zimams:
Yes..
i will take a cautious dip today.. and watch for losses on those 3 stocks that i can capitalize on during the week.

Did you see Ucap losing today?
That's why its most times risky to chase vehicle that already moved far.
Ucap fell to as low as 1.90 during the March low.....

megawealth01:

What's Funny

Coolcash1:
Guinness yesterday gra gra don finish. Coming down to N10.

Dats why FOMO is not a good investment strategy.

onegentleguy:

abeg leave u and meine. I forgive u 2 in advance.
...I am enjoying ur posts na !! . It is well.

Me sef I forgive you in arrears because I asked you powerful questions you couldn't answer but ran away.

Coolcash1:
Guinness yesterday gra gra don finish.

Coming down to N10.

Bargain hunters who entered based on Peterichy's post to jump out of the bus now!!!

You think this is WAPCO with audio Earnings that is heading back to N9 if in doubt check out their over 22m offers with no serious buyers.

BARGAIN HUNTERS TAKE NOTE!

PETERiCHY:


You think this is WAPCO with audio Earnings that is heading back to N9 if in doubt check out the 22m offers with no serious buyers.

BARGAIN HUNTERS TAKE NOTE!

Wapco dark days are over whilst that of Guinness is just starting....Just watch how the offers will dry up.

You better leave ponmo (guinness) and chop meat (wapco)....

PETERiCHY:


You think this is WAPCO with audio Earnings that is heading back to N9 if in doubt check out their over 22m offers with no serious buyers.

BARGAIN HUNTERS TAKE NOTE!

sir PETER...That offer in Wapco is only ment to deceive people, single offer of 9m@13.2 and 6m@13.2 and same individual keeps buying at 11.90 -11.95..if he needs money let him offer @12 and see what happens

ositadima1:


Not quite.


Once again, I pulled Dangote Cement PLC annual reports from 2010 to 2019 and this is what i saw:

The big Five
Sales (revenue): growth (or contraction) for the last 9 years ==> 17.9% (Compound Annual Growth Rate).
EPS: growth (or contraction) for the last 9 years ==> 5.96% (Compound Annual Growth Rate).
Equity: growth (or contraction) for the last 9 years ==> 17.43% (Compound Annual Growth Rate).
Free Cash Flow: growth (or contraction) for the last 9 years ==> 21.95% (Compound Annual Growth Rate).
Long Term Debt-to-Free Cash Flow: 0.55 (pretty good)

Notes:
Not bad as per Nigerian standard. Though, Sales, EPS, and Equity slowed down last year (2019) at -1.06%, -48% and -8.99% respectively. I assume the harsh economy took a toll on the stock.

Next, Discounted cash flow (DCF) valuation

1.) Assuming 5.96% growth (EPS above) and 15% (MoS in view) rate of return projected for the next 10 years and then discounted for MoS. Buy price would be pegged at not more than 140.59 per share.

2.) Assuming 15% growth (Equity above) and 15% (MoS in view) rate of return projected for the next 10 years and then discounted for MoS. Buy price would be pegged at not more than 227.55 per share.

Conclusions: If you can snatch it at less than 140, u are very ok.

Also, better to buy when MACD, Stochastic and MA align and echo buy!







Due diligence applies as these numbers may be off the mark.

Good job. I dont think DCF Valuation model works for NSE. There are a lot of assumptions before coming to it. Like my lecturer in uni will say "Assumption is the mother of all f*ck ups". So please don't duel so much on it.

ositadima1:


Not quite.

Once again, I pulled Dangote Cement PLC annual reports from 2010 to 2019 and this is what i saw:

The big Five
Sales (revenue): growth (or contraction) for the last 9 years ==> 17.9% (Compound Annual Growth Rate).
EPS: growth (or contraction) for the last 9 years ==> 5.96% (Compound Annual Growth Rate).
Equity: growth (or contraction) for the last 9 years ==> 17.43% (Compound Annual Growth Rate).
Free Cash Flow: growth (or contraction) for the last 9 years ==> 21.95% (Compound Annual Growth Rate).
Long Term Debt-to-Free Cash Flow: 0.55 (pretty good)

Notes:
Not bad as per Nigerian standard. Though, Sales, EPS, and Equity slowed down last year (2019) at -1.06%, -48% and -8.99% respectively. I assume the harsh economy took a toll on the stock.

