Dear all, I make amend the IRR mathematic model refer to as share of FCF (Payment to equity holders) Share of Net profit is different as share of FCF distribute to the shareholders. FCF =Net profit + depreciation + interest payment – Loan payment of USD 109.712 million.
Now this is a well written totally unbiased article.
Kudos Sslee.
In the absence of real concrete results, I believe it is safer to use the most conservative figure available. At least that way when the real results come up you can be pleasantly surprised instead of aggressive investing based on anticipated good results and very shocked.
and a challenge to verify the net income with the management during the AGM
Many careless readers will be easily misled into believing your last figure RM77. 61 is the total net profit of the business operation even though after the ammendments and your reminder it is not.
Sorry to tell early in the morning, Very misleading playing with figures.
Dear All, If you use the 2019 AGM BOD share of profit RM (80-100) million or USD (19.37-24.21) million Exchange rate 4.13 Since FCF=Net profit + depreciation + interest expenses – Loan repayment of USD 109.712 million.
Then share of FCF for the end of first year (base on 30%). Exchange rate USD to MYR = 4.34 USD (19.37-24.21) + 1870X0.3/25 + 1402.5X0.06X0.3 - 109.712X0.3 USD (19.37-24.21) + 22.44 + 25.245 – 32.913 USD (19.37-24.21) + 14.77 USD (34.14-38.98) RM (148.16- 169.17) million
Base on above using NPV with discount rate of 5% for inflation NPV with 5% discount Sum (1/(1+0.05)^N). Where N= 1 to 25 is 14.0939 Hence base on NPV with 5% discount rate the 30% JHDP worth to JAKS is RM (148.16- 169.17) X 14.0939 million =RM (2,088 – 2,384) million
"..75% loan is taken care of by capacity payment" implies that at minimum the capacity payment would cover both interest and principal loan payment. Bear in the mind however different source of loan carries different interest rate. At low end, those loans from development banks probably cost much less than 5% interest rate while loans from Vietnamese banks have interest rate in low teens (Interest rate in Vietnam was around 8-15% during the earlier years of 2010s). Private equities loans? Probably in high teens... What does that mean? If you run a policy guaranteeing loan but not equity, you risk gamification by investors (Max loan, indiferrence to interest rate (government pays mah)). Net results is negative to government due to higher tariff rates.
The alternative is to set the project IRR to 12%. What the government want is to get investors to invest. And quickly. A project IRR of 12% in fact looks unattractive in an environment where interest rate was around 8-15% given the long gestation period. Hence, the many side incentives: USD tariff payment, guaranteed buyer, capacity payment, hedge from coal price fluctuation, etc.. Yes, the equities IRR of 27% would look ridiculously high but that is more to leverage than other things. Flip the ratio to 75% Equity 25% loan, the equity IRR drops to mere 14%...
Dear DK66, I have not come across any feasibility study report given out at any trade promotion organized by foreign country investment mission with Equity IRR calculation. All are base on total project cost IRR.
Posted by Sslee > May 15, 2020 10:08 AM | Report Abuse
Dear All, If you use the 2019 AGM BOD share of profit RM (80-100) million or USD (19.37-24.21) million Exchange rate 4.13 Since FCF=Net profit + depreciation + interest expenses – Loan repayment of USD 109.712 million. ======
Haha qqq3, Interest expense is tax deductable hence net profit mean profit after tax, depreciation and interest. By the way FCF on one hand you add back interest expenses but deduct the loan repayment (Principal plus interest) so interest is zero sum gain in FCF.
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Posted by qqq33333333 > 2020-05-14 20:15 | Report Abuse
sslee
u think DK and the rest don't know meh? They all pretending only.
https://klse.i3investor.com/servlets/forum/600317771.jsp