was originally published to members of the CEF/ETF Income Laboratory on October 14, 2022.

BlackRock Floating Rate Income Strategies Fund (NYSE: FRA) and BlackRock Floating Rate Income Trust (NYSE: BGT) were two of the latest changes to payouts for the BlackRock range of funds. Fortunately, these two funds were distribution relays for their shareholders. Since these are funds exposed to variable rates, this was generally expected.

In fact, as rates continue to be pushed higher by the Fed, we could likely see even more hikes going forward. At the same time, both of these funds are offered at quite attractive prices with significant discounts. These haircuts arise from the fact that there are credit risks in the assets. Since they are issued by lower quality companies, the risk of default or bankruptcy is higher during tough economic times. Consequently, investors sell the funds faster than the actual underlying performance of the portfolios.

Here’s a look at the year-to-date total share price and total net asset value return performance between these two funds. We can clearly see that total net asset value returns have held up much better relative to stock prices. So, the latest big discounts we’ve seen pop up.

The rate hike is very likely to put the economy in a tough spot as the Fed works to slow the economy to fight inflation; hence why discounts opened on uncertainty about the severity of an economic downturn.

That being said, just because there is a default or bankruptcy does not mean there is no collection of some of the loans. Recoveries have actually been quite strong, according to a report from Fitch. Of course, this is for historical data only and does not guarantee future results.

The latest UNII report showed that the distribution coverage rate peaked at over 100% for FRA and BGT. That was for the end of August 2022. Then there was another 75 basis point increase from the Fed in September. With at least one, possibly two increases of more than 75 basis points at the end of this year.

This will only see even more net investment income from these funds. In turn, this will essentially mean that new distributions will or will likely be covered by the NII.

However, it can be noted that the UNII is always negative. For distribution changes, the direction of NII seems to mean more than what UNII shows. UNII is simply undistributed net investment income. So this only tells us where the payment was, but not where the payment might go.

BlackRock Floating Rate Income Strategies Fund

• Z-score over 1 year: -1.67
• Discount: 11.85%
• Distribution yield: 8.71%
• Expense ratio: 1.17%
• Leverage: 28.69%
• Assets under management: $613.7 million
• Structure: Perpetual

FRA’s investment objective is “to provide shareholders with high current income and capital preservation consistent with investments in a diversified leveraged portfolio of debt securities and floating rate instruments”.

To achieve this investment objective, “at least 80% of its assets in floating rate debt securities, including floating or variable rate debt securities which pay interest at rates which adjust each time ‘a specified interest rate changes and/or resets on predetermined dates’. As is generally the case with these types of funds, the portfolio “invests a substantial portion of its investments in floating rate debt securities consisting of lower rated secured or unsecured floating rate senior loans. to investment quality.

It hasn’t been long since we last covered FRA. However, in this volatile market, a lot can happen. We’ve seen an increase in distribution, but a lower price has also pushed up distribution yield along with that increase. Market volatility also pushed the fund into an even wider discount and what I would consider an even more attractive discount.

The boost for FRA was good for a 20.5% increase, taking the monthly payment from $0.0667 to $0.0804. This was the first increase in this fund since rates rose. These funds tend to focus on more even payment to shareholders rather than more regular adjustments. For floating rate funds, being so sensitive to changes in interest rates, they tend to see fairly regular changes, relatively speaking.

From another angle, the fund is now paying well above its historical payout level. This is due to the decline in the stock price, but with heavy hedging, I think it’s attractive.

The effective duration of the fund is incredibly low at 0.33 years. This is common for these floating rate loan funds. This is partly why they are a hedge against other fixed rate debt in nature.

Despite this, we have seen the fund’s discount widen significantly. It is wider than its historical range and is bouncing near the lows we have seen from 2019 to the COVID pandemic.

BlackRock Floating Rate Income Trust

• Z-score over 1 year: -1.39
• Discount: 12.30%
• Distribution yield: 8.76%
• Expense ratio: 1.18%
• Leverage: 28.92%
• Assets under management: $378.8 million
• Structure: Perpetual

BGT’s investment objective is “to provide a high level of current income”. To achieve this, the fund will invest “at least 80% of its assets in floating and variable rate instruments of US and non-US issuers, including a substantial portion of its assets in global floating and variable rate securities, including including floating rate senior secured loans made to corporations and other business entities.”

For BGT, it’s been a while since I specifically covered this fund. It has many similarities to FRA as a whole. Almost the same expense ratio, even though it’s a smaller fund. The leverage used by the fund is quite high, but it is typical for these types of funds. The effective duration of the portfolio is also exactly the same at 0.33 years.

Even the payout increase for BGT was quite similar to that of FRA with an increase of 20.7%. It went from a monthly payment of $0.0647 to $0.0781. It’s also not too surprising to see such similarities, given that the cast coverage was quite similar in the last UNII report. BGT had a slightly better coverage rate of half a percent. It was also BGT’s first increase in this latest rate hike cycle.

Looking at the performance of distribution over the past decade, we can see almost a mirror image of what we saw from FRA above. Again, the higher distribution yield is a function of lower prices. Given that distribution coverage is quite strong and likely to improve, this is a positive development.

The fund’s discount also shows that BGT is trading above its long-term average level. Both of these funds had rising valuations as we approached the end of 2021. Credit risks, however, completely took over and drove down haircuts to near decade lows – excluding the period of the COVID crisis.

An interesting thing to note for BGT is that the fund generally trades at a narrower discount than FRA. Yet right now it has an even bigger discount as of the last close on October 13th. I hold FRA but not BGT. I had at some point in the last hiking cycle. That being said, the difference in valuation right now is not necessarily large enough to make an exchange an obvious choice.

