Discounted Cash Flow Calculation for SEHK:3958 using Excess Returns Model Model
The calculations below outline how an intrinsic value for Orient Securities is arrived at using the Excess Return Model. This approach is used for finance firms where free cash flow is difficult to estimate.
In the Excess Return Model the value of a firm can be written as the sum of capital invested currently in the firm and the present value of excess returns that the firm expects to make in the future.
The model is sensitive to the Return on Equity of the company versus the Cost of Equity, how these are calculated is detailed below the main calculation.
The current share price of
is above its future cash flow value.
Often investors are willing to pay a
for a company that has a high dividend or the potential for future growth.
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
Orient Securities's earnings available for a low price, and how does
this compare to other companies in the same industry?
Orient Securities's earnings are expected to grow by 17.3% yearly, however this is not considered high growth (20% yearly).
Orient Securities's revenue is expected to grow by 8.3% 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.
Orient Securities'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
0/6, 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
Orient Securities's finances.
The net worth of a company is the difference between its assets and liabilities.
Orient Securities's short term (1 year) commitments are greater than its holdings of cash and other short term assets.
Orient Securities's cash and other short term assets cover its long term commitments.
This treemap shows a more detailed breakdown of
Orient Securities'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.
Low level of unsold assets.
Debt is not covered by short term assets, assets are 0.7x 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. Jin Wenzhong has been the President and Executive Director of Orient Securities Company Limited since March 29,2018 and September 2010 respectively. Mr. Jin serves as the Chairman at Shanghai Dongfang Securities Capital Investment Co., Ltd. Mr. Jin has been serving as a director and the chairman of the board of Orient Securities Capital Investment since March 2013, the chairman of the board of Orient Securities Futures since December 2014, a director of Orient Securities Innovation Investment since November 2012, a director of Orient Securities Asset Management since July 2010 and a director of Citi Orient since June 2012. Mr. Jin served as the assistant manager of the distribution department, the deputy director of the research institute and the assistant to the president of Wanguo Securities from January 1992 to September 1995. Mr. Jin also served as a director of the board of Orient Finance Hong Kong from February 2010 to November 2014. Mr. Jin graduated from Shanghai University of Finance and Economics with a master’s degree in economics in January 1988 and a bachelor’s degree in economics in July 1985 and obtained the qualification of economist in October 1992. He serves as chairman of Shanghai East Securities Futures Co., Ltd. He serves as Director of Shanghai Oriental Security Innovation Investment Co., Ltd. He serves as Director of Shanghai Oriental Securities Asset Management Co., Ltd. Director. From January to September 1995 as deputy manager of the Universal Securities Distribution Department. From October 1995 to December 1997 as the Deputy Director of the Project Room of the modernization committee of Nomura Securities Enterprise.
Wenzhong's compensation has been consistent with company performance over the past year.
Wenzhong's remuneration is about average for companies of similar size in Hong Kong.
Management Team Tenure
Average tenure and age of the
management team in years:
The tenure for the Orient Securities management team is about average.
Chairman of the Board
President & Executive Director
Chief Risk Officer & Chief Compliance Controller
VP & Joint Company Secretary
Secretary to the Board
GM of the Compliance
Joint Company Secretary
Board of Directors Tenure
Average tenure and age of the
board of directors in years:
The tenure for the Orient Securities board of directors is about average.
Orient Securities Company Limited operates as a securities company in China. It operates through four segments: Securities Sales and Trading, Investment Management, Brokerage and Securities Financing, and Investment Banking. The company engages in securities and futures brokerage, margin financing and securities lending, securities investment advisory, securities proprietary trading, asset management, agency sale of financial products, security underwriting and sponsorship, and other business activities. It also provides cross-border financial, fund management, fixed income, margin trading and short selling, stock pledging, over-the-counter-market, agency sale, stock options, equity innovation, and asset securitization services, as well as research, PB, and qualified foreign institutional investor services. In addition, the company offers futures investment advisory, equity and securities investment, investment management, bond and industrial investment, management consultancy, project investment, equity trading, and credit operation services. Orient Securities Company Limited was founded in 1997 and is based in Shanghai, China.
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