An Intrinsic Calculation For Raffles Medical Group Ltd (SGX:BSL) Suggests It's 50% Undervalued

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An Intrinsic Calculation For Raffles Medical Group Ltd (SGX:BSL) Suggests It's 50% Undervalued

Simply Wall St.09-07

Key Insights Raffles Medical Group's estimated fair value is S$1.78 based on 2 Stage Free Cash Flow to Equity Current share price of S$0.90 suggests Raffles Medical Group is potentially 50% ...

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Tanakaken
·09-18
RMC has been struggling in China, partly because of the slowdown in the economy, but due to inability to overcome markets scepticism over a new foreign hospital' s professional credentials. Hopefully, the recruitment of a new Greater China biz development head with solid prior experience in this sector in China ( ex Ping An Health) will remedy this!
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Current share price of S$0.90 suggests Raffles Medical Group is potentially 50% undervalued. Our fair value estimate is 62% higher than Raffles Medical Group's analyst price target of S$1.10. Today we'll do a simple run through of a valuation method used to estimate the attractiveness of Raffles Medical Group Ltd  as an investment opportunity by taking the expected future cash flows and discounting them to today's value. One way to achieve this is by employing the Discounted Cash Flow  model. Models like these may appear beyond the comprehension of a lay person, but they're fairly easy to follow.We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model.Check out our latest analys","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK6092":"保健护理机构","FCF":"第一联邦金融","BSL.SI":"莱佛士医疗","TV":"墨西哥电视","BK6511":"医疗保健服务概念","BK4100":"有线和卫星","BSL":"BLACKSTONE SENIOR FLOATING RATE 2027 TERM FUND","DCF":"Dreyfus Alcentra Global Credit Income 2024 Target Term Fund, Inc","BK4211":"区域性银行"},"translate_title":"莱佛士医疗集团有限公司（新交所股票代码：BSL）的内在计算表明其价值被低估了50%","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"BSL":1,"DCF":1,"FCF":1,"TV":1,"BSL.SI":0.9},"content_text":"Key Insights\n\n Raffles Medical Group's estimated fair value is S$1.78 based on 2 Stage Free Cash Flow to Equity \n Current share price of S$0.90 suggests Raffles Medical Group is potentially 50% undervalued \n Our fair value estimate is 62% higher than Raffles Medical Group's analyst price target of S$1.10 \n\n Today we'll do a simple run through of a valuation method used to estimate the attractiveness of Raffles Medical Group Ltd (SGX:BSL) as an investment opportunity by taking the expected future cash flows and discounting them to today's value. One way to achieve this is by employing the Discounted Cash Flow (DCF) model. Models like these may appear beyond the comprehension of a lay person, but they're fairly easy to follow. \n We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model. \n Check out our latest analysis for Raffles Medical Group \n What's The Estimated Valuation? \n We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. \n Generally we assume that a dollar today is more valuable than a dollar in the future, so we discount the value of these future cash flows to their estimated value in today's dollars: \n 10-year free cash flow (FCF) forecast \n\n\n\n\n2025\n2026\n2027\n2028\n2029\n2030\n2031\n2032\n2033\n2034\n\n\n Levered FCF (SGD, Millions) \nS$100.2m\nS$105.7m\nS$110.1m\nS$113.9m\nS$117.5m\nS$120.8m\nS$124.0m\nS$127.1m\nS$130.1m\nS$133.1m\n\n\nGrowth Rate Estimate Source\nAnalyst x3\nAnalyst x2\nEst @ 4.10%\nEst @ 3.52%\nEst @ 3.11%\nEst @ 2.83%\nEst @ 2.63%\nEst @ 2.49%\nEst @ 2.39%\nEst @ 2.32%\n\n\n Present Value (SGD, Millions) Discounted @ 5.5% \nS$95.0\nS$95.1\nS$93.8\nS$92.1\nS$90.1\nS$87.8\nS$85.5\nS$83.1\nS$80.6\nS$78.2\n\n\n\n(\"Est\" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = S$881m\n After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.2%. We discount the terminal cash flows to today's value at a cost of equity of 5.5%. \nTerminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = S$133m× (1 + 2.2%) ÷ (5.5%– 2.2%) = S$4.1b\nPresent Value of Terminal Value (PVTV)= TV / (1 + r)10= S$4.1b÷ ( 1 + 5.5%)10= S$2.4b\n The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is S$3.3b. To get the intrinsic value per share, we divide this by the total number of shares outstanding. Relative to the current share price of S$0.9, the company appears quite good value at a 50% 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. \n\n\n\n  SGX:BSL Discounted Cash Flow September 7th 2024\n \n\n The Assumptions \n Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual 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 Raffles Medical Group 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 5.5%, 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 Raffles Medical Group\n\n\nStrength\n\nDebt is not viewed as a risk.