What will be the intrinsic value for APOLLO based on the Benjamin Graham's Growth Valuation?
To answer this question, we have to understand what is the component on Benjamin Graham's Growth Valuation and determine the value for each component
(1) Normalized EPS
Based on Jae Jun's writeup, we shouldn't take the EPS based on single 12 month period. It have to be adjusted to a normalized number by ignoring one time hugre or depressed earnings based on 5 year or 10 year history.
Above figure show that APOLLO's EPS was in uptrend mode and it have been growth at 10Yr CAGR of 7.89%. I am not intend to use the average EPS from pass 5 or 10 years as normalized EPS as it is a little too conservative for a growth company like APOLLO.
Thus, I decided to use the average of T4Q , FY2013 and FY 2012 EPS . Based on this assumption, 0.334 have been selected as the Normalized EPS.
(2) EPS Growth Rate
Based on Jae Jun's writeup, we could just use the analyst 5yr predictions or, a regression of the historical EPS to project the following year growth rate.
APOLLO's EPS have been growth at 10Yr CAGR of 7.89%, with a 5 year / 10 Year Multi-Year Growth Rate of 1.30% and 6.41% respectively. I am using the average of these 3 figures as my EPS growth rate, i.e. 5.20%
(3) Growth Multiplier
The “2 x G” is quite aggressive as Graham never experienced companies with growth rates of 20-30% which is common today (There was no Amazon or Facebook in Graham's time). So I tend to agree to Jae Jun's writeup, and reduced the multiplier to 1.5 instead of 2.
(4) No Growth P/E
I am using a no growth P/E of 8 (EY of 12.5%) instead of 8.5.
(5) 20 Years Grade A Bond Rate
Based on Yahoo Finance, the 20 Years Grade A Bond Rate should be 4.39%
From the (1) - (5), the intrinsic value of APOLLO can be derrived based on formula:-
V = 0.334 x (8 + 1.5g) X 4.4 / 4.39%, and I am using the BGG's worksheet on Financial Statement Analysis Template to perform the calculation.
From the calculation result, APOLLO's intrinsic value is 5.291. If compare to its share price of 4.980, it provide a 5.88% of MOS and 6.25% of Up Side.
References:-
To answer this question, we have to understand what is the component on Benjamin Graham's Growth Valuation and determine the value for each component
(1) Normalized EPS
Based on Jae Jun's writeup, we shouldn't take the EPS based on single 12 month period. It have to be adjusted to a normalized number by ignoring one time hugre or depressed earnings based on 5 year or 10 year history.
Above figure show that APOLLO's EPS was in uptrend mode and it have been growth at 10Yr CAGR of 7.89%. I am not intend to use the average EPS from pass 5 or 10 years as normalized EPS as it is a little too conservative for a growth company like APOLLO.
Thus, I decided to use the average of T4Q , FY2013 and FY 2012 EPS . Based on this assumption, 0.334 have been selected as the Normalized EPS.
(2) EPS Growth Rate
Based on Jae Jun's writeup, we could just use the analyst 5yr predictions or, a regression of the historical EPS to project the following year growth rate.
APOLLO's EPS have been growth at 10Yr CAGR of 7.89%, with a 5 year / 10 Year Multi-Year Growth Rate of 1.30% and 6.41% respectively. I am using the average of these 3 figures as my EPS growth rate, i.e. 5.20%
(3) Growth Multiplier
The “2 x G” is quite aggressive as Graham never experienced companies with growth rates of 20-30% which is common today (There was no Amazon or Facebook in Graham's time). So I tend to agree to Jae Jun's writeup, and reduced the multiplier to 1.5 instead of 2.
(4) No Growth P/E
I am using a no growth P/E of 8 (EY of 12.5%) instead of 8.5.
(5) 20 Years Grade A Bond Rate
Based on Yahoo Finance, the 20 Years Grade A Bond Rate should be 4.39%
From the (1) - (5), the intrinsic value of APOLLO can be derrived based on formula:-
V = 0.334 x (8 + 1.5g) X 4.4 / 4.39%, and I am using the BGG's worksheet on Financial Statement Analysis Template to perform the calculation.
From the calculation result, APOLLO's intrinsic value is 5.291. If compare to its share price of 4.980, it provide a 5.88% of MOS and 6.25% of Up Side.
References:-
- Benjamin Graham's Growth Valuation Formula
- Benjamin Graham's Growth Valuation on Financial Statement Analysis Template (v1.60)
- APOLLO (6432) Quarterly Result
- APOLLO (6432) Annual Result
Monday, 7 July 2014
Benjamin Graham's Growth Valuation on Financial Statement Analysis Template (v1.60)
As usual, the "V-BGG" will be auto pick all the required data after you filled in the purple colour input worksheet as per specified in Financial Statement Analysis Template.
First
and foremost, you will need to review the data setup sections, and then
the worksheet will calculate intrinsic value based on different version
of the benjamin graham's growth valuation:-
- The original version
- Required Rate of Return version
- Jae Jun's modificatiokn
- Self Defined Version
Do review the Calculation Detail section in order to check out the how the excel calculate the intrinsic value. You can override the default value in the grey color cell.
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