Conclusion

FRA and BGT have recently increased their distributions. This seems like an obvious outcome as a floating rate fund in a rising rate environment. However, although the underlying portfolios are doing quite well, the credit risks of their portfolios seem to be making investors nervous. This penalized the real share price of these funds, opening up to the latest discounts. I think these are priced attractively right now. But I recognize that – at least for FRA – the market does not agree with me.

I originally went bullish on FRA in May. Again, just at the end of August. In May, the discount amounted to around 13%. It then tightened in August to around 7%. Now it is again offering a discount of almost 12%. This has at least played a role in the losses generated since the August update.

FRA has produced losses each of these times, holding up much better than the S&P 500, but it’s not an appropriate benchmark. This can help provide some context. In the long term, equities should be able to smoke investments into loans. If we take more risks, we should expect to be better rewarded. At least that’s the general idea.

Ultimately, the higher revenue generated resulting in higher fund distributions is a welcome sign that things are still working out on this front.

How far is China Energine International (Holdings) Limited (HKG:1185) from its intrinsic value? Using the most recent financial data, we will examine whether the stock price is fair by taking the expected future cash flows and discounting them to the present value. The Discounted Cash Flow (DCF) model is the tool we will apply to do this. There really isn’t much to do, although it may seem quite complex.

We draw your attention to the fact that there are many ways to value a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. Anyone interested in learning a little more about intrinsic value should read the Simply Wall St.

Check opportunities and risks within Hong Kong’s renewable energy industry.

Is China Energine International (Holdings) fair valued?

We will use a two-stage DCF model which, as the name suggests, takes into account two stages of growth. The first stage is usually a period of higher growth which stabilizes towards the terminal value, captured in the second period of “sustained growth”. To begin with, we need to obtain cash flow estimates for the next ten years. Since no analyst estimates of free cash flow are available to us, we have extrapolated the previous free cash flow (FCF) from the company’s latest reported value. We assume that companies with decreasing free cash flow will slow their rate of contraction and companies with increasing free cash flow will see their growth rate slow during this period. We do this to reflect the fact that growth tends to slow more in early years than in later years.

A DCF is based on the idea that a dollar in the future is worth less than a dollar today, so we need to discount the sum of these future cash flows to arrive at an estimate of present value:

Estimated free cash flow (FCF) over 10 years

(“East” = FCF growth rate estimated by Simply Wall St)
10-year discounted cash flow (PVCF) = HK$326 million

After calculating the present value of future cash flows over the initial 10-year period, we need to calculate the terminal value, which takes into account all future cash flows beyond the first stage. The Gordon Growth formula is used to calculate the terminal value at a future annual growth rate equal to the 5-year average 10-year government bond yield of 1.6%. We discount terminal cash flows to present value at a cost of equity of 5.9%.

Terminal value (TV)= FCF₂₀₃₂ × (1 + g) ÷ (r – g) = HK$66 million × (1 + 1.6%) ÷ (5.9%–1.6%) = HK$1.6 billion Kong

Present value of terminal value (PVTV)= TV / (1 + r)^ten= HK$1.6 billion÷ (1 + 5.9%)^ten= HK$891 million

The total value is the sum of the cash flows for the next ten years plus the present terminal value, which gives the total equity value, which in this case is HK$1.2 billion. To get the intrinsic value per share, we divide it by the total number of shares outstanding. Compared to the current share price of HK$0.2, the company appears to be about fair value at a 12% discount to the current share price. The assumptions of any calculation have a big impact on the valuation, so it’s best to consider this as a rough estimate, not accurate down to the last penny.

The hypotheses

We emphasize that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows. If you disagree with these results, try the math yourself and play around with the assumptions. The DCF also does not take into account the possible cyclicality of an industry or the future capital needs of a company, so it does not give a complete picture of a company’s potential performance. Since we consider China Energine International (Holdings) 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 takes into account the debt. In this calculation, we used 5.9%, which is based on a leveraged beta of 0.800. Beta is a measure of a stock’s volatility relative to the market as a whole. We derive our beta from the average industry beta of broadly comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable company.

Next steps:

Although a business valuation is important, it is only one of the many factors you need to assess for a business. The DCF model is not a perfect stock valuation tool. Instead, the best use of 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, if the terminal value growth rate is adjusted slightly, it can significantly change the overall result. For China Energine International (Holdings), we have compiled three additional things for you to assess:

1. Risks: Be aware that China Energine International (Holdings) displays 3 warning signs in our investment analysis and 2 of them are significant…
2. Other high-quality alternatives: Do you like a good all-rounder? Explore our interactive list of high-quality actions to get an idea of ​​what you might be missing!
3. Other top analyst picks: Interested to see what the analysts think? Take a look at our interactive list of analysts’ top stock picks to find out what they think could have attractive future prospects!

PS. Simply Wall St updates its DCF calculation for every Hong Kong stock daily, so if you want to find the intrinsic value of any other stock, just search here.

Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

The following segment is taken from this fund letter.

Golden Equinox (NYSE: EQX)

As a first-order effect, gold has performed poorly in an environment of rising real rates and a strong dollar (although it is at all-time highs in other currencies). gold the adjustment of prices to real rates seems contemporary.

Historically, for every 1% increase in real 10-year rates, there is a reasonably foreseeable 10% decline in the price of USD-denominated gold, all other things being equal. If this historical relationship holds, the current rise in real rates implies a 26% decline in gold prices, matching the 22% fall from the March highs of this year. However, there is a growing gap between the sell and sentiment of the precious metal versus the value of a call option on a total loss of confidence in central banks.

