Discounted Cash Flow Calculation for DB:HY7 using 2 Stage Free Cash Flow to Equity Model
The calculations below outline how an intrinsic value for
is arrived at by discounting future cash flows to their present value using the 2 stage method.
We try to start with analysts estimates of free cash flow, however if these are not available we use the most recent financial results. In the 1st stage we continue to grow the free cash flow over a 10 year period, with the growth rate trending towards the perpetual growth rate used in the 2nd stage. The 2nd stage assumes the company grows at a stable rate into perpetuity.
DB:HY7 DCF 1st Stage: Next 10 year cash flow forecast
Amount off the current price
is available for.
Share price is
vs Future cash flow value of
Current Discount Checks
to be considered undervalued it must be available for at least 20% below the
current price. Less than 40% is even better.
Shoprite Holdings's share price is below the future cash flow value, and at a moderate discount (> 20%).
Shoprite Holdings's share price is below the future cash flow value, and at a substantial discount (> 40%).
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for
it. This is similar to the price of fruit (e.g. Mangoes or Avocados) increasing
when they are out of season, or how much your home is worth.
The amount the stock market is willing to pay for
is considered below, and whether this is a fair price.
Price based on past earnings
Shoprite Holdings's earnings available for a low price, and how does
this compare to other companies in the same industry?
Shoprite Holdings's earnings are expected to grow by 10.9% yearly, however this is not considered high growth (20% yearly).
Shoprite Holdings's revenue is expected to grow by 7.3% yearly, however this is not considered high growth (20% yearly).
Past and Future Earnings per Share
The accuracy of the analysts who estimate the future performance data can
be gauged below. We look back 3 years and see if they were any good at
predicting what actually occurred. We also show the highest and lowest estimates
looking forward to see if there is a wide range.
Shoprite Holdings's performance over the past 5 years by checking for:
Has earnings increased in past 5 years? (1 check)
Has the earnings growth in the last year exceeded that of the
industry? (1 check)
Is the recent earnings growth over the last year higher than the average annual growth over the
past 5 years? (1 check)
Is the Return on Equity (ROE) higher than 20%? (1 check)
Is the Return on Assets (ROA) above industry average? (1 check)
Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
The above checks will fail if the company has reported a loss in the most recent
earnings report. Some checks require at least 3 or 5 years worth of data.
has a total score of
2/6, see the detailed checks below.
Note: We use GAAP Net Income excluding extraordinary items in all our calculations.
A company's financial position is much like your own financial position,
it includes everything you own
The boxes below represent the relative size of what makes up
Shoprite Holdings's finances.
The net worth of a company is the difference between its assets and liabilities.
Shoprite Holdings is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
Shoprite Holdings's cash and other short term assets cover its long term commitments.
This treemap shows a more detailed breakdown of
Shoprite Holdings's finances. If any of them are yellow this
indicates they may be out of proportion and red means they relate to one of the
Liabilities and shares
The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
High level of physical assets or inventory.
Debt is covered by short term assets, assets are 2.7x debt.
Nearly all companies have debt. Debt in itself isn’t
however if the debt is too high, or the company can’t afford to pay the interest
on its debts this may have impacts in the future.
The graphic below shows equity (available funds) and debt, we ideally want to
see the red area (debt) decreasing.
If there is any debt we look at the companies capability to repay it, and
whether the level has increased over the past 5 years.
Management is one of the most important areas of a company. We look at
unreasonable CEO compensation, how long the team and board of directors have
been around for and insider trading.
TENURE AS CEO
Mr. Pieter C. Engelbrecht, BCompt Hons CA(SA), has been the Chief Executive Officer and Executive Director of Shoprite Holdings Limited since January 1, 2017. Mr. Engelbrecht served as the Chief Operating Officer of Shoprite Holdings Ltd. since 2007. Mr. Engelbrecht focusing on driving down costs while continuing the rapid expansion of the business. On the international front, he has been instrumental in the establishment of Shoprite’s position as the Number One retailer in Africa. Mr. Engelbrecht is passionate about all aspects retail and is committed to growing the Shoprite Group through a relentless focus on lowering prices for consumers. Mr. Engelbrecht appointed as the Chief Operating Officer of Shoprite Checkers (Pty) Ltd in 2005 and served as Personal Assistant to Chief Executive Officer of Shoprite Holdings Ltd. He serves as a Director of Shoprite Checkers (Pty) Ltd and various other group subsidiaries. He joined Coopers & Lybrand in 1993, gaining experience through various roles in the firm’s Auditing and Corporate Finance Divisions. Mr Engelbrecht subsequently joined Shoprite Checkers (Pty) Ltd in 1997, spending 10 years leading the project office, establishing new brands into multi-billion rand businesses. During this time, he launched MoneyMarket, USave and LiquorShop and led the acquisitions of Computicket and Transpharm Pharmaceutical Wholesalers. He was appointed to the Board of Directors of Shoprite Checkers (Pty) Ltd in 2003. A Chartered Accountant by profession, Mr Engelbrecht holds an Honours degree in Accounting Science from UNISA and a Bachelor of Commerce in Accounting from Stellenbosch University.
Pieter's compensation has been consistent with company performance over the past year.
Pieter's remuneration is lower than average for companies of similar size in Germany.
CEO & Executive Director
Divisional Manager & Executive Director
Anton de Bruyn
CFO & Executive Director
P. du Preez
Board of Directors Tenure
Average tenure and age of the
board of directors in years:
The average tenure for the Shoprite Holdings board of directors is less than 3 years, this suggests a new board.
Shoprite Holdings Limited, an investment holding company, primarily engages in the food retailing business. The company operates through four segments: Supermarkets RSA, Supermarkets Non-RSA, Furniture, and Other Operating segments. It also offers clothing, general merchandise, furniture, bedding, loose carpeting, home entertainment, and floor covering products; and cosmetics, liquors, electrical and household appliances, and soft furnishings. As of July 1, 2018, the company operated 639 Shoprite supermarkets; 221 Checkers supermarkets; 37 Checkers Hyper supermarkets; 400 Usave supermarkets; 430 OK Furniture outlets; 54 House & Home outlets; 440 liquor shops, including 260 under the Shoprite LiquorShop and 180 under the Checkers LiquorShop brand names; and 418 franchise stores under the OK Foods, OK MiniMark, OK Express, Megasave, OK Liquor, and Sentra brand names. It also operates 163 MediRite pharmacies within stores; and 53 Hungry Lion outlets. In addition, the company distributes various pharmaceutical products and surgical equipment to pharmacies, hospitals, clinics, dispensing doctors, and veterinary surgeons. Further, it operates under the OK Power Express brand name. Additionally, the company provides financial, ticketing, and car rental and accommodation services; and stadium management, capacity management, travel management, and access control solutions. It also supplies products to hospitality and catering industries. The company operates in 15 countries across Africa and the Indian Ocean Islands. Shoprite Holdings Limited was founded in 1979 and is based in Brackenfell, South Africa.
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