DCF Studio

    1299.HK · HKG · Financial Services

    AIA Group Limited

    Also onConsensus Drift

    Implied value per share

    HKD 216.59

    Market price

    HKD 76.75

    Implied upside

    +182.2%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · USD model at 7.8441

    Wrong toolThis is a financial. Banks and insurers report no meaningful operating income, and capex and working capital do not mean what a free-cashflow model assumes, so a DCF will misprice it. The model below runs on best-effort numbers - treat it as an illustration, not a valuation.
    AdjustedSome line items were not reported and have been derived. Each one is labelled in the workings below.
    AdjustedOnly 3 year(s) of history available to anchor assumptions on.
    AdjustedReports in USD, trades in HKD. Modelled in USD, converted at the end.
    AdjustedReported capital expenditure averages just 0.83% 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. The accounts do not separate depreciation from amortisation, so the combined charge is used - if a large part of it is amortisation of an acquisition, the reported capex is probably right and this substitution is not. Override it if the reported figure is right.
    NoteRisk-free rate is an assumption: HKD assumption - no free live source available for this market.

    Current EV/EBITDA of 92.4x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    HKD 216.59+182.2%
    Exit multiple
    HKD 295.44+284.9%
    Market price
    HKD 76.75

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn12bn23bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 45.4bnUSD 52.1bnUSD 59.8bnUSD 68.6bnUSD 78.7bn+14.7%
    EBITUSD 8.9bnUSD 10.3bnUSD 11.8bnUSD 13.5bnUSD 15.5bn+14.7%
    NOPATUSD 7.5bnUSD 8.6bnUSD 9.9bnUSD 11.3bnUSD 13.0bn+14.7%
    Add depreciation & amortisationUSD 438.6mUSD 503.2mUSD 577.4mUSD 662.4mUSD 760.0m+14.7%
    Less capital expenditureUSD -454.4mUSD -521.3mUSD -598.1mUSD -686.2mUSD -787.3m+14.7%
    Less increase in working capitalUSD 5.8bnUSD 6.7bnUSD 7.7bnUSD 8.8bnUSD 10.1bn-14.7%
    Free cashflow to firmUSD 13.3bnUSD 15.3bnUSD 17.5bnUSD 20.1bnUSD 23.1bn+14.7%
    Discount factor0.96020.88530.81620.75250.6937-
    Present valueUSD 12.8bnUSD 13.5bnUSD 14.3bnUSD 15.1bnUSD 16.0bn+5.8%
    Present Value Of The ForecastUSD 71.8bn

    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
    Beta0.764Reported 0.648, pulled toward 1.0 (Blume)
    Cost of equity8.55%Risk-free + beta x equity risk premium
    Cost of debt4.68%Interest expense / average total debt
    Market capitalisationUSD 790.8bn98.2% of capital
    Total debtUSD 14.7bn1.8% of capital, book value as a proxy
    Tax rate16.1%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 shareUSD 27.61

    62% of EV

    Forecast FCFF, final year
    USD 23.1bn
    Capex at depreciation, working capital in reinvestment
    USD 13.0bn
    Less reinvestment at g/ROIC (22.9% of NOPAT)
    USD -3.0bn
    Capitalised
    USD 10.0bn
    ROIC (reported)
    10.9%
    Terminal value, undiscounted
    USD 172.3bn
    Terminal value, discounted
    USD 119.5bn
    Enterprise value
    USD 191.3bn
    Less net debt
    USD -100.4bn
    Equity value
    USD 291.7bn

    Exit at 20.0x EBITDA

    Value per shareUSD 37.66

    76% of EV

    Terminal value, undiscounted
    USD 325.3bn
    Terminal value, discounted
    USD 225.7bn
    Enterprise value
    USD 297.5bn
    Less net debt
    USD -100.4bn
    Equity value
    USD 397.9bn

    Spread between methods: 31%.

    Sensitivity

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

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    6.46%33.0233.9735.1536.6538.65
    7.46%29.5430.0430.6431.3632.25
    8.46%27.0427.3027.6127.9728.39
    9.46%25.1525.2825.4425.6025.80
    10.46%23.6723.7323.7923.8523.92

    Outlined: this model. Green text: above today's price of 9.78. 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 year14.7%-24.1%-38.8pp
    EBIT margin19.7%-13.8%-33.5pp
    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.