Latest news with #HupSeng
Yahoo
26-05-2025
- Business
- Yahoo
A Look At The Intrinsic Value Of Hup Seng Industries Berhad (KLSE:HUPSENG)
Using the 2 Stage Free Cash Flow to Equity, Hup Seng Industries Berhad fair value estimate is RM1.15 With RM0.98 share price, Hup Seng Industries Berhad appears to be trading close to its estimated fair value The average premium for Hup Seng Industries Berhad's competitorsis currently 149% In this article we are going to estimate the intrinsic value of Hup Seng Industries Berhad (KLSE:HUPSENG) by taking the expected future cash flows and discounting them to today's value. Our analysis will employ the Discounted Cash Flow (DCF) model. There's really not all that much to it, even though it might appear quite complex. Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model. This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality. We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. In the first stage we need to estimate the cash flows to the business over the next ten years. Seeing as no analyst estimates of free cash flow are available to us, we have extrapolate the previous free cash flow (FCF) from the company's last 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. A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, 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 (MYR, Millions) RM45.0m RM46.2m RM47.5m RM49.0m RM50.6m RM52.3m RM54.2m RM56.1m RM58.1m RM60.1m Growth Rate Estimate Source Est @ 2.17% Est @ 2.61% Est @ 2.92% Est @ 3.13% Est @ 3.29% Est @ 3.39% Est @ 3.47% Est @ 3.52% Est @ 3.56% Est @ 3.58% Present Value (MYR, Millions) Discounted @ 8.4% RM41.5 RM39.3 RM37.3 RM35.5 RM33.9 RM32.3 RM30.8 RM29.4 RM28.1 RM26.9 ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = RM335m The second stage is also known as Terminal Value, this is the business's cash flow after the first stage. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (3.6%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 8.4%. Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = RM60m× (1 + 3.6%) ÷ (8.4%– 3.6%) = RM1.3b Present Value of Terminal Value (PVTV)= TV / (1 + r)10= RM1.3b÷ ( 1 + 8.4%)10= RM587m The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is RM923m. To get the intrinsic value per share, we divide this by the total number of shares outstanding. Relative to the current share price of RM1.0, the company appears about fair value at a 15% discount to where the stock price trades currently. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out. The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the 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 Hup Seng Industries Berhad 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 8.4%, which is based on a levered beta of 0.800. 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. Check out our latest analysis for Hup Seng Industries Berhad Strength Earnings growth over the past year exceeded its 5-year average. Currently debt free. Dividend is in the top 25% of dividend payers in the market. Weakness Earnings growth over the past year underperformed the Food industry. Opportunity Annual earnings are forecast to grow for the next 3 years. Current share price is below our estimate of fair value. Threat Dividends are not covered by cash flow. Whilst important, the DCF calculation 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 example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. For Hup Seng Industries Berhad, there are three additional elements you should assess: Risks: Be aware that Hup Seng Industries Berhad is showing 1 warning sign in our investment analysis , you should know about... Future Earnings: How does HUPSENG'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 High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing! PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the KLSE every day. If you want to find the calculation for other stocks 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.
The Star
21-05-2025
- Business
- The Star
Hup Seng eyes growth despite global volatility
The group said it remains focused on enhancing overall performance by innovating its product portfolio and expanding its distributor network. PETALING JAYA: Hup Seng Industries Bhd remains cautiously optimistic about its outlook for the rest of the year, despite anticipating a highly competitive operating environment amid ongoing global uncertainties, including developments in US trade policy. 'The group witnessed some margin compression due to cost pressures. Nevertheless, efforts to enhance operational efficiency will continue to mitigate as much as possible the impact of higher input costs,' the food and beverage company said. Additionally, it remains focused on enhancing overall performance by innovating its product portfolio and expanding its distributor network to safeguard revenue and profitability. In the first quarter ended March 31, Hup Seng's net profit fell 24.2% to RM10.6mil, compared with almost RM14mil in the year-ago quarter. Revenue for the quarter dipped 2% to RM91.7mil against RM93.6mil last year, while earnings per share declined to 1.32 sen from 1.75 sen previously.
The Star
21-05-2025
- Business
- The Star
Hup Seng's 1Q profit slips 24%, stays focused on efficiency and expansion
KUALA LUMPUR: Hup Seng Industries Bhd remains cautiously optimistic about its outlook for the rest of the year, despite anticipating a highly competitive operating environment amid ongoing global uncertainties, including developments in US trade policy. 'The group witnessed some margin compression due to cost pressures. Nevertheless, efforts to enhance operational efficiency will continue to mitigate as much as possible the impact of higher input costs,' the food and beverage company said. Additionally, it said it remained focused on enhancing overall performance by innovating its product portfolio and expanding its distributor network to safeguard revenue and profitability. In the first quarter ended March 31, Hup Seng's net profit fell 24.2% to RM10.6mil compared with almost RM14mil in the year-ago quarter, due to lower revenue and higher input costs. Revenue for the quarter dipped 2% to RM91.7mil against RM93.6mil last year, while earnings per share declined to 1.32 sen from 1.75 sen previously.
