DCF Studio

    0006.HK · HKG · Utilities

    Power Assets Holdings Limited

    Also onConsensus Drift

    Implied value per share

    HKD 45.29

    Market price

    HKD 59.85

    Implied upside

    -24.3%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedReported capital expenditure averages just 0.02% of revenue, which is too low to be the company's real investment - property trusts and similar structures invest through lines that are not reported as capex. Capex has been set to 1.00% of revenue so the forecast is not handed free growth. Override it if the reported figure is right.
    AdjustedCapital expenditure runs at 1.0% of revenue against depreciation of 0.1%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.
    NoteRisk-free rate is an assumption: HKD assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    HKD 45.29-24.3%
    Exit multiple
    HKD 66.31+10.8%
    Market price
    HKD 59.85

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (HKD). Outflows negative.

    0bn4bn8bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayHKD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueHKD 7.2bnHKD 7.6bnHKD 7.9bnHKD 8.3bnHKD 8.7bn+4.6%
    EBITHKD 6.9bnHKD 7.2bnHKD 7.5bnHKD 7.8bnHKD 8.2bn+4.6%
    NOPATHKD 6.6bnHKD 6.9bnHKD 7.2bnHKD 7.6bnHKD 7.9bn+4.6%
    Add depreciation & amortisationHKD 3.8mHKD 4.0mHKD 4.2mHKD 4.4mHKD 4.6m+4.6%
    Less capital expenditureHKD -72.3mHKD -75.6mHKD -79.1mHKD -82.7mHKD -86.5m+4.6%
    Less increase in working capitalHKD 317.0mHKD 331.5mHKD 346.7mHKD 362.6mHKD 379.3m-4.6%
    Free cashflow to firmHKD 6.9bnHKD 7.2bnHKD 7.5bnHKD 7.9bnHKD 8.2bn+4.6%
    Discount factor0.96020.88540.81630.75270.6940-
    Present valueHKD 6.6bnHKD 6.4bnHKD 6.1bnHKD 5.9bnHKD 5.7bn-3.6%
    Present Value Of The ForecastHKD 30.7bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate3.20%HKD assumption - no free live source available for this market (assumption)
    Equity risk premium7.00%Market assumption
    Beta0.754Reported 0.633, pulled toward 1.0 (Blume)
    Cost of equity8.48%Risk-free + beta x equity risk premium
    Cost of debt7.82%Interest expense / average total debt
    Market capitalisationHKD 127.5bn97.5% of capital
    Total debtHKD 3.3bn2.5% of capital, book value as a proxy
    Tax rate3.5%Effective, capped at statutory
    WACC8.46%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareHKD 45.29

    68% of EV

    Forecast FCFF, final year
    HKD 8.2bn
    Capex at depreciation, working capital in reinvestment
    HKD 7.9bn
    Less reinvestment at g/ROIC (29.6% of NOPAT)
    HKD -2.3bn
    Capitalised
    HKD 5.6bn
    ROIC (WACC floor)
    8.5%
    Terminal value, undiscounted
    HKD 96.0bn
    Terminal value, discounted
    HKD 66.6bn
    Enterprise value
    HKD 97.3bn
    Less net debt
    HKD 789.0m
    Equity value
    HKD 96.5bn

    Exit at 19.5x EBITDA

    Value per shareHKD 66.31

    78% of EV

    Terminal value, undiscounted
    HKD 160.5bn
    Terminal value, discounted
    HKD 111.4bn
    Enterprise value
    HKD 142.1bn
    Less net debt
    HKD 789.0m
    Equity value
    HKD 141.3bn

    Spread between methods: 38%.

    Sensitivity

    Value per share (HKD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    6.46%59.0259.3559.7160.1160.58
    7.46%50.9651.1451.3251.5051.68
    8.46%44.9845.1445.2945.4445.59
    9.46%40.2840.4140.5440.6740.80
    10.46%36.4736.5836.6936.8136.92

    Outlined: this model. Green text: above today's price of 59.85. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year4.6%11.0%+6.4pp
    Discount rate8.5%6.4%-2.0pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.