Equinox Gold has been the most painful position in our portfolio, down about 50% since March. The fall in share price implies that this fast-growing gold producer has fared far worse than it has. According to our models, the current stock price indicates a long-term gold price of approximately $1,050 at a 10% discount rate. This appears as a significant pricing error.

Political risk has undoubtedly been an issue, with operations at the Los Filos mine interrupted on several occasions and permit issues at the RDM mine in Brazil. EQX is a development story and is in the high growth phase of its business lifecycle, with more construction underway at any given time than most mining companies will experience in their entire lifetime. of life.

We believe Equinox will be a strong midstream producer by the middle of this decade, doubling the size of its business over the next three years. We are comfortable holding this position through a price cycle and the ensuing volatility as the business matures.

We will be going down to Brazil to visit several Equinox mines in October, so expect a full review of the firm in Q4.

Editor’s note: The summary bullet points for this article were chosen by the Seeking Alpha editors.

Does Agilyx ASA (OB:AGLX) stock price in October reflect what it is really worth? Today we are going to estimate the intrinsic value of the stock by taking the expected future cash flows and discounting them to their present value. One way to do this is to use the discounted cash flow (DCF) model. Don’t be put off by the jargon, the underlying calculations are actually quite simple.

Remember though that there are many ways to estimate the value of a business and a DCF is just one method. If you still have burning questions about this type of assessment, take a look at Simply Wall St.’s analysis template.

Check opportunities and risks within the commercial services industry NO.

The model

We will use a two-stage DCF model which, as the name suggests, takes into account two stages of growth. The first stage is usually a period of higher growth which stabilizes towards the terminal value, captured in the second period of “sustained growth”. To begin with, we need to obtain cash flow estimates for the next ten years. Wherever possible, we use analysts’ estimates, but where these are not available, we extrapolate the previous free cash flow (FCF) from the latest estimate or reported value. We assume that companies with decreasing free cash flow will slow their rate of contraction and companies with increasing free cash flow will see their growth rate slow during this period. We do this to reflect the fact that growth tends to slow more in early years than in later years.

A DCF is based on the idea that a dollar in the future is worth less than a dollar today, 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

(“East” = FCF growth rate estimated by Simply Wall St)
10-year discounted cash flow (PVCF) = $24 million

The second stage is also known as the terminal value, it is the cash flow of the business after the first stage. For a number of reasons, a very conservative growth rate is used which cannot exceed that of a country’s GDP growth. In this case, we used the 5-year average of the 10-year government bond yield (1.1%) to estimate future growth. Similar to the 10-year “growth” period, we discount future cash flows to present value, using a cost of equity of 5.3%.

Terminal value (TV)= FCF₂₀₃₂ × (1 + g) ÷ (r – g) = $9.3 million × (1 + 1.1%) ÷ (5.3%–1.1%) = $228 million

Present value of terminal value (PVTV)= TV / (1 + r)^ten= $228 million ÷ (1 + 5.3%)^ten= $137 million

The total value, or equity value, is then the sum of the present value of future cash flows, which in this case is $161 million. The final step is to divide the equity value by the number of shares outstanding. Compared to the current share price of 25.1 kr, the company appears slightly overvalued at the time of writing. Remember though that this is only a rough estimate, and like any complex formula – trash in, trash out.

The hypotheses

Now, the most important inputs to a discounted cash flow are the discount rate and, of course, the actual cash flows. If you disagree with these results, try the math yourself and play around with the assumptions. The DCF also does not take into account the possible cyclicality of an industry, nor the future capital needs of a company, so it does not give a complete picture of a company’s potential performance. Since we view Agilyx 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 factors in debt. In this calculation, we used 5.3%, which is based on a leveraged beta of 0.880. Beta is a measure of a stock’s volatility relative to the market as a whole. We derive our beta from the average industry beta of broadly comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable company.

SWOT analysis for Agilyx

Look forward:

Although a business valuation is important, it is only one of many factors you need to assess for a business. The DCF model is not a perfect stock valuation tool. Instead, the best use of 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 have a significant impact on the valuation. Can we understand why the company is trading at a premium to its intrinsic value? For Agilyx, we’ve put together three relevant factors you should consider:

1. Risks: We believe that you should evaluate the 1 warning sign for Agilyx we reported before investing in the company.
2. Future earnings: How does AGLX’s growth rate compare to its peers and the market in general? Dive deeper into the analyst consensus figure for the coming years by interacting with our free analyst growth forecast chart.
3. Other high-quality alternatives: Do you like a good all-rounder? Explore our interactive list of high-quality actions to get an idea of ​​what you might be missing!

PS. Simply Wall St updates its DCF calculation for every Norwegian stock daily, so if you want to find the intrinsic value of any other stock, just search here.

Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

Melbourne’s current long-term strategic land use plan, set out in Melbourne Plan 2017-2050, is based on two fundamental ideas.

These are that Melbourne would become a polycentric city based on a series of activity clusters, mainly in the middle suburbs (called National Employment and Innovation Clusters – or NEICs) and Melbourne would be organized into a set of 20-minute neighborhoods.

NEICs aim to promote productivity growth through agglomeration and develop a more equitable city, including increasing employment opportunities closer to the city’s outer urban growth corridors.

The idea of ​​improving access to public transport for medium-sized urban activity centers is appealing, as a means of supporting their growth potential.