Next, Discounted cash flow (DCF) valuation

1.) Assuming 5.96% growth (EPS above) and 15% (MoS in view) rate of return projected for the next 10 years and then discounted for MoS. Buy price would be pegged at not more than 140.59 per share.

2.) Assuming 15% growth (Equity above) and 15% (MoS in view) rate of return projected for the next 10 years and then discounted for MoS. Buy price would be pegged at not more than 227.55 per share.

Conclusions: If you can snatch it at less than 140, u are very ok.

Also, better to buy when MACD, Stochastic and MA align and echo buy!

Due diligence applies as these numbers may be off the mark.

U are doing great, but let me help refine a few lines for u.
In valuing an asset using the DCF method, the KEY to EFFECTIVE PRICING lies in;

1) The discount rate. ...what u intend to rake-off from the proposed investment in lieu of future risk.(benchmark of present to future value of money in view)
2) The growth rate. ...how u perceive of the coy looking into the future(efficiency in view)

With the 1st, I always advise folks to use a discount rate that beats(@ premium to) the average of the sum of ur surrounding interest rate and inflation rate at the time. That way, u would've factored in all key surrounding risk into ur forecast.
...and a growth rate that's an average of, or a % discount from the assets current FCF growth rate.
That percentage discount can also be 100%... meaning u are assuming zero growth rate.(which is ur best bet)

With the DCF valuation method, the growth rate is usually the Achilles heel.
It pays to keep growth rate as low as possible. The higher you set the growth rate, the higher you set up the assets downside potential.
If and when a company looks to be undervalued with 0% growth rate, then u surely have more upside than downside.
...which is why u SHOULD use FCF growth rate and NOT that of earnings(EPS). Like I always tell folks; A coys earnings does not tell the whole story. It can always be manipulated.(either up or down)
Alternatively its even better to use C/S growth rate or change in CGPR but not EPS.

To illustrate;
If u use earnings growth rate for an asset with accelerated EPS that resulted from a cycle, a one-off event or an unsustainable rewarding environment(OKOMU and PRESCO comes to mind here), then u certainly would fall into a huge trap.
If u must utilize earnings growth alone, then do a scrutiny on the coy using EM/EPS BOOTSTRAPPING to guage its TRUE earnings power.

When u are done with 1 and 2 above, always use an MoS that's at least 3x ur discount rate. ...and where the business is seasonal, use an MoS of >5x ur discount rate.

If u follow up with the above guide, u'll find that DANGOTE CEMENT' FVE should even be slightly higher than ur estimate(they have cash)
...while a coy like WAPCO should have NO business selling for less than N23.85(assuming zero growth and adjusting for maximum risk) ...else, FVE should compute to N28.10.(They have more than enough cash)

Finally, its important to note that the DCF formula is not subjective. ...it's something that u always need to refine to suite ur targeted asset, while seeking VALUE(risk-reward margin in view)
So don't take everything u read in a book to heart(including the one u are currently reading now)
Just seek to refine and model things to suite ur investment personality and goals.

Disclosure: For some genuine reason, the DCF(though ok) is certainly not the best method to value coys in the cement industry.
Otherwise u may not see the IMMENSE POTENTIAL in the coy with the current greatest value proposition in that sector- WAPCO !!

It is well.

Profit taking ongoing in Ucap......

