There have been queries from my readers regarding the usage of the DCF worksheet which I have put up previously. I did a brief calculation on a sample company Ouhua (AJ2.SG) and you may download it here. I have added some comments to aid all who are interested in using the worksheet. Any comments are welcomed and I am glad to answer any of your queries.
Monday, January 14, 2008
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4 comments:
Hi, as Free Cash Flow = Operating Cash Flow - Capital Expenditure, you state the Operating Cash Flow as -86.274.
However, I can only find the Cash from Operation as -197.9 for FY06.
Care to clarify further? Also, I will be interested to know where past financial reports of the company can be found.
Thanks.
Hi there, I get the "Net cash flows used in operating activities" figure from the FY06 announcement of Ouhua dated 28-Feb-2007. You may refer to this link:
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_5999438B9244EC95482572900055693F/$file/FY2006Results.pdf?openelement
As for past financial reports, you can either obtain it from SGX under 'Annual Report/Fin. Report' link, or from the company's website (if available).
Oh i see. Thanks.
Btw, in the actual calculation for the FCF growth of a company of which we only have information for the past 2 years.
I am thinking of of how can we account for the expected overall downturn in the economy. Is it already accounted for in the amount of discount rate we use or we should try to have some reduction of cash flow in the future projection.
Hi Interested,
DCF valuation relies heavily on your forecasted FCF for the future years. I chose to have the discount factor being the risk-free rate of 6% as I am very conservative in my FCF forecast. I normally will not assign any growth for the remaining years once I have incorporated all the known prospects/future plans to come out with my forecasted FCF. You may refer to my SP Chemicals research report. In that example, I have fully forecasted the amount of FCF up till 2009F, taking into account the capex expansion of 2008.
The more confident you are able to forecast the financials of the company, the more accurate your intrinsic value will be. Cheers!
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