And the Victorian government’s Suburban Rail Loop (SRL), part of its Big Build scheme, is set to play that role.

But this solution is probably too big for its purpose.

Highly developed global cities that have circumferential rail services – i.e. trains running around an urban area rather than radially towards its center – generally have much higher densities than Melbourne and their circular rail loops are quite short.

Most are also located in the higher density inner parts of cities where demand is greatest, while more distant circumferential public transport usually requires transfers between services.

In 2022 Melbourne’s built-up area has a population density of 1,746 people per square kilometer and the SRL has a proposed length of 90 kilometres, from Cheltenham to Werribee.

Compare that to London, whose data tells us a population density of 6,504 people per square kilometer – the city’s Circle Line is 27 kilometers long. Tokyo-Yokohama has a density of 4,584 people per square kilometer, with its Yamanote line at 34.5 kilometers, and Berlin has 2,934 people per square kilometer and the 37.5 km long Ringbahn.

In short, Melbourne’s SRL is about three times longer than these circular lines, in a city with a much lower population density and lower ridership potential.

The economy is against the operation of the SRL.

The SRL of August 2021 Business and Investment Cases for SRL’s Cheltenham to Melbourne Airport segment (SRL East plus SRL North) showed a positive outcome, with an expected benefit-cost ratio between 1.0 and 1.7.

However, there are two serious problems with this result.

First, benefit-cost analysis was undertaken with a low discount rate (four percent) to convert future benefits and costs over the lifetime of the project to present values ​​(this is needed to derive benefit ratios -costs). The usual Australian discount rate for valuing major infrastructure projects – seven per cent – would have produced much lower returns for the SRL.

A good argument can be made for using a four per cent discount rate for a long life project, such as SRL, but this is not the usual public policy approach in Australia (unlike the UK). United).

The choice of this discount rate should be the subject of wide debate, including consideration of the implications for the valuation of alternative investment opportunities whose impacts accumulate over shorter periods.

Second, as is well documented in the media, the expected cost of the project has increased significantly. The cost was estimated at around A$50 billion for the entire project when initially announced in 2018, rising to A$35-57 billion for SRL East plus North in the Business and Investment Case.

The figure now stands again at A$125 billion for SRL East plus North, according to estimates from Victoria’s Parliamentary Budget Office.

This would bring the capital cost of the full SRL to around A$200 billion, around four times the original estimate made just a few years ago.

Unfortunately, the expected benefits do not grow as quickly as this rate of cost inflation. If valued today with a more usual discount rate, the SRL would struggle to generate even 50 Australian cents of profit per dollar of capital cost.

This should be cause for concern.

Medium-Capacity Transit (MCT) solutions, as proposed by the Rail Futures Institute, are likely to be a more cost-effective and flexible solution to meet the circumferential public transport accessibility needs of medium-sized urban clusters of Melbourne in a faster time frame.

This type of cluster development could then be bolstered by direct investments in the clusters’ competitive strengths – such as supporting the growth of their universities and hospitals or medical research facilities – as well as investments in place creation.

These plus MCT investments would be a more integrated way to promote polycentric growth in Melbourne than relying so much on SRL.

The savings made by not pursuing the expensive development of the SRL could also be used to promote a much faster roll-out of the Melbourne Plan’s distinctive and highly innovative idea of ​​20-Minute Neighborhoods; this concept has been taken up by many European cities as well as others in Asia, Canada, South America and recently in Singapore.

A neighborhood 20 minutes away has most of the services that most people need most of the time, including shopping, schools, health services, parks and recreation.

This form of land use reduces urban sprawl through higher density housing, strengthens community and promotes social capital, improves accessibility and provides a greener environment.

As a result, the likely results are improved health and well-being, increased social inclusion and increased economic productivity, and a reduced need to travel, which also helps reduce transport emissions.

The Victorian government is testing 20-minute quarters in Melbourne. However, these trials neglected the public transport component, relying instead on walking and cycling.

A catchment area of ​​800 meters, as used in the trials, and considered an acceptable walking distance, is unlikely to provide access to many service needs. This reliance on active transportation does not provide an equal opportunity for all, potentially excluding many older people, those who commute or carry heavier loads, people with disabilities, and people with multitasking needs – such as work, childcare and school. deposits, purchases and the list goes on.

A larger neighborhood is needed to provide essential services, supported by frequent local transit service.

Improving circumferential access to public transport to serve Melbourne’s intermediate urban hubs is an important requirement to ensure the planned development of the city’s land use. But the commuter rail loop is an expensive solution to this challenge.

This comes at the cost of other significant infrastructure and service improvements that are likely to be effective in reducing inequality and facilitating growth with lower emissions.

Mid-capacity transit options and direct investment in cluster development provide a more cost-effective route, complemented by a significantly accelerated rollout of 20-minute neighborhoods in Melbourne’s midtown and outlying urban areas at increased densities.

It would give Melbourne big advantages without such a big bet.

Banner: AAP

Space is important to us and that’s why we strive to provide you with the best coverage of the industry and Florida launches. Journalism like this takes time and resources. Please support him with a subscription here.

—

The Kennedy Space Center Visitor Complex’s annual “Salute to Brevard” offer returns and offers deep discounts on daily admission and access to limited-time experiences.

The program, which offers a 75% discount on daily admission for Brevard County residents, runs October 17-30, 2022.

With proof of residency in the form of a driver’s license or utility bill, guests can purchase up to six regular admission tickets at the discounted price of $19 for adults and $14 for children from 3 to 11 years old (plus tax).