\n\n\nDividends are covered by earnings and cash flows.\n\n\nDividend information for BSL.\n\n\n\nWeakness\n\nEarnings declined over the past year.\n\n\nDividend is low compared to the top 25% of dividend payers in the Healthcare market.\n\n\n\nOpportunity\n\nAnnual earnings are forecast to grow faster than the Singaporean market.\n\n\nGood value based on P/E ratio and estimated fair value.\n\n\n Significant insider buying over the past 3 months.\n\n\n\nThreat\n\nRevenue is forecast to grow slower than 20% per year.\n\n\nWhat else are analysts forecasting for BSL?\n\n\n\n Next Steps: \n Although the valuation of a company is important, it ideally won't be the sole piece of analysis you scrutinize for a company. DCF models are not the be-all and end-all of investment valuation. Rather it should be seen as a guide to \"what assumptions need to be true for this stock to be under/overvalued?\" For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. Why is the intrinsic value higher than the current share price? For Raffles Medical Group, we've put together three further items you should assess: \n\n Risks: Be aware that  Raffles Medical Group is showing  1 warning sign in our investment analysis , you should know about... \n Management:Have insiders been ramping up their shares to take advantage of the market's sentiment for BSL's future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors. \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\n PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the SGX every day. If you want to find the calculation for other stocks 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. Simply Wall St has no position in any stocks mentioned.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[{"id":350709474509064,"gmtCreate":1726646089736,"gmtModify":1726646102196,"author":{"id":"4089847491717180","authorId":"4089847491717180","name":"Tanakaken","avatar":"https://community-static.tradeup.com/news/b2c8052eb7da9187d1391df076199523","vip":1,"crmLevel":8,"crmLevelSwitch":0,"idStr":"4089847491717180","authorIdStr":"4089847491717180"},"htmlText":"RMC has been struggling in China, partly because of the slowdown in the economy, but due to&nbsp;inability to overcome markets scepticism over a new foreign hospital' s professional credentials. Hopefully, the recruitment of a new Greater China biz development head with solid prior experience in this sector in China ( ex Ping An Health) will remedy this!","listText":"RMC has been struggling in China, partly because of the slowdown in the economy, but due to&nbsp;inability to overcome markets scepticism over a new foreign hospital' s professional credentials. Hopefully, the recruitment of a new Greater China biz development head with solid prior experience in this sector in China ( ex Ping An Health) will remedy this!","text":"RMC has been struggling in China, partly because of the slowdown in the economy, but due to inability to overcome markets scepticism over a new foreign hospital' s professional credentials. Hopefully, the recruitment of a new Greater China biz development head with solid prior experience in this sector in China ( ex Ping An Health) will remedy this!","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/350709474509064","repostId":2465679750,"repostType":2,"repost":{"id":"2465679750","kind":"highlight","pubTimestamp":1725670103,"share":"https://ttm.financial/m/news/2465679750?lang=&edition=fundamental","pubTime":"2024-09-07 08:48","market":"us","language":"en","title":"An Intrinsic Calculation For Raffles Medical Group Ltd (SGX:BSL) Suggests It's 50% Undervalued","url":"https://stock-news.laohu8.com/highlight/detail?id=2465679750","media":"Simply Wall St.","summary":"Raffles Medical Group's estimated fair value is S$1.78 based on 2 Stage Free Cash Flow to Equity. Current share price of S$0.90 suggests Raffles Medical Group is potentially 50% undervalued. Our fair value estimate is 62% higher than Raffles Medical Group's analyst price target of S$1.10. Today we'll do a simple run through of a valuation