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Some Corrections to ComfortDelgro Valuation Done Previously

Back when ComfortDelgro’s share price was around $2.04, I wrote a comprehensive analysis about it.

In the article, I went through a few rounds of discounted cash flow to see at current earnings, cash flow scenario, what is the estimated intrinsic value given the growth rate and the discount rate.

I also did  a reverse discounted cash flow on it.

I think not many people delve deep into the figures except for probably a few.

Rusmin from Fifth Person was the rare few that gives me a conservative value, and I was thinking why is it so low. Another Journalist came up with a figure closer to Rusmin (or the other way round)

It needs a friend who dives deeper to be able to tell me that somehow my calculator seems to be wrong.

And it is indeed wrong.

This is what you get when you try to do DCF at 4 am in the morning.

So here are the recomputed figures.

The first DCF takes into consideration my estimated growth (or negative growth) due to how competition will render their Singapore Taxi division.

The discount rate is a conservative 10%. The terminal growth rate is 0%. We arrive at a valuation of $1.245. This is some $0.20 below the original incorrect figure.

If we embed a 3% growth rate for 18 years, with terminal growth rate to be 0%, we get $1.615. This is also lesser than the previous.

The last table shows the reverse DCF, where we try to see what is the discounted rate, based on the -17% growth and subsequent 0% growth. We get 6.05% instead of 7.5%.

Given the current share price of $1.91, the discounted rate we get from reverse DCF is 6.50%.

So what I said about CDG being fair valued around $2.00, that probably takes some beating. It looks slightly expensive at $2.00.

Certainly, if we see a reverse DCF discount rate of 6.05%, it is not VERY attractive. It could be a good investment if the moat is alive and this business can go on for a prolong period.

Never trust a financial bloggers figures fully. Especially if they did not sleep enough.

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23 likes 12 comments

Tks Kyith...FA investors better run first.. TA investors short...


Thanks Kyith for the sharing! I agree more with your this newest sharing. I think CDG will probably grow with single digit growth rate in view of competition not only with it's local taxi business but also it's overseas transport businesses may face competition as well as pricing pressure. I have noticed that for the past decade, it has given only a single digit CAGR for various financial metrics such as revenues, operating income, operating cash flows etc.

Unless there are any future major positive changes in it's various businesses in order to improve it's competitive moats significantly, or else I think it will just cruise along with single digit growth rates at best. If that is the case, then the estimated intrinsic value per share could be as what you shared in this newest sharing of between $1.30 to $1.60 range taking into account the figures you posted here. Maybe so?


Reply to @jeremyowtaip : with the now disruptive nature. CDG doesn't have the moat which they once have. which raise the qn of is CDG still a buy like it used to.

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I see that u are vested in CDG at 2.08
What do you plan to do with this position?


Reply to @Hachiko : most likely sell it


There is a certain risk to equity return. if you do not use a approrpriate hurdle, every stock will look attractively valued. The rule of thumb is, if the business is normal use 10%. if the business have a strong moat 8%. if the business is more risky 12%.


Good analysis must support


I think the discount % can use 4.5-5% which is slightly more than the CPf interest of 4%. I think ComfortDelgro fair value is about 2.06-2.20


Reply to @Sporeshare : Cpf is considered risk free. 4.5-5% is not sufficient risk premium above a risk free rate.. even in “safe” singapore, anything with less than 8% IRR is not really cheap.


Thank you for being so responsible.

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