Only the ticket purchaser must be a Brevard County resident, but tickets must be purchased at the Visitor Complex on the day of entry.

Customers are asked to bring canned goods and non-perishables, formula and baby food, and personal hygiene items to donate to the Brevard County Sharing Center, but are not required to do so. do to get the reduced ticket prices.

“Salute to Brevard is one of the many ways we give back to our community here at the Kennedy Space Center Visitor Complex,” Therrin Protze, visitor complex chief operating officer, said in a statement. “We can show them our appreciation by inviting them to explore the space at a discounted rate while collecting much-needed supplies for Brevard County Sharing Centers.”

Purchasing a discounted daily admission ticket will grant all guests access to all exhibits, including Space Shuttle Atlantis, Apollo Center/Saturn V and the recently opened Skywalk: The Deep Space Launch Complex.

As an added bonus, guests can also experience the limited-time “Taste of Space: Fall Bites” food festival throughout the resort running through November 6, 2022.

For more information you can visit the visitor complex website.

Jamie Groh is a space reporter for Florida Today. You can contact her at [email protected] Follow her on Twitter at @AlteredJamie.

Thesis

Guggenheim Active Allocation Fund (NYSE: GUG) is a multi-asset closed-end Guggenheim fund. The fund went public in November 2021 and had a tough first year. Down more than -28% since its inception, the CEF has changed its orientation, being now overweight fixed income. The fund started with a 50/50 equity/fixed income allocation. The vehicle is reminiscent of another multi-asset CEF, namely BlackRock Capital Allocation Trust (BCAT) that we have explored in detail here. Both funds are multi-asset CEFs with broad mandates that have floated relatively recently, and have seen their discounts to net asset value widen to historic lows.

In our first article on GUG, we discussed at length why we thought the first year was going to be a tough one for the fund, given the propensity of newly IPO CEFs to underperform. In addition to its issuance schedule, the fund has also increased its portfolio to the top of the market (end of 2021). The results were not favorable to investors. Interestingly, however, the fund is taking advantage of its broad mandate to optimize its collateral mix, having liquidated most of its equity positions in 2022. The fund now has an 86% allocation to fixed income, compared to 50 % in equities, 50% fixed income at the beginning of the year.

Both vehicles are now trading at very deep discounts to NAV, and at least in the case of GUG, the discount is justified. Having pivoted to fixed income securities, the fund failed to create a history of tangible and measurable risk factors. An investor valuing the vehicle should allocate a higher discount rate given its “black box” characteristics. GUG is now using less ROC than expected (only 38% ROC according to the September distribution) given the cash flows received from the fixed income portfolio. We remain a firm believer that new CEF vehicles should not be purchased by retail investors in their first year on the market, due to historical underperformance and issues associated with establishing a well-established trading model. defined and identifiable.

Assets

The fund started out with a balanced 50/50 equity/fixed income mix:

However, CEF pivoted to fixed income in 2022, after shedding most of its equity holdings:

The vehicle can be seen to have shifted to high yield corporate bonds and loans (traditional instruments of a classic fixed income CEF) with other small tranches tilted towards ABS and preferred securities. Equities now represent only 12.1% of the fund.

On the one hand, the beauty of a broad mandate allows for this type of pivot, but at the same time, investors will find it difficult to allocate capital to a “black box” type vehicle. We are curious to see the evolution of the fund here and how the collateral mix will evolve throughout the economic cycle. We believe the fund needs to establish some sort of identifiable trading identity or pattern for investors to properly value it.

The current main holdings of the fund are:

Performance

The fund has fallen significantly since its creation:

We can see that since its creation in November 2021 the fund has fallen by more than -28%. During this period, it has a similar return profile to BCAT. A more established CEF fixed income bond from Credit Suisse, namely CIK, fell only -20% due to better spread performance.

Year-to-date, the fund’s return profile has mirrored the broader market:

Ultimately, in the fixed income/multi-asset CEF space, when adding leverage to a losing position, the result will always be a more negative return.

Premium/Rebate to NAV

During its short tenure, the fund moved to a discount to net asset value and stayed there:

We can see that the fund has a bit of a beta to risk-on/risk-off environments, but is generally stuck in the range of -7% to -18% in terms of the discount to NAV. Is it justified? We believe it. The fund has no performance history and it has already significantly modified its risk factors by its virtual exit from equities. A cautious investor does not know what the fund will look like next, so when uncertainty prevails, a discount is warranted.

When the market recovers, and if the fund manages to forge a certain identity, we should see this discount tighten given the robustness of the Guggenheim platform.

Distributions

So how does GUG fare in the distribution department?

Having pivoted to fixed income, ROC utilization is only 38%, well below what we expected. If the fund had stayed in equities, which are having a horrible year, the vehicle would have used a higher amount of ROC.

Underperformance early in a vehicle’s life is a bit of a vicious circle. Dividends are taken out of principal through the ROC and the fund essentially has a steeper slope to climb on recovery due to principal depletion.

Conclusion

GUG is a multi-asset CEF from the Guggenheim. The vehicle was IPO at the height of the market in 2021 and suffered from the fall in fixed income and equities in 2022. Down more than -28% since inception, the vehicle is still trying to find its footing. place and its identity. The CEF pivoted to an overweight bond allocation (HY bonds and loans) in 2022, and saw its discount widen to historic lows. The vehicle is reminiscent of BCAT, another multi-asset CEF from a major asset manager. Both funds have broad mandates, were fairly recently floated, and have seen their discounts to net asset value widen to historic lows. The GUG has not yet established an identity and currently uses 38% of the ROC for its distribution given its performance. We expect the discount to NAV to normalize in 2023 as the market recovers and the fund is able to show a track record.