Please guys, what do you think about ETI at current price if someone is looking at price appreciation between now and January? Thanks

onegentleguy:


U are doing great, but let me help refine a few lines for u.
In valuing an asset using the DCF method, the KEY to EFFECTIVE PRICING lies in;

1) The discount rate. ...what u intend to rake-off from the proposed investment in lieu of future risk.(benchmark of present to future value of money in view)
2) The growth rate. ...how u perceive of the coy looking into the future(efficiency in view)

With the 1st, I always advise folks to use a discount rate that beats the average of the sum of ur surrounding interest rate and inflation rate at the time. That way, u wouldve factored in all key surrounding risk factors into ur forecast.
...and a growth rate that's an average of, or a % discount from the assets current FCF growth rate.
That percentage discount can also be 100%... meaning u are assuming zero growth rate.(which is ur best bet)

With the DCF valuation method, the growth rate is usually the Achilles heel.
It pays to keep growth rate as low as possible. The higher you set the growth rate, the higher you set up the assets downside potential.
If and when a company looks to be undervalued with 0% growth rate, then u surely have more upside than downside.
...which is why u SHOULD use FCF growth rate and NOT that of earnings(EPS). Like I always tell folks; A coys earnings does not tell the whole story. It can always be manipulated.(either up or down)
Alternatively its even better to use C/S growth rate or change in CGPR but not EPS.

To illustrate;
If u use earnings growth rate for an asset with accelerated EPS that resulted from a cycle, one time event or an unsustainable rewarding environment(OKOMU and PRESCO comes to mind here), then u certainly would fall into a huge trap.
If u must utilize earnings growth alone, then do a scrutiny on the coy using EM/EPS BOOTSTRAPPING to guage its TRUE earnings power.

When u are done with 1 and 2 above, always use an MoS that's at least 3x ur discount rate. ...and where the business is seasonal, use an MoS of >4x ur discount rate.

If u follow up with the above guide, u'll find that DANGOTE CEMENT' FVE should even be slightly higher than ur estimate(they have cash)
...while a coy like WAPCO should have NO business selling for less than N23.85(assuming zero growth and adjusting for maximum risk) They have more than enough cash.

Finally, its important to note that the DCF formula is not subjective. ...it's something that u always need to refine to suite ur targeted asset, while seeking VALUE(risk-reward margin in view)
So don't take everything u read in a book to heart(including the one u are currently reading now)
Just seek to refine and model things to suite ur investment personality and goals.

Disclosure: For some genuine reasons, the DCF(though ok) is certainly not the best method to value coys in cement industry.
Otherwise u may not see the IMMENSE POTENTIAL in the coy with the current greatest value proposition in that sector- WAPCO !!

It is well.

Very insightful !

Eghuan01:
Please guys, what do you think about ETI at current price if someone is looking at price appreciation between now and January? Thanks

One word; BUY !!

As u win, come back later to show some appreciation.
...I love Nkwobi and a bottle of non-acoholic wine.

CAVEAT: Due dilligence still applies.

Regards

chibjohn:

Good job. I dont think DCF Valuation model works for NSE. There are a lot of assumptions before coming to it. Like my lecturer in uni will say "Assumption is the mother of all f*ck ups". So please don't duel so much on it.

All valuations have assumptions as their basis. Except you get eye way dey see tomorrow. You be babalawo?

onegentleguy:


One word; BUY !!

As u win, come back later to show some appreciation.
...I love Nkwobi and a bottle of non-acoholic wine.

CAVEAT: Due dilligence still applies.

Regards

Thank you Sir �� Will do�

Agbalowomeri:
Party scatter.....

https://www.youtube.com/watch?v=EtbwTgY3AIk

Agba, welcome oo ooo
All d old hands don dey commot dis forum...
Small Small....

Yes o.. it's been red for most of today. I had dipped in yesterday. Na to average down at sub N2.70 be that. If it gets there.

Mcy56:

Did you see Ucap losing today?
That's why its most times risky to chase vehicle that already moved far.
Ucap fell to as low as 1.90 during the March low.....

ositadima1:


All valuations have assumptions as their basis. Except you get eye way dey see tomorrow. You be babalawo?

