Discounted Cash Flow Calculation for DB:FWOA 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:FWOA 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.
Fairwood Holdings's share price is below the future cash flow value, and at a moderate discount (> 20%).
Fairwood 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
Fairwood Holdings's earnings available for a low price, and how does
this compare to other companies in the same industry?
Fairwood Holdings's earnings are expected to grow by 8.1% yearly, however this is not considered high growth (20% yearly).
Fairwood Holdings's revenue is expected to grow by 10.1% 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.
Fairwood 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
3/6, 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
Fairwood Holdings's finances.
The net worth of a company is the difference between its assets and liabilities.
Fairwood Holdings is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
Fairwood Holdings's cash and other short term assets cover its long term commitments.
This treemap shows a more detailed breakdown of
Fairwood 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 683.9x 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. Chan Chee Shing has been the Chief Executive Officer of Fairwood Holdings Ltd. since January 01, 2009. Mr. Chan joined Fairwood in 1995. He has over 28 years' experience in marketing. Before joining Fairwood, he was a senior executive of a restaurant group which is listed on The Stock Exchange of Hong Kong Limited. He has been Executive Director of Fairwood Holdings Limited since January 1998. He received a Bachelor of Arts Degree in Economics from the University of Manitoba, Canada in 1977 and an Master of Business Administration Degree from the University of East Asia, Macau in 1987.
Chee Shing's compensation has been consistent with company performance over the past year, both up more than 20%.
Chee Shing's remuneration is about average for companies of similar size in Germany.
Management Team Tenure
Average tenure and age of the
management team in years:
The average tenure for the Fairwood Holdings management team is over 5 years, this suggests they are a seasoned and experienced team.
Chee Shing Chan
CEO & Executive Director
Chief Marketing Officer & Executive Director
Yee Mei Mak
Company Secretary & Executive Director
Board of Directors Tenure
Average tenure and age of the
board of directors in years:
The average tenure for the Fairwood Holdings board of directors is over 10 years, this suggests they are a seasoned and experienced board.
Fairwood Holdings Limited, an investment holding company, engages in the operation of fast food restaurants. The company operates in two segments, Hong Kong Restaurants and Mainland China Restaurants. As of March 31, 2018, it operated 145 stores in Hong Kong, which included 134 fast food stores and 11 specialty restaurants; and 10 stores in Mainland China. The company is also involved in the property investment and trademark holding activities. Fairwood Holdings Limited is headquartered in North Point, Hong Kong.
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