How far is Emirates Telecommunications Group Company PJSC (ADX:ETISALAT) from its intrinsic value? Using the most recent financial data, we will examine whether the stock price is fair by taking the company’s projected future cash flows and discounting them to the present value. We will use the Discounted Cash Flow (DCF) model for this purpose. Before you think you can’t figure it out, just read on! It’s actually a lot less complex than you might imagine.

Remember though that there are many ways to estimate the value of a business and a DCF is just one method. For those who are passionate about stock analysis, the Simply Wall St analysis template here may interest you.

Check out our latest analysis for Emirates Telecommunications Group Company PJSC

The model

We will use a two-stage DCF model which, as the name suggests, takes into account two stages of growth. The first stage is usually a period of higher growth which stabilizes towards the terminal value, captured in the second period of “sustained growth”. In the first step, we need to estimate the company’s cash flow over the next ten years. Wherever possible, we use analysts’ estimates, but where these are not available, we extrapolate the previous free cash flow (FCF) from the latest estimate or reported value. We assume that companies with decreasing free cash flow will slow their rate of contraction and companies with increasing free cash flow will see their growth rate slow during this period. We do this to reflect the fact that growth tends to slow more in early years than in later years.

A DCF is based on the idea that a dollar in the future is worth less than a dollar today, and so the sum of these future cash flows is then discounted to today’s value:

10-Year Free Cash Flow (FCF) Forecast

(“East” = FCF growth rate estimated by Simply Wall St)
10-year discounted cash flow (PVCF) = Ï.å60b

After calculating the present value of future cash flows over the initial 10-year period, we need to calculate the terminal value, which takes into account all future cash flows beyond the first stage. The Gordon Growth formula is used to calculate the terminal value at a future annual growth rate equal to the 5-year average 10-year government bond yield of 8.9%. We discount terminal cash flows to present value at a cost of equity of 13%.

Terminal value (TV)= FCF₂₀₃₂ × (1 + g) ÷ (r – g) = Ï,å16b× (1 + 8.9%) ÷ (13%– 8.9%) = Ï,å453b

Present value of terminal value (PVTV)= TV / (1 + r)^ten= Ï.å453b÷ ( 1 + 13%)^ten= د.إ137b

The total value is the sum of the cash flows for the next ten years plus the present terminal value, which gives the total equity value, which in this case is د.إ197b. In the last step, we divide the equity value by the number of shares outstanding. Compared to the current share price of د.إ24.2, the company appears around fair value at the time of writing. Ratings are imprecise instruments, however, much like a telescope – move a few degrees and end up in another galaxy. Keep that in mind.

Important assumptions

We emphasize that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows. You don’t have to agree with these entries, I recommend that you redo the calculations yourself and play around with them. The DCF also does not take into account the possible cyclicality of an industry, nor the future capital needs of a company, so it does not give a complete picture of a company’s potential performance. Since we consider Emirates Telecommunications Group Company PJSC 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 takes debt into account . In this calculation, we used 13%, which is based on a leveraged beta of 0.800. Beta is a measure of a stock’s volatility relative to the market as a whole. We derive our beta from the average industry beta of broadly comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable company.

Next steps:

Valuation is only one side of the coin in terms of building your investment thesis, and it ideally won’t be the only piece of analysis you look at for a company. It is not possible to obtain an infallible valuation with a DCF model. Instead, the best use of 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, if the terminal value growth rate is adjusted slightly, it can significantly change the overall result. For Emirates Telecommunications Group Company PJSC, there are three relevant factors that you should investigate further:

1. Financial health: Does ETISALAT have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors such as leverage and risk.
2. Future earnings: How does ETISALAT’s growth rate compare to its peers and the market in general? Dive deeper into the analyst consensus figure for the coming years by interacting with our free analyst growth forecast chart.
3. Other strong companies: Low debt, high returns on equity and good past performance are essential to a strong business. Why not explore our interactive list of stocks with strong trading fundamentals to see if there are any other companies you may not have considered!

PS. Simply Wall St updates its DCF calculation for every UAE stock daily, so if you want to find the intrinsic value of any other stock, just search here.

Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

The Federal Reserve is “the nation’s bank of banks.” Wysiati of Getty Images Signature; Cloth

Who is the Federal Reserve?

The Federal Reserve is the central bank of United States. Also known as “The Fed“, he is in charge of the monetary policies of the country. He also designs fiscal policies with the aim of achieving a healthy economy with low prices and maximum employment.

What are the 3 entities that make up the Federal Reserve?

The Board of Governors oversees the Federal Reserve – including setting target interest rates known as discount rates. It also controls the required reserves. Governors are appointed by the WE President and confirmed by the US Senate. The President acts as Chief Executive Officer and reports to the US Congress about WE economy. The 12 Federal Reserve Banks are the operational arm of the Federal Reserve. They act as fiscal agents of the WE government and serve as “bank to the nation’s banks” by lending money, printing and circulating currency, processing millions of checks and other deposits, and redeeming government securities. Federal Free Market Committee (FOMC) manages open market operations by buying and selling securities. It meets eight times a year. The FOMC is composed of the Board of Governorsthe president of the Reserve Bank of New York and the presidents of 4 of the remaining 11 Reserve Banks, who serve rotating one-year terms.

What does the Federal Reserve do?

The Federal Reserve has three main functions.