Yes all valuation have assumptions but the lesser the assumptions the more reliable the result will be. DCF valuation is mostly all assumptions and estimations. You must be a God to get all the assumptions right at the same time. Don't get me wrong, DCF valuation works for NYSE and developed markets where the economy is relatively stable and more predictable. It is not for NSE that is in an undeveloped economy without any foreseeable timeline for future growth. I use it seldomly just to compare with other valuation models. It's not to be solely relied on as far as NSE is concerned.

Coolcash1:


Wapco dark days are over whilst that of Guinness is just starting....Just watch how the offers will dry up.

You better leave ponmo (guinness) and chop meat (wapco)....

WAPCO is coming from all time high of N136 and over the years they have overbloated their OS from 4.4B units to over 16B units meanwhile

Guinness came from all time high of N297 and their OS has slightly increased from 1.5B units to 2.2B unit's

Now tell me the one that is coming out of dark days

BARGAIN HUNTERS TAKE NOTE!

zimams:
Yes o.. it's been red for most of today. I had dipped in yesterday. Na to average down at sub N2.70 be that. If it gets there.

Thought you said you'll watch out for pullback or something.
It's still ranging btw 3/3.10 anyway........let's see how it goes....

@coolcash1 or anyone who dares to speak against Guinness when Peter is still inside the bus will have him to answer to.
Better relax and allow him join Wapco bus again.......before you can be on same page.

chibjohn:

Yes all valuation have assumptions but the lesser the assumptions the more reliable the result will be. DCF valuation is mostly all assumptions and estimations. You must be a God to get all the assumptions right at the same time. Don't get me wrong, DCF valuation works for NYSE and developed markets where the economy is relatively stable and more predictable. It is not for NSE that is in an undeveloped economy without any foreseeable timeline for future growth. I use it seldomly just to compare with other valuation models. It's not to be solely relied on as far as NSE is concerned.

Please, can u list the other valuation models u use.

GTB still showing strength.......despite higher offers than bids .....KM 25 is very close......
.......the type of fund entering the stock is very massive......

Pls do not take as any form of advice, it's just observation, I may be wrong.....

[/quote]

[quote author=chibjohn post=92698306]
Yes all valuation have assumptions but the lesser the assumptions the more reliable the result will be. DCF valuation is mostly all assumptions and estimations. You must be a God to get all the assumptions right at the same time. Don't get me wrong, DCF valuation works for NYSE and developed markets where the economy is relatively stable and more predictable. It is not for NSE that is in an undeveloped economy without any foreseeable timeline for future growth. I use it seldomly just to compare with other valuation models. It's not to be solely relied on as far as NSE is concerned.

My dear it's ok if ur assertion was driven by the need to advise for CAUTION, but it is totally wrong to write-off that valuation method on the premise that it's mostly based on assumptions and estimates.
All valuation templates/model are also based on some degree of assumption, albeit at varying levels.

The valua u derive from using any valuation model is only but a forecast/estimate that u hope will eventually match ur EXPECTED RETURN over a specific timeframe.
But what u'd eventually get(reward in view), which is ur ACTUAL RETURN is a function of how RISK gravitates around ur INVESTED CAPITAL. ...that RISK will always be there because its a subset of every investment play, and NOT because u had used the best valuation model or a different one from the DCF.
Ur power/potential to reap REWARD lies NOT in any one valuation method, but in ur ability to manage that part about RISK that comes with using them.

If and when u apply the DCF method to the RIGHT asset segment and appropriately size RISK, it can also be one of the best.
Best in this case, isn't subjective, so no one valuation method can be said to be cast in stone.(definite)
The KEY is on how well u utilize it. ...then again, the "how well" part is a function of how u can effectively rejig and refine each valuation model to sync with ur investment personality and goals !!

...see my last post above.

If the Price of a stock goes down and you are a seller then you a loser... but when it falls and you a buying I.e you keep narrowing down then you're a Winner..

like let's make the floor of the exchange a better place for all... Right

onegentleguy:


My dear it's ok if ur assertion was driven by the need to advise for CAUTION, but it is totally wrong to write-off that valuation method on the premise that it's mostly based on assumptions and estimates.
All valuation templates/model are also based on some degree of assumption, albeit at varying levels.

