Wai Kee Holdings Limited (0610.HK) – Valuation Study

Wai Kee Holdings Ltd. is an investment holding company, which engages in the construction and infrastructure business. It operates through the following segments: Construction; Construction Materials; Quarrying; and Property Development and Investment, Toll Road, Investment and Asset Management.

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It is worth noting that the Forward annual dividend yield of Wai Kee Holdings is 5.94%.

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Trailing PEG

  • Wai Kee Trailing PEG: 3.94/(22.77+5.81) = 0.13
  • P/E ratio is 3.94, 5 years EPS growth rate: 22.77, Dividend yield: 5.81

That is way below 1. A ratio below 1 suggests a good investment. (read here)

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Valuation Study

I will be using two methods to come up with the intrinsic values.

Method 1

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appcoiner

Method 2

First let’s look at the estimated 5 years earning growth which is 22.77%. Let’s assume a 20% discount, the figure will be 18.22%.

Given EPS and a PE ratio, stock price can easily be calculated for any company. Using the below formula.

F = P(1+R)N where:

  • F = the future EPS
  • P = the starting (present) EPS (1.151)
  • R = compound growth rate (18.22)
  • N = number of years in the future (5)

Estimated future EPS: HKD 2.66

I will be estimating the future PE of Wai Kee Holdings Limited to be 4.03 (See data from Morningstar below) Average of the PE from 2010 to 2017.

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Future Stock Price

P=EPSxPE

  • P = future stock price
  • EPS = future EPS
  • PE = future PE

Hence future stock price of Wai Kee Holdings Limited is 4.03  x 2.66 = HKD 10.72

Intrinsic Value

P=F/(1+R)N

  • P = present (intrinsic) value
  • F = future stock price (10.72)
  • R = MARR (15% or 0.15)
  • N = Number of years (5)

Hence, the intrinsic value of Wai Kee Holdings Limited is HKD 5.33.

 

In Summary

From method 1, the valuation is HKD 17.13, while from method 2, the intrinsic value is HKD 5.33. Stock price of Wai Kee Holdings Limited on 9 May 2018 is HKD 4.54.

There is margin of safety from both valuation methods.

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About apenquotes

Born in 1976. Married with 2 kids (a boy and a girl). A typical Singaporean living in a 4 room HDB flat. Check out my Facebook Page: https://www.facebook.com/apenquotes.tte.9?ref=bookmarks
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