It conducts the nation’s monetary policyIt ensures the stability of our financial marketsIt regulates financial institutions

The Federal Reserve operates under the mandate of Congress to “effectively promote the objectives of maximum employment, stable prices and moderate long-term interest rates”, according to the Richmond Regional Bank.

Who is the current president of Federal Reserve?

Jerome Powell became chairman of the Fed on February 5, 2018. His term runs until May 2026.

What does the FOMC do?

It is the work of FOMC to monitor the WE the economy and adjust interest rates accordingly. After the 2008 financial crisis, the FOMC took on additional responsibilities, including quantitative easing, which was a large-scale buyout of WE Treasuries designed to increase liquidity, keep long-term interest rates low and promote economic recovery. Throughout the COVID-19 pandemic, FOMC has repeatedly said that it will begin to “reduce”, or reduce, these buybacks in order to stem inflation. This practice is also known as quantitative tightening.

How does the Federal Reserve set monetary policy?

The Fed requires deposit-taking institutions, such as banks, savings banks, and credit unions, to keep a certain amount of cash deposits they have on hand as reserves. These required reserves are also called federal funds.

When an institution’s reserves exceed what it needs, it can lend a portion of its federal funds to other financial institutions, so they too can meet reserve requirements. The interest rate at which they make these loans is known as the federal funds rate.

The Fed calculates a bank’s reserve requirements as a ratio based on its liabilities. The federal funds rate is based on the simple supply and demand of these federal funds. The rate fluctuates, and so, at its eight annual meetings, the FOMC sets a target rate.

Changes in the federal funds rate, whether positive or negative, have a significant impact on all aspects of financial markets. It affects short-term and long-term interest rates as well as exchange rates. It also has an impact on broader economic variables, such as employment. For example, a lower federal funds rate makes borrowing more attractive to businesses so they can hire more workers, open new offices, increase production or production processes, etc.

Federal funds rate vs discount rate

It may sound confusing, but the fed funds rate is not the same as the discount rate. The discount rate is the interest rate the Fed charges banks that borrow directly from it, and the method of accessing these funds is called the discount window. The discount rate is usually set at a higher interest rate than the federal funds rate because the Fed wants to encourage banks to lend and borrow from each other.

How is the Federal Reserve structured?

The Federal Reserve Board is composed of seven governors, including its president. He is based in washington d.c.. The 12 federal banks are organized by economic zone. They monitor data and disaggregated economic conditions in the following regions:

AtlantaBostonChicagoClevelandDallasKansas CityMinneapolisNew YorkPhiladelphiaRichmondSan FranciscoSt. Louis

When is the next Fed meeting? Fed Meeting Schedule 2021-2022

The FOMC meets 8 times a year and additionally as needed. It publishes its political declarations on the same day as its meetings. The minutes of the meetings are then published 3 weeks later.

Dates of the next FOMC 2022 meetings:

20–21 September 20221–2 November 202213–14 December 2022

Frequently Asked Questions (FAQ):

Did you know that Federal Reserve operates independently of the federal government? Read on for more fascinating Fed FAQs.

Why was the Fed created?

A bank panic in 1907 caused a run on banking resources. Until then, various financial crises literally caused customers to run to the bank to withdraw their deposits, which devastated the banking sector. In 1913, Congress created the Federal Reserve Act, which established the Federal Reserve system as we know it. President Woodrow Wilson signed the law on December 23, 1913.

Who is in charge of Federal Reserve?

The Federal Reserve is not a federal entity. While the Federal Reserve was created by Congressthe Board of Governors is an independent agency and the 12 Federal Reserve Banks are run as private corporations.

How does the Federal Reserve increase the money supply?

When the Fed lowers a bank’s reserve requirements, it effectively creates more liquidity in financial markets, thereby increasing the money supply. His Treasury security buybacks also increase reserves, putting more cash back into circulation.

What is the maximum employment rate? And what is the desired rate of inflation?

The Federal Reserve Bank of San Francisco defines “maximum employment” as an unemployment rate of 4% or less. A constant average inflation rate of 2% is the target rate that the Fed strives to maintain.

How does the Fed affect the stock market?

Institutions and individuals generally see a drop in interest rates as a cause for celebration, and stock prices tend to rise accordingly. Lower interest rates generally stimulate economic growth and pump more money into consumers’ pockets, which, in turn, can fuel additional spending and, therefore, growth.

What is a Federal Reserve Note? Is it backed by gold?

A Federal Reserve note is a currency issued by the Fed that is backed by gold. These banknotes are generally worth their face value, although some historic banknotes, such as those from 1928, are worth more.

Are Federal Reserve employees federal employees?

The Federal Reserve is independent of the federal government. The employees of the Federal Reserve are not federal government employees; they continue to work even in the event of a government shutdown.

Amazon is doubling down on its annual Prime Day by adding a second Prime members-only sale to its calendar called the Prime Early Access Sale. This is the first time we’ve seen two Prime sales in the same year and this just-announced event is coming very soon – in October, to be exact.

The early fall timeline puts this round of deals ahead of the year-end holiday sales that kick off in earnest as Black Friday approaches. Because supply chains and shipping times have struggled in recent years, locking down your gift list before the holiday rush might not be the worst idea.

With all that in mind, here are four things to know about the upcoming Amazon Prime Early Access sale.

When is Amazon’s second Prime Day sale?

Amazon will hold its second Prime Day sale of the year on October 11-12, starting at 12:00 p.m. PDT on the 11th.

Who can buy Amazon’s Prime Day fall deals?

As with the original summer Prime Day, this fall release of Amazon’s Prime Day discounts will only be available to those with an Amazon Prime membership. The normal price for a one-year Prime subscription is normally $139 per year, but there are other options if you don’t want to pay that big sum.

