DCF Studio

    0688.HK · HKG · Real Estate

    China Overseas Land & Investment Limited

    Also onConsensus Drift

    Implied value per share

    HKD 29.43

    Market price

    HKD 12.20

    Implied upside

    +141.2%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · CNY model at 1.1708

    AdjustedReports in CNY, trades in HKD. Modelled in CNY, converted at the end.
    AdjustedReported capital expenditure averages just 0.18% 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 0.3%. 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 29.43+141.2%
    Exit multiple
    HKD 23.30+91.0%
    Market price
    HKD 12.20

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (CNY). Outflows negative.

    0bn10bn20bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayCNY
    LineFY26FY27FY28FY29FY30CAGR
    RevenueCNY 164.2bnCNY 160.4bnCNY 156.7bnCNY 153.1bnCNY 149.5bn-2.3%
    EBITCNY 24.2bnCNY 23.6bnCNY 23.1bnCNY 22.5bnCNY 22.0bn-2.3%
    NOPATCNY 20.2bnCNY 19.7bnCNY 19.3bnCNY 18.8bnCNY 18.4bn-2.3%
    Add depreciation & amortisationCNY 448.3mCNY 437.9mCNY 427.8mCNY 417.9mCNY 408.2m-2.3%
    Less capital expenditureCNY -1.6bnCNY -1.6bnCNY -1.6bnCNY -1.5bnCNY -1.5bn-2.3%
    Less increase in working capitalCNY 1.1bnCNY 1.1bnCNY 1.1bnCNY 1.1bnCNY 1.0bn+2.3%
    Free cashflow to firmCNY 20.1bnCNY 19.7bnCNY 19.2bnCNY 18.8bnCNY 18.3bn-2.3%
    Discount factor0.97770.93450.89330.85380.8161-
    Present valueCNY 19.7bnCNY 18.4bnCNY 17.2bnCNY 16.0bnCNY 15.0bn-6.6%
    Present Value Of The ForecastCNY 86.2bn

    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
    Beta0.719Reported 0.580, pulled toward 1.0 (Blume)
    Cost of equity8.23%Risk-free + beta x equity risk premium
    Cost of debt3.20%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationCNY 133.5bn35.0% of capital
    Total debtCNY 247.7bn65.0% of capital, book value as a proxy
    Tax rate16.5%Effective, capped at statutory
    WACC4.62%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 shareCNY 25.14

    79% of EV

    Forecast FCFF, final year
    CNY 18.3bn
    Capex at depreciation, working capital in reinvestment
    CNY 18.4bn
    Less reinvestment at g/ROIC (54.1% of NOPAT)
    CNY -10.0bn
    Capitalised
    CNY 8.4bn
    ROIC (WACC floor)
    4.6%
    Terminal value, undiscounted
    CNY 408.0bn
    Terminal value, discounted
    CNY 333.0bn
    Enterprise value
    CNY 419.2bn
    Less net debt
    CNY 144.1bn
    Equity value
    CNY 275.1bn

    Exit at 15.1x EBITDA

    Value per shareCNY 19.90

    76% of EV

    Terminal value, undiscounted
    CNY 337.8bn
    Terminal value, discounted
    CNY 275.7bn
    Enterprise value
    CNY 361.9bn
    Less net debt
    CNY 144.1bn
    Equity value
    CNY 217.8bn

    Spread between methods: 23%.

    Sensitivity

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

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    2.62%77.48112.54441.08——
    3.62%36.5537.8840.2346.08119.60
    4.62%24.8424.9925.1425.2825.43
    5.62%18.2618.3818.5018.6218.73
    6.62%13.6813.7713.8713.9614.06

    Outlined: this model. Green text: above today's price of 10.42. 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 year-2.3%-13.9%-11.6pp
    EBIT margin14.7%9.1%-5.7pp
    Discount rate4.6%7.6%+3.0pp
    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.