method used to estimate the attractiveness of Raffles Medical Group Ltd  as an investment opportunity by taking the expected future cash flows and discounting them to today's value. One way to achieve this is by employing the Discounted Cash Flow  model. Models like these may appear beyond the comprehension of a lay person, but they're fairly easy to follow.We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model.Check out our latest analys","content":"<html><body><h3>Key Insights</h3>\n<ul>\n<li> Raffles Medical Group's estimated fair value is S$1.78 based on 2 Stage Free Cash Flow to Equity </li>\n<li> Current share price of S$0.90 suggests Raffles Medical Group is potentially 50% undervalued </li>\n<li> Our fair value estimate is 62% higher than Raffles Medical Group's analyst price target of S$1.10 </li>\n</ul>\n<p> Today we'll do a simple run through of a valuation method used to estimate the attractiveness of Raffles Medical Group Ltd (SGX:BSL) as an investment opportunity by taking the expected future cash flows and discounting them to today's value. One way to achieve this is by employing the Discounted Cash Flow (DCF) model. Models like these may appear beyond the comprehension of a lay person, but they're fairly easy to follow. </p>\n<p> We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model. </p>\n<p><span> Check out our latest analysis for Raffles Medical Group </span></p>\n<h2> What's The Estimated Valuation? </h2>\n<p> We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. </p>\n<p> Generally we assume that a dollar today is more valuable than a dollar in the future, so we discount the value of these future cash flows to their estimated value in today's dollars: </p>\n<h4> 10-year free cash flow (FCF) forecast </h4>\n<table>\n<tbody>\n<tr>\n<td></td>\n<td><strong>2025</strong></td>\n<td><strong>2026</strong></td>\n<td><strong>2027</strong></td>\n<td><strong>2028</strong></td>\n<td><strong>2029</strong></td>\n<td><strong>2030</strong></td>\n<td><strong>2031</strong></td>\n<td><strong>2032</strong></td>\n<td><strong>2033</strong></td>\n<td><strong>2034</strong></td>\n</tr>\n<tr>\n<td><strong> Levered FCF (SGD, Millions) </strong></td>\n<td>S$100.2m</td>\n<td>S$105.7m</td>\n<td>S$110.1m</td>\n<td>S$113.9m</td>\n<td>S$117.5m</td>\n<td>S$120.8m</td>\n<td>S$124.0m</td>\n<td>S$127.1m</td>\n<td>S$130.1m</td>\n<td>S$133.1m</td>\n</tr>\n<tr>\n<td><strong>Growth Rate Estimate Source</strong></td>\n<td>Analyst x3</td>\n<td>Analyst x2</td>\n<td>Est @ 4.10%</td>\n<td>Est @ 3.52%</td>\n<td>Est @ 3.11%</td>\n<td>Est @ 2.83%</td>\n<td>Est @ 2.63%</td>\n<td>Est @ 2.49%</td>\n<td>Est @ 2.39%</td>\n<td>Est @ 2.32%</td>\n</tr>\n<tr>\n<td><strong> Present Value (SGD, Millions) Discounted @ 5.5% </strong></td>\n<td>S$95.0</td>\n<td>S$95.1</td>\n<td>S$93.8</td>\n<td>S$92.1</td>\n<td>S$90.1</td>\n<td>S$87.8</td>\n<td>S$85.5</td>\n<td>S$83.1</td>\n<td>S$80.6</td>\n<td>S$78.2</td>\n</tr>\n</tbody>\n</table>\n<p><i>(\"Est\" = FCF growth rate estimated by Simply Wall St)</i><br/><strong>Present Value of 10-year Cash Flow (PVCF)</strong> = S$881m<br/></p>\n<p> After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.2%. We discount the terminal cash flows to today's value at a cost of equity of 5.5%. </p>\n<p><strong>Terminal Value (TV)</strong>= FCF<sub>2034</sub> × (1 + g) ÷ (r – g) = S$133m× (1 + 2.2%) ÷ (5.5%– 2.2%) = S$4.1b</p>\n<p><strong>Present Value of Terminal Value (PVTV)</strong>= TV / (1 + r)<sup>10</sup>= S$4.1b÷ ( 1 + 5.5%)<sup>10</sup>= S$2.4b</p>\n<p> The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is S$3.3b. To get the intrinsic value per share, we divide this by the total number of shares outstanding. Relative to the current share price of S$0.9, the company appears quite good value at a 50% 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. </p>\n<figure>\n<img height=\"380\" src=\"https://s.yimg.com/uu/api/res/1.2/Woj0DlZ54V6PqqvA1sw9.Q--/cT03NTthcHBpZD15dmlkZW9mZWVkczs-/https://media.zenfs.com/en/simply_wall_st__316/3e7ce60174952f81a8216d8c8825043e\" width=\"853\"/>\n<figcaption>\n  SGX:BSL Discounted Cash Flow September 7th 2024\n </figcaption>\n</figure>\n<h2> The Assumptions </h2>\n<p> Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual 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 Raffles Medical Group 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 5.5%, 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. </p>\n<h3>SWOT Analysis for Raffles Medical Group</h3>\n<div>\n<div>\n<strong>Strength</strong>\n<ul>\n<li>Debt is not viewed as a risk.