The valuation u derive from using any valuation model is only but a forecast/estimate that u hope will eventually match ur EXPECTED RETURN over a specific timeframe.
But what u'd eventually get(reward in view), which is ur ACTUAL RETURN is a faction of how RISK gravitates around ur INVESTED CAPITAL. ...that RISK will always be there because its a subset of every investment play, and NOT because u had used the best valuation model or a different one from the DCF.
Ur power/potential to reap REWARD lies not in any one valuation method, but in ur ability to manage that part about RISK that comes from using them.

If and when u apply the DCF method to the RIGHT asset segment and appropriately size RISK, it can also be one of the best.
Best in this case, isn't subjective, so no one valuation method can be said to be cast in stone.(definite)
The KEY is on how well u utilize it. ...then again, the "how well" part is a function of how u can effectively rejig and refine each valuation model to sync with ur investment personality and goals !!

...see my last post above.

I never expressly wrote nor implied that it is a total write off. I mentioned that I use it to compare.
The issue with it is that it's not for every asset and more suitable for specific markets like you mentioned in bolded.
No one valuation model works in all cases. Don't get me wrong, I am still learning and will always be learning...

Mcy56:
@coolcash1 or anyone who dares to speak against Guinness when Peter is still inside the bus will have him to answer to.
Better relax and allow him join Wapco bus again.......before you can be on same page.

I know he is inside the bus so he got to shoot down any contrary opinion on it. But my advice is even to those following him blindly so that they don't get their hard-earned money burnt.....

chibjohn:

I never expressly wrote nor implied that it is a total write off. I mentioned that I use it to compare.
The issue with it is that it's not for every asset and more suitable for specific markets like you mentioned in bolded.
No one valuation model works in all cases. Don't get me wrong, I am still learning and will always be learning...

Not best suited for every asset? ...YES !!
But note the phrase; "best suited". ...meaning its ok, but there should be a more appropriate method of valuing the said asset.

Not suitable for specific markets? ...hell NO !!
Again NO valuation method/model fits it all.
The KEY is on how well u use them !! ...that's what counts for everything, as it is what determines the level of REWARD u can tap from utilizing them.

Btw, we are all learning. ...I am also a learner like u !!

Selah

onegentleguy:


Not best suited for every asset? ...YES !!
But note the phrase; "best suited". ...meaning its ok, but there should be a more appropriate method of valuing the said asset.

Not suitable for specific markets? ...hell NO !!
Again NO valuation method/model fits it all.
The KEY is on how well u use them !! ...that's what counts for everything, as it is what determines the level of REWARD u can tap from utilizing them.

Btw, we are all learning. ...I am also a learner like u !!

Selah

Thanks.
That's why we have you here...
You just refined my previous learning...

Is access a good buy at current price. Any price appreciation in the next 2months. Thanks

Mcy56:
Profit taking ongoing in Ucap......

Do we expect further upward movement after the profit taking?

ositadima1:


Very insightful !

Good if u can practically do them.
...but it'll even be much better if u can utilize the REVERSE DCF valuation method.
One of the advantage of this method is in its ability to eliminate some of the worries/reservation that folks like @chibjohn has with the normal DCF method.
The REVERSE DCF valuation method seeks to address and sought them out !!

A simple description of the REVERSE DCF method is that it is an investigative cash flow and growth tool.
For emphasis, while the DCF looks to find out the expectation of what the future growth rate of an asset holds, the REVERSE DCF investigates that EXPECTATION to see if its REALISTIC !!
Just like when u seek to investigate a coys earnings by doing some eps bootstrapping.

But u need to have a broad understanding of how the DCF works and how to rejig and refine it 1st.
...then u can remodel it with the REVERSE DCF to suite ur investment personality and goals !!

cc @ chibjohn