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QuestionsCategory: Valuation Quadrant2015 NTPM discounted cash flow
evansoo asked 6 years ago

Hi Victor/Rusmin,

I’m practicing how to do discounted cash flow and would like you to check if I’m doing correctly. The result I got were as below,

1) 5 years (2010 to 2010) CAGR were unable to be done because the cash flow/earning were decreasing y-y. Is this correct?

2) Thus I did 10 years cash flow CAGR (I’m using OCF as I do not know what Is FCF,yet), which is 7.9%
Then I calculated Intrinsic value = RM0.30, with Risk-Free-Rate = 6%

With current NTPM share price of 99 cents, I got Margin of safety which was -225%, which was overvalued.

Advanced MOS = -217%, with debt/share= RM0.02.

Did I calculate them correctly?
I’m not very confident, it’s so confusing.


2 Answers
evansoo answered 6 years ago

correction *2010 to 2015

Victor Chng answered 6 years ago

Hi Evan,
Firstly, DCF is one type of model for valuation but don;t fully rely on it. You must at least use 2-3 valuation model on NTPM to confirm the company valuation range.
Secondly, What is the CFO/per share you are using?
Thirdly, You can also use the revenue growth 

evansoo replied 6 years ago

Hi Victor,

I’ll take noted on using different type valuation.

I’m using CFO of 8.31per share (as I later found that FCF was 8.26 cents, which has little difference) from annual report 2015 (RM93,392,896/1,123,193,000 outstanding shares, correct?)


Victor Chng replied 6 years ago

Hi Evan,

The figure RM93.4 mil is Operating cash flows before changes in working capital not the CFO. The CFO is Net cash flows generated from/(used in) operating activities which is RM52.8 mil.

evansoo replied 6 years ago

Hi Victor, Thanks!

Then, Free Cash Flow (FCF) = Operating Cash Flow before changes in working capital – CAPEX?

And CAPEX = Loss/(gain) on disposal of property, plant and equipment + Property, plant and equipment written off + Purchase of Property Plant and equipment ?? (Above referring to 2015 NTPM ar)

Also I’m looking at breadtalk annual report with its receivables in negative value. What’s this mean? I Google it somehow, it said something like aging receivables from customer or subsidiaries that unable to collect back and thus written off? Is this correct?

Victor Chng replied 6 years ago

Hi Evan,

FCF = Net Operating Cash Flow from/(used in) operating activities – CAPEX

CAPEX = Purchase of property plant and equipment only

As for the breadtalk, which year is the annual report and the page of the receivables so I can refer to it?

evansoo replied 6 years ago

Thx Victor,

Thus, NTPM 2015
CFO = 52.8 million
CAPEX = 93.1 million
FCF = -40.3 million
Outstanding shares = 1,123,193,000
I got FCF = -3.59 cents? This is correct?

Due to negative value, I then choose to use Discounted Earning instead. EPS = 3.8 cents (AR2015 Net profit =42.6 million, Outstanding shares = 1,123,193,000). calculated Intrinsic value = 14 cents (2015 to 2025)? MOS = -620% ? (with share price = 98 cents, Earning CAGR = 7.4%, risk free rate = 6%.)
For breadtalk, I’m referring to 2003 ar. The one I see negative trade receivables was at “consolidated cash flow statement” pg.43 but then I found a positive value at balance sheet.

1) what’s consolidated cash flow?
2) I should refer to balance sheet for trade receivables/payables or “consolidated cash flow statement”?
4) In this same ar, breadtalk acquired fixed asset of RM5.3 million. With CFO of RM3.9mil, it’s FCF = -1.4 mil? A minus value? They issued new shares to fund the acquisition, should I include the “net cash inflow on acquisition of subsidiary” in 2003 case?

Victor Chng replied 6 years ago

Hi Evan,

1. The figure for CFO,Capex and FF are all correct except the number of shares which is 1,123,160,00 where you can get it from page 104 of the annual report. Please note that discounted cash flow model using FCF is mainly for mature, stable or large companies. Smaller companies, discounted earnings model is prefer.

2. The data you collected for the discounted earning model are all correct except the number shares as mentioned above. Please note that there is a row in the income statement stated other operating income of RM1.8m. You have to refer to the note 5 and find out how they generate the income. Whether it is generate from the core business or not. If yes, your net profit will be RM42.6m, if no, the net profit will be RM42.6m – RM1.8m = RM40.8m as net profit. As for the intrinsic value of 14 cents, may i know how do you get it because I get 40 cents. You may want to use the calculator provided by the investment quadrant course to calculate your Intrinsic Value.

3. Receivables figure should always be collected from the balance sheet not the cash flow statement. Cash flow statement track the in/out flow of the cash in the company. Negative receivables in the cash flow statements means that the company have not collect back their receivables.

4. Consolidated figure is the sum of all the subsidiary and holding company. Please note that always take consolidated figure.

5. As mentioned above, Breadtalk is classified as small and growing company. Hence, discounted earning model, PE, PCFO is the prefer valuation for them as compare using DCF model that use FCF.

6. 2003 is the year where Breaktalk IPO which is why you can see them issuing share and receiving proceed from the share issuing.

I hope I clear you doubts. Keep the questions coming and I am more than happy to answer them. Keep up the good work Evan :)

evansoo replied 6 years ago

Hi Victor,

1) Noted on this.

2) (a)As for other operating income, sundry income and interest income shouldn’t be core business income I guess, haha. Thus RM40.8 mil as net profit. Thx.

(b) I found that I misunderstood the Discount factor formula, where it’s supposed “a power of n” instead of multiplication. But, actually, it should be written in this way;

Discount Factor = [1 / (1+ Risk free factor)^n]

With the “^” symbol, Isn’t it?

(c) Then I guess that the “intrinsic calculator” ( was wrong on MOS calculation.

I checked it with the value found in (, where
Share price = 12
Growth rate = 12%
Risk free rate = 6%
EPS = 1.7

MOS = 48%, but the calculator gave 94.17%. Can you verify?

(d) Advanced MOS formula should be (minus) “Net Debt” instead of (plus), isn’t it? Because if plus Net Debt,

Adv MOS = {[23.28-12+(2-4)] / 23.28}*100%

I cannot get 57%, instead I get 40%. Kindly verify.

3) What about positive receivables mean? It also mean amount not collected yet, right? So any different?

4), 5) & 6) Noted.

Victor Chng replied 6 years ago

Hi Evan,

b) Thanks for your feedback. I will get the n change to superscript.

c) Your MOS of 48% is the correct figure. Thanks for pointing out, I will get the bug fixed

d) the example shown in the Advanced MOS, $2 is debt and $4 is cash so it will derived a net cash position instead of net debt and this give a negative figure. Hence the net cash position is -$2. If you put this in the formula, (23.28-($12-$2)/23.28)*100% = 57%.

3) positive figure in cash flow statement means that the receivables is being collected and there is an inflow of cash