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Some Corrections to ComfortDelgro’s Valuation Done Previously

Back when ComfortDelgro’s share price was around $2.04, I wrote a comprehensive analysis about it.

In the article, I went through a few rounds of discounted cash flow to see at current earnings, cash flow scenario, what is the estimated intrinsic value given the growth rate and the discount rate.

I also did  a reverse discounted cash flow on it.

I think not many people delve deep into the figures except for probably a few.

Rusmin from Fifth Person was the rare few that gives me a conservative value, and I was thinking why is it so low. Another Journalist came up with a figure closer to Rusmin (or the other way round)

It needs a friend who dives deeper to be able to tell me that somehow my calculator seems to be wrong.

And it is indeed wrong.

This is what you get when you try to do DCF at 4 am in the morning.

So here are the recomputed figures.

The first DCF takes into consideration my estimated growth (or negative growth) due to how competition will render their Singapore Taxi division.

The discount rate is a conservative 10%. The terminal growth rate is 0%. We arrive at a valuation of $1.245. This is some $0.20 below the original incorrect figure.

If we embed a 3% growth rate for 18 years, with terminal growth rate to be 0%, we get $1.615. This is also lesser than the previous.

The last table shows the reverse DCF, where we try to see what is the discounted rate, based on the -17% growth and subsequent 0% growth. We get 6.05% instead of 7.5%.

Given the current share price of $1.91, the discounted rate we get from reverse DCF is 6.50%.

So what I said about CDG being fair valued around $2.00, that probably takes some beating. It looks slightly expensive at $2.00.

Certainly, if we see a reverse DCF discount rate of 6.05%, it is not VERY attractive. It could be a good investment if the moat is alive and this business can go on for a prolong period.

Never trust a financial bloggers figures fully. Especially if they did not sleep enough.

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