</li>\n</ul>\n<ul>\n<li>Dividends are covered by earnings and cash flows.</li>\n</ul>\n<ul>\nDividend information for BSL.\n</ul>\n</div>\n<div>\n<strong>Weakness</strong>\n<ul>\n<li>Earnings declined over the past year.</li>\n</ul>\n<ul>\n<li>Dividend is low compared to the top 25% of dividend payers in the Healthcare market.</li>\n</ul>\n</div>\n<div>\n<strong>Opportunity</strong>\n<ul>\n<li>Annual earnings are forecast to grow faster than the Singaporean market.</li>\n</ul>\n<ul>\n<li>Good value based on P/E ratio and estimated fair value.</li>\n</ul>\n<ul>\n<li> Significant insider buying over the past 3 months.</li>\n</ul>\n</div>\n<div>\n<strong>Threat</strong>\n<ul>\n<li>Revenue is forecast to grow slower than 20% per year.</li>\n</ul>\n<ul>\nWhat else are analysts forecasting for BSL?\n</ul>\n</div>\n</div>\n<h2> Next Steps: </h2>\n<p> Although the valuation of a company is important, it ideally won't be the sole piece of analysis you scrutinize for a company. DCF models are not the be-all and end-all of investment valuation. Rather it should be seen as a guide to \"what assumptions need to be true for this stock to be under/overvalued?\" For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. Why is the intrinsic value higher than the current share price? For Raffles Medical Group, we've put together three further items you should assess: </p>\n<ol>\n<li> <strong>Risks</strong>: Be aware that  Raffles Medical Group is showing <strong> 1 warning sign in our investment analysis</strong> , you should know about... </li>\n<li> <strong>Management</strong>:Have insiders been ramping up their shares to take advantage of the market's sentiment for BSL's future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors. </li>\n<li> <strong>Other High Quality Alternatives</strong>: 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! </li>\n</ol>\n<p> PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the SGX every day. If you want to find the calculation for other stocks just search here.</p>\n<p><strong>Have feedback on this article? Concerned about the content?</strong> <strong>Get in touch</strong><strong> with us directly.</strong><i> Alternatively, email editorial-team (at) simplywallst.com.</i><br/><br/><i>This article by Simply Wall St is general in nature. <strong>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.</strong> 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. Simply Wall St has no position in any stocks mentioned.</i><br/><br/></p></body></html>","source":"yahoofinance_sg","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>An Intrinsic Calculation For Raffles Medical Group Ltd (SGX:BSL) Suggests It's 50% Undervalued</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; 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\">\nAn Intrinsic Calculation For Raffles Medical Group Ltd (SGX:BSL) Suggests It's 50% Undervalued\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-09-07 08:48 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://finance.yahoo.com/news/intrinsic-calculation-raffles-medical-group-004823618.html><strong>Simply Wall St.</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Key Insights\n\n Raffles Medical Group's estimated fair value is S$1.78 based on 2 Stage Free Cash Flow to Equity \n Current share price of S$0.90 suggests Raffles Medical Group is potentially 50% ...</p>\n\n<a href=\"https://finance.yahoo.com/news/intrinsic-calculation-raffles-medical-group-004823618.html\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"https://s.yimg.com/uu/api/res/1.2/6BRhFnc.pgAxsBLr6Um7fw--~B/aD00MzI7dz0xMTk0O2FwcGlkPXl0YWNoeW9u/https://media.zenfs.com/en/simply_wall_st__316/4a502612fd94fa7765656091ba791336","relate_stocks":{"BK6092":"保健护理机构","FCF":"第一联邦金融","BSL.SI":"莱佛士医疗","TV":"墨西哥电视","BK6511":"医疗保健服务概念","BK4100":"有线和卫星","BSL":"BLACKSTONE SENIOR FLOATING RATE 2027 TERM FUND","DCF":"Dreyfus Alcentra Global Credit Income 2024 Target Term Fund, Inc","BK4211":"区域性银行"},"source_url":"https://finance.yahoo.com/news/intrinsic-calculation-raffles-medical-group-004823618.html","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"2465679750","content_text":"Key Insights\n\n Raffles Medical Group's estimated fair value is S$1.78 based on 2 Stage Free Cash Flow to Equity \n Current share price of S$0.90 suggests Raffles Medical Group is potentially 50% undervalued \n Our fair