Estimating The Intrinsic Value Of Union Gas Holdings Limited (SGX:1F2)

Simply Wall St.03-21

Key Insights Union Gas Holdings' estimated fair value is S$0.40 based on Dividend Discount Model Union Gas Holdings' S$0.38 share price indicates it is trading at similar levels as its fair value ...

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overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nEstimating The Intrinsic Value Of Union Gas Holdings Limited (SGX:1F2)\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-03-21 14:01 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://finance.yahoo.com/news/estimating-intrinsic-value-union-gas-060152612.html><strong>Simply Wall St.</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Key Insights\n\n Union Gas Holdings' estimated fair value is S$0.40 based on Dividend Discount Model \n Union Gas Holdings' S$0.38 share price indicates it is trading at similar levels as its fair value ...</p>\n\n<a href=\"https://finance.yahoo.com/news/estimating-intrinsic-value-union-gas-060152612.html\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK6500","symbol_name":"公用股","start_time":0,"source_url":"https://finance.yahoo.com/news/estimating-intrinsic-value-union-gas-060152612.html","article_id":"2421050539","we_media_id":null,"thumbnails":["https://s.yimg.com/uu/api/res/1.2/hLxijyoK76Y31NmVo9Rq8g--~B/aD00MzI7dz0xMTk0O2FwcGlkPXl0YWNoeW9u/https://media.zenfs.com/en/simply_wall_st__316/a6352373bc07e95e9fcd2d2b0061b8ce"],"rights":{"source":"yahoofinance_sg","url":"https://finance.yahoo.com/news/estimating-intrinsic-value-union-gas-060152612.html","rn_cache_url":null,"customStyle":"","selectors":"article, body","filters":"","directOrigin":true},"url":"https://stock-news.laohu8.com/highlight/detail?id=2421050539","pubTimestamp":1711000912,"sourceInfo":{"source_id":"yahoofinance_sg","name":"Yahoo Finance"},"weMediaInfo":null,"summary":"Union Gas Holdings' estimated fair value is S$0.40 based on Dividend Discount Model. Union Gas Holdings' S$0.38 share price indicates it is trading at similar levels as its fair value estimate. Union Gas Holdings' peers are currently trading at a premium of 1,737% on average. The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. 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 Union Gas Holdings as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital  which accounts for debt. In this calculation we've used 5.7%, which is based on a levered beta of 0.800. B","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK6500":"公用股","BK6102":"燃气公用事业","DCF":"Dreyfus Alcentra Global Credit Income 2024 Target Term Fund, Inc","1F2.SI":"优联燃气控股有限公司"},"translate_title":"估计联合燃气控股有限公司（新交所：1F2）的内在价值","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"DCF":1,"1F2.SI":0.9},"content_text":"Key Insights\n\n Union Gas Holdings' estimated fair value is S$0.40 based on Dividend Discount Model \n Union Gas Holdings' S$0.38 share price indicates it is trading at similar levels as its fair value estimate \n Union Gas Holdings' peers are currently trading at a premium of 1,737% on average \n\n Today we'll do a simple run through of a valuation method used to estimate the attractiveness of Union Gas Holdings Limited (SGX:1F2) as an investment opportunity by taking the forecast future cash flows of the company and discounting them back to today's value. We will use the Discounted Cash Flow (DCF) model on this occasion. Models like these may appear beyond the comprehension of a lay person, but they're fairly easy to follow. \n Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model. \n View our latest analysis for Union Gas Holdings \n The Method \n As Union Gas Holdings operates in the gas utilities sector, we need to calculate the intrinsic value slightly differently. Instead of using free cash flows, which are hard to estimate and often not reported by analysts in this industry, dividends per share (DPS) payments are used. Unless a company pays out the majority of its FCF as a dividend, this method will typically underestimate the value of the stock. The 'Gordon Growth Model' is used, which simply assumes that dividend payments will continue to increase at a sustainable growth rate forever. The dividend is expected to grow at an annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.1%. We then discount this figure to today's value at a cost of equity of 5.7%. Relative to the current share price of S$0.4, the company appears about fair value at a 6.8% discount to where the stock price trades currently. Valuations are imprecise instruments though, rather like a telescope - move a few degrees and end up in a different galaxy. Do keep this in mind. \nValue Per Share = Expected Dividend Per Share / (Discount Rate - Perpetual Growth Rate)\n= S$0.01 / (5.7% – 2.1%)\n= S$0.4\n\n\n\n  SGX:1F2 Discounted Cash Flow March 21st 2024\n \n\n The Assumptions \n The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. 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 Union Gas Holdings 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 5.7%, 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. \nSWOT Analysis for Union Gas Holdings\n\n\nStrength\n\nEarnings growth over the past year exceeded the industry.\n\n\nDebt is not viewed as a risk.\n\n\nDividends are covered by earnings and cash flows.\n\n\nDividend information for 1F2.\n\n\n\nWeakness\n\nDividend is low compared to the top 25% of dividend payers in the Gas Utilities market.\n\n\nKey risks with investing in 1F2.\n\n\n\nOpportunity\n\n Current share price is below our estimate of fair value.\n\n\nLack of analyst coverage makes it difficult to determine 1F2's earnings prospects.\n\n\n\nThreat\n\nNo apparent threats visible for 1F2.\n\n\n\n Looking Ahead: \n Although the valuation of a company is important, it shouldn't be the only metric you look at when researching a company. The DCF model is not a perfect stock valuation tool. 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 instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. For Union Gas Holdings, there are three important factors you should explore: \n\n Risks: As an example, we've found 3 warning signs for Union Gas Holdings (1 shouldn't be ignored!) that you need to consider before investing here. \n 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! \n Other Top Analyst Picks: Interested to see what the analysts are thinking? Take a look at our interactive list of analysts' top stock picks to find out what they feel might have an attractive future outlook! \n\n PS. Simply Wall St updates its DCF calculation for every Singaporean stock every day, so if you want to find the intrinsic value of any other stock just search here.\nHave feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This 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. 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