Latest news with #CHG
Yahoo
05-05-2025
- Business
- Yahoo
Are Investors Undervaluing Chemring Group PLC (LON:CHG) By 40%?
Using the 2 Stage Free Cash Flow to Equity, Chemring Group fair value estimate is UK£6.83 Chemring Group's UK£4.12 share price signals that it might be 40% undervalued The UK£4.82 analyst price target for CHG is 29% less than our estimate of fair value In this article we are going to estimate the intrinsic value of Chemring Group PLC (LON:CHG) by estimating the company's future cash flows and discounting them to their present value. One way to achieve this is by employing the Discounted Cash Flow (DCF) model. Don't get put off by the jargon, the math behind it is actually quite straightforward. Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you. We check all companies for important risks. See what we found for Chemring Group in our free report. We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase. In the first stage we need to estimate the cash flows to the business over the next ten years. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. Generally we assume that a dollar today is more valuable than a dollar in the future, so we discount the value of these future cash flows to their estimated value in today's dollars: 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF (£, Millions) UK£6.73m UK£32.6m UK£65.8m UK£72.7m UK£81.8m UK£88.6m UK£94.3m UK£99.3m UK£103.6m UK£107.4m Growth Rate Estimate Source Analyst x4 Analyst x4 Analyst x4 Analyst x1 Analyst x1 Est @ 8.28% Est @ 6.49% Est @ 5.23% Est @ 4.35% Est @ 3.74% Present Value (£, Millions) Discounted @ 6.6% UK£6.3 UK£28.7 UK£54.3 UK£56.3 UK£59.5 UK£60.4 UK£60.4 UK£59.6 UK£58.4 UK£56.8 ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = UK£501m The second stage is also known as Terminal Value, this is the business's cash flow after the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.3%. We discount the terminal cash flows to today's value at a cost of equity of 6.6%. Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = UK£107m× (1 + 2.3%) ÷ (6.6%– 2.3%) = UK£2.6b Present Value of Terminal Value (PVTV)= TV / (1 + r)10= UK£2.6b÷ ( 1 + 6.6%)10= UK£1.4b The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is UK£1.9b. The last step is to then divide the equity value by the number of shares outstanding. Compared to the current share price of UK£4.1, the company appears quite undervalued at a 40% discount to where the stock price trades currently. The assumptions in any calculation have a big impact on the valuation, so it is better to view this as a rough estimate, not precise down to the last cent. Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Chemring Group as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 6.6%, which is based on a levered beta of 0.834. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. View our latest analysis for Chemring Group Strength Earnings growth over the past year exceeded its 5-year average. Debt is not viewed as a risk. Weakness Earnings growth over the past year underperformed the Aerospace & Defense industry. Dividend is low compared to the top 25% of dividend payers in the Aerospace & Defense market. Opportunity Annual earnings are forecast to grow faster than the British market. Trading below our estimate of fair value by more than 20%. Threat Dividends are not covered by cash flow. Revenue is forecast to grow slower than 20% per year. Although the valuation of a company is important, it shouldn't be the only metric you look at when researching a company. It's not possible to obtain a foolproof valuation with a DCF model. Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued. For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. What is the reason for the share price sitting below the intrinsic value? For Chemring Group, we've put together three relevant items you should explore: Financial Health: Does CHG have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk. Future Earnings: How does CHG's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart. Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered! PS. Simply Wall St updates its DCF calculation for every British stock every day, so if you want to find the intrinsic value of any other stock just search here. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio
Khaleej Times
17-03-2025
- Business
- Khaleej Times
Abu Dhabi launches new affordable housing initiative to boost quality of life
In an effort to enhance the real estate landscape and improve the quality of life for its residents, Abu Dhabi is rolling out a new initiative focused on affordable, high-quality housing. Value Housing Programme will be rolled out in phases, with a focus on improving living standards for individuals and families. Launched by the Department of Municipalities and Transport (DMT), the initiative also aims to strengthen social integration and foster community bonds, which are central to the Year of Community. By offering affordable, high-quality housing, the programme emphasises the commitment to building dynamic, inclusive communities. As part of this initiative, DMT has signed Memorandums of Understanding (MoUs) with Sdeira Group (formerly KEZAD Communities) and Central Holding Group (CHG). By leveraging their extensive global experience, the partnership between DMT and CHG aims to drive collaboration, share knowledge, and amplify the effectiveness and impact of affordable housing across Abu Dhabi. Commenting on the initiative, Mohamed Ali Al Shorafa, Chairman of DMT, noted that the MoU agreements aim to create vibrant and thriving neighbourhoods that would set new benchmarks for quality and innovation. 'These partnerships underscore our dedication to delivering housing solutions that adhere to our principles of inclusivity and sustainability. They are a crucial step in addressing the growing demand for housing in the Emirate, while improving living standards and providing avenues for everyone to access housing that enhances their well-being,' Al Shorafa said. DMT is also committed to working closely with investors, developers, and partners to drive the programme forward. Through strategic partnerships, the department aims to reshape the real estate sector and ensure the versatility of Abu Dhabi's housing market, offering diverse options for all segments of society. Furthermore, the DMT is committed to working closely with investors, developers, and partners to identify new opportunities and drive the Value Housing Programme forward. These efforts contribute to Abu Dhabi's recognition as the most liveable city in the MENA region, according to the Economist Intelligence Unit's (EIU) Global Liveability Index 2024.
Zawya
17-03-2025
- Business
- Zawya
DMT launches new value housing programme in Abu Dhabi
The Department of Municipalities and Transport (DMT) has announced the launch of a new Value Housing Programme to bolster versatility in the emirate's real estate market. The initiative, which will be rolled out in strategic phases, aims to improve the living standards for individuals and families alike, strengthening social integration and foster community bonds– which form key elements underpinning the Year of Community. By ensuring the housing units are both affordable and of exceptional quality, the programme underscores a commitment to cultivating dynamic and inclusive communities. As part of this effort, DMT signed a Memorandum of Understanding (MoU) with Sdeira Group (formerly KEZAD Communities) to develop a range of residential units and commercial assets. The Group was selected for its strong reputation in Abu Dhabi, with extensive expertise in real estate, investment, and asset management. DMT has also signed an MoU with Central Holding Group (CHG), a leading investment, asset management, and real estate firm. CHG was chosen for its proven expertise in real estate development, both locally and internationally, mixed with pioneering strategies that integrate cutting-edge technologies across the Group's real estate projects. By leveraging their extensive global experience, the partnership between DMT and CHG aims to drive collaboration, share knowledge, and amplify the effectiveness and impact of affordable housing across Abu Dhabi. Commenting on the initiative, Mohamed Ali Al Shorafa, Chairman of DMT, noted that the MoU agreements aim to create vibrant and thriving neighbourhoods that would set new benchmarks for quality and innovation. 'These partnerships underscore our dedication to delivering housing solutions that adhere to our principles of inclusivity and sustainability. They are a crucial step in addressing the growing demand for housing in the Emirate, while improving living standards and providing avenues for everyone to access housing that enhances their well-being,' Al Shorafa said. Furthermore, the Department is committed to working closely with investors, developers, and partners to identify new opportunities and drive the Value Housing Programme forward. By fostering strategic partnerships, it seeks to drive sustained growth, reshape the real estate sector, and ensure the versatility of Abu Dhabi's housing market by offering diverse options for all segments of society. These efforts not only support the Emirate's high standards of liveability but have also contributed to Abu Dhabi being recognised as the most liveable city in the MENA region by the Economist Intelligence Unit's (EIU) Global Liveability Index 2024.