value estimate is 62% higher than Raffles Medical Group's analyst price target of S$1.10 \n\n Today we'll do a simple run through of a valuation method used to estimate the attractiveness of Raffles Medical Group Ltd (SGX:BSL) as an investment opportunity by taking the expected future cash flows and discounting them to today's value. One way to achieve this is by employing the Discounted Cash Flow (DCF) model. Models like these may appear beyond the comprehension of a lay person, but they're fairly easy to follow. \n We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model. \n Check out our latest analysis for Raffles Medical Group \n What's The Estimated Valuation? \n We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. \n Generally we assume that a dollar today is more valuable than a dollar in the future, so we discount the value of these future cash flows to their estimated value in today's dollars: \n 10-year free cash flow (FCF) forecast \n\n\n\n\n2025\n2026\n2027\n2028\n2029\n2030\n2031\n2032\n2033\n2034\n\n\n Levered FCF (SGD, Millions) \nS$100.2m\nS$105.7m\nS$110.1m\nS$113.9m\nS$117.5m\nS$120.8m\nS$124.0m\nS$127.1m\nS$130.1m\nS$133.1m\n\n\nGrowth Rate Estimate Source\nAnalyst x3\nAnalyst x2\nEst @ 4.10%\nEst @ 3.52%\nEst @ 3.11%\nEst @ 2.83%\nEst @ 2.63%\nEst @ 2.49%\nEst @ 2.39%\nEst @ 2.32%\n\n\n Present Value (SGD, Millions) Discounted @ 5.5% \nS$95.0\nS$95.1\nS$93.8\nS$92.1\nS$90.1\nS$87.8\nS$85.5\nS$83.1\nS$80.6\nS$78.2\n\n\n\n(\"Est\" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = S$881m\n After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.2%. We discount the terminal cash flows to today's value at a cost of equity of 5.5%. \nTerminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = S$133m× (1 + 2.2%) ÷ (5.5%– 2.2%) = S$4.1b\nPresent Value of Terminal Value (PVTV)= TV / (1 + r)10= S$4.1b÷ ( 1 + 5.5%)10= S$2.4b\n The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is S$3.3b. To get the intrinsic value per share, we divide this by the total number of shares outstanding. Relative to the current share price of S$0.9, the company appears quite good value at a 50% 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. \n\n\n\n  SGX:BSL Discounted Cash Flow September 7th 2024\n \n\n The Assumptions \n Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual 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 Raffles Medical Group 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 5.5%, 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 Raffles Medical Group\n\n\nStrength\n\nDebt is not viewed as a risk.\n\n\nDividends are covered by earnings and cash flows.\n\n\nDividend information for BSL.\n\n\n\nWeakness\n\nEarnings declined over the past year.\n\n\nDividend is low compared to the top 25% of dividend payers in the Healthcare market.\n\n\n\nOpportunity\n\nAnnual earnings are forecast to grow faster than the Singaporean market.\n\n\nGood value based on P/E ratio and estimated fair value.\n\n\n Significant insider buying over the past 3 months.\n\n\n\nThreat\n\nRevenue is forecast to grow slower than 20% per year.\n\n\nWhat else are analysts forecasting for BSL?\n\n\n\n Next Steps: \n Although the valuation of a company is important, it ideally won't be the sole piece of analysis you scrutinize for a company. DCF models are not the be-all and end-all of investment valuation. Rather it should be seen as a guide to \"what assumptions need to be true for this stock to be under/overvalued?\" For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. Why is the intrinsic value higher than the current share price? For Raffles Medical Group, we've put together three further items you should assess: \n\n Risks: Be aware that  Raffles Medical Group is showing  1 warning sign in our investment analysis , you should know about... \n Management:Have insiders been ramping up their shares to take advantage of the market's sentiment for BSL's future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors. \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\n PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the SGX every day. If you want to find the calculation for other stocks 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. Simply Wall St has no position in any stocks mentioned.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"hasMoreComments":true,"newsSizeData":{"likeSize":1,"commentSize":1,"repostSize":1,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false}}