Posted by hng33 > 2020-05-20 22:37 | Report Abuse

Very well written, clear with counter check and proven calculation.

Posted by probability > 2020-05-20 23:10 | Report Abuse

To calculate Cash Flow using DCF method (IRR 17% & 12% respectively)

Formula : DCF = CF1/(1+r)^1 + CF2/(1+r)^2 + ...+CFn/(1+r)^n

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ehome009, thanks for sharimg.

Is the above method used by MBB & PBB to determine MFCB's FCF?

Is that something standard?

Wouldnt it be more accurate using the expected outflow & inflow of cash as per the predicted timelines of the project? Meaning the 'timing' of these cash flows can differ greatly between MFCB and JHDP right?

Posted by probability > 2020-05-20 23:26 | Report Abuse

DCF = RM 9,835.93 (HAI DUONG)

JAKS 30% = RM 2,950.77m

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The above DCF value is total asset value right?

If that is the case, wouldnt you need to offset the Debt (NPV) to get the Equity portion value first - before multiplying 30% stakes of JAKS on the Equity to obtain the share price?

Posted by probability > 2020-05-20 23:36 | Report Abuse

Basically, is your FCF used above , FCF-F or FCF-E?

Posted by Shan Kee Tiow > 2020-05-21 08:56 | Report Abuse

First, some IB report are posting in our report , all IB report about power plant company like Malakoff and ytl etc. When you to read all this IB report, you will discovered DCF and WACC. Why they must use DCF with WACC? The reason is inflation and power plant is a long run project for 25year. After 10 year, same money but value must less than today, so purpose of DCF method is consider Value preservation. The other reason is revaluation, when power plant run 5 year from cod, BOT just left 20 year life so calculate DCF just can count 20 year only, decrease value as the life of the power plant decreases.

Posted by Shan Kee Tiow > 2020-05-21 09:12 | Report Abuse

Probability
Wouldnt it be more accurate using the expected outflow & inflow of cash as per the predicted timelines of the project?

Don sahong IPP and Hai duong IPP can predicted well than Malaysia power plant, because of PPA. Laos and Vietnam government will guarantee purchase 80%- 100% power and give a stable coal price, Malaysia don’t have this guarantee.

Stable revenue and stable cost, so their most important work is confirmed power generation in predicted. This model is more easily predicted than other business, so they can predict IRR rate 12%.

Posted by johnmasino > 2020-05-21 09:21 | Report Abuse

Good stuff! Very enlightening and promising! Cheers!

Posted by Shan Kee Tiow > 2020-05-21 09:32 | Report Abuse

DCF valuations method not a total asset value, it is a power plant business value of NPV. Why use NPV? hai duong power plant’s present value worth RM4.53, so we can compare it’s value to share price.

FCF = Net income + (non-cash expenses）- increasing in working capital - capital expenditure

Probability, this is a FCF Method calculation of accounting, it is a mathematical. We want calculate net income , so we just adjust the method.

Net income = FCF - (non-cash expenses）+ increasing in working capital + capital expenditure

Why set 0 to increasing in working capital and capital expenditure? The reason is we don’t know how much of them, but we can confirm these two item will increase profit . 0 will not make higher profit was predicted, it will be safety in our calculation.

Posted by Shan Kee Tiow > 2020-05-21 09:35 | Report Abuse

If that is the case, wouldnt you need to offset the Debt (NPV) to get the Equity portion value first - before multiplying 30% stakes of JAKS on the Equity to obtain the share price?

It need for WACC, we want to find it for calculate DCF with WACC.

WACC  =  (E/V x Re)  +  ((D/V x Rd)  x  (1 – T))

E = IPP EQUITY
D = IPP DEBT
V = total value of capital (equity plus debt)
E/V = percentage of capital that is equity
D/V = percentage of capital that is debt
Re = cost of equity (required rate of return)
Rd = cost of debt (yield to maturity on existing debt)
T = tax rate

Posted by rururunnn > 2020-05-21 15:02 | Report Abuse

why did you use RoE as Re? wrong

Posted by Shan Kee Tiow > 2020-05-21 15:54 | Report Abuse

Equity and Debt Components of WACC Formula
It's a common misconception that equity capital has no concrete cost that the company must pay after it has listed its shares on the exchange. In reality, there is a cost of equity.

The shareholders' expected rate of return is considered a cost from the company's perspective. That's because if the company fails to deliver this expected return, shareholders will simply sell off their shares, which will lead to a decrease in share price and the company’s overall valuation. The cost of equity is essentially the amount that a company must spend in order to maintain a share price that will keep its investors satisfied and invested.

Posted by abang_misai > 2020-05-24 09:59 | Report Abuse

Thanks for the superb analysis. I believe the write has been all in Jaks. Let’s hope for the best