First, you can get a 30-day free Prime trial if you haven’t been a Prime customer in the past 12 months.

If you want Prime during shopping season, you can get three months at a discounted price of $7.49 per month instead of the normal price of $14.99 per month. Prime monthly membership discounts are also available for students and those on certain types of government assistance.

This specific October Prime Day sale will only be available in Austria, Canada, China, France, Germany, Italy, Luxembourg, Netherlands, Poland, Portugal, Spain, Sweden , Turkey, United Kingdom and United States.

Related: How to get 10% back on your Amazon purchases

What will be on sale on Amazon’s 2nd Prime Day?

Only time will tell which of Amazon’s seemingly endless items are on sale, but we expect a variety of items in many popular categories.

Specifically, Amazon has shared that there will be deals from Peloton and New Balance, as well as the lowest prices of the year from brands such as Philips Sonicare. The e-commerce juggernaut also said there would be “hundreds of thousands of deals” in categories including electronics, fashion, Amazon devices, home and more.

Amazon plans to release a list of the top 100 most popular selling products on October 11, which could help focus on the most popular deals.

TPG will scour the list for the best Prime Day fall sales that might help travelers — just like we did for Prime Day summer. (We’re looking at you, Apple AirTags.)

How to Get the Best Deals on Amazon’s 2nd Prime Day

Once you’ve found the item(s) you want, here are some tips for getting the best Amazon Prime Day deals possible.

At the end of the line

We’re excited to see how Amazon is running a fall release of Prime Day that could help consumers jump on holiday shopping at discounted prices. Stay tuned as the sale kicks off October 11 for more coverage.

Today we are going to walk through one way to estimate the intrinsic value of Fresnillo plc (LON:FRES) by taking expected future cash flows and discounting them to the present value. One way to do this is to use the discounted cash flow (DCF) model. Believe it or not, it’s not too hard to follow, as you’ll see in our example!

We draw your attention to the fact that there are many ways to value a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. For those who are passionate about stock analysis, the Simply Wall St analysis template here may interest you.

See our latest analysis for Fresnillo

The method

We will use a two-stage DCF model which, as the name suggests, takes into account two stages of growth. The first stage is usually a period of higher growth which stabilizes towards the terminal value, captured in the second period of “sustained growth”. To start, we need to estimate the cash flows for the next ten years. Wherever possible, we use analysts’ estimates, but where these are not available, we extrapolate the previous free cash flow (FCF) from the latest estimate or reported value. We assume that companies with decreasing free cash flow will slow their rate of contraction and companies with increasing free cash flow will see their growth rate slow during this period. We do this to reflect the fact that growth tends to slow more in early years than in later years.

Generally, we assume that a dollar today is worth more than a dollar in the future, and so the sum of these future cash flows is then discounted to today’s value:

Estimated free cash flow (FCF) over 10 years

(“East” = FCF growth rate estimated by Simply Wall St)
10-year discounted cash flow (PVCF) = $3.1 billion

After calculating the present value of future cash flows over the initial 10-year period, we need to calculate the terminal value, which takes into account all future cash flows beyond the first stage. The Gordon Growth formula is used to calculate the terminal value at a future annual growth rate equal to the 5-year average 10-year government bond yield of 0.9%. We discount terminal cash flows to present value at a cost of equity of 7.7%.

Terminal value (TV)= FCF₂₀₃₂ × (1 + g) ÷ (r – g) = US$505 million × (1 + 0.9%) ÷ (7.7%–0.9%) = US$7.6 billion

Present value of terminal value (PVTV)= TV / (1 + r)^ten= $7.6 billion ÷ (1 + 7.7%)^ten= $3.6 billion

The total value is the sum of the cash flows for the next ten years plus the present terminal value, which gives the total equity value, which in this case is $6.7 billion. In the last step, we divide the equity value by the number of shares outstanding. Compared to the current share price of £6.9 in the UK, the company appears to be about fair value at a 17% discount to the current share price. Remember though that this is only a rough estimate, and like any complex formula – trash in, trash out.

Important assumptions

We emphasize that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows. If you disagree with these results, try the math yourself and play around with the assumptions. The DCF also does not take into account the possible cyclicality of an industry, nor the future capital needs of a company, so it does not give a complete picture of a company’s potential performance. Since we consider Fresnillo 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 factors in debt. In this calculation, we used 7.7%, which is based on a leveraged beta of 1.160. Beta is a measure of a stock’s volatility relative to the market as a whole. We derive our beta from the average industry beta of broadly comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable company.

Look forward:

Although a business valuation is important, it is only one of many factors you need to assess for a business. The DCF model is not a perfect stock valuation tool. Rather, it should be seen as a guide to “what assumptions must be true for this stock to be under/overvalued?” For example, changes in the company’s cost of equity or the risk-free rate can have a significant impact on the valuation. For Fresnillo, we’ve compiled three essentials you should dig deeper into:

1. Risks: Take risks, for example – Fresnillo has 2 warning signs we think you should know.
2. Future earnings: How does FRES’ growth rate compare to its peers and the market in general? Dive deeper into the analyst consensus figure for the coming years by interacting with our free analyst growth forecast chart.
3. Other high-quality alternatives: Do you like a good all-rounder? Explore our interactive list of high-quality actions to get an idea of ​​what you might be missing!

PS. The Simply Wall St app performs an updated cash flow valuation for every stock on the LSE every day. If you want to find the calculation for other stocks, search here.

Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.