Extra income for Q1 FY2019 compared to Q1 FY2018 from KP MUKAH acquisition RM 2,693,000.

00

2018 (Current) 2019 (Year 1) 2020 (Year 2) 2021 (Year 3)

Net income RM 7,636,111.00 RM 18,408,111.00 RM 18,408,111.00 RM 18,408,111.00
FCFE RM 139,450,427.00 RM 150,222,427.00 RM 150,222,427.00 RM 150,222,427.00

Terminal value = After tax operating income in year 3 (1 Reinvestment rate) / ( Cost of equity - Expected growth rate )

After tax operating income in year 3 RM 18,408,111.00

1- Reinvestment rate 53.04%
Cost of equity, assuming beta is 1 as firm stabilise 0.1140
Expected growth rate, assuming firm growth is 1% as firm stabilise 1%
Terminal value RM 93,881,366.10
Cost of equity 9.72%
DCF value RM 482,997,847.27
Shares outstanding 470,913,442
Estimated GFM value RM 1.03

Note:
 2022 (Year 4) 2023 (Year 5) 2024 (Year 6)
RM 18,408,111.00 RM 18,408,111.00 RM 18,408,111.00
RM 150,222,427.00 RM 150,222,427.00 RM 150,222,427.00

ed growth rate )
Inputs to Intrinsic valuation
1) cash flows from existing assets
2) expected growth in these cash flows for a forecast period
3) Cost of financing the assets (Risk)
4) An estimate of what the firm will be worth at the end of forecast period

1) Cash flows from existing assets (potential dividend)

FCFE = net income - ( CapEx + depreciation ) - CNINCWC - ( Principal repaid - new debt issued )

GFM
net income RM 7,636,111.00
Capex RM 1,222,081.00
Depreciation RM 638,982.00
CINCWC RM (8,429,505.00)
Principal repaid RM (6,316,495.00)
New debt issued RM 144,699,253.00
Potential dividend RM 139,450,427.00

FCFE RM 139,450,427.00

2) Expected growth in these cash flows for a forecast period

Two methods

1- Efficiency growth
2- New investment growth

New investment growth

Growth in earnings = Retention ratio * Return on equity (ROE)

Net income RM 7,636,111.00

Dividends paid RM 4,050,037.00
Retention ratio RM 0.47

Total Equity RM 87,913,309.00

ROE 8.69%
Growth in earning 4.08%

3) Cost of financing the assets (Risk)

Three inputs needed to estimate a cost of equity
1) Risk free rate
2) Equity risk premium (ERP)
3) Relative risk or beta

Sources for (1) and (2) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=335

Sources for (3) See Sheet 2

Risk free rate 7.10%

Equity risk premium (ERP) 4.30%
Relative risk or beta 0.61

Cost of equity = Risk-free rate + Beta * ERP 9.72%

Expected Free Cash Flow to Equity for GFM

2018 (Current) 2019 (Year 1)

Net income RM 7,636,111.00 RM 7,947,664.33
FCFE RM 139,450,427.00 RM 145,140,004.42

4) An estimate of what the firm will be worth at the end of forecast period
Two ways:
1) Estimate a liquidation value for the assets of the firm, assuming that the assets are sold in the terminal year.
2) Estimate a going concern value , assuming that the firm's operation continue.

Use 2nd way, by using perpetuan growth model

Reinvestment rate = expected growth rate in net income / ROE

Terminal value = After tax operating income in year 6 (1 Reinvestment rate) / ( Cost of equity - Expected growth rate )

After tax operating income in year 6

1- Reinvestment rate
Cost of equity, assuming beta is 1 as firm stabilise
Expected growth rate, assuming firm growth is 3% as firm stabilise

Terminal value RM 61,289,122.87

DCF Model RM 834,234,835.39

Shares outstanding 470,913,442
Value RM 1.77

Another calculation… assuming year 1 has 4.08% growth rate, then going 1% afterwards.
2018 (Current) 2019 (Year 1)
Net income RM 7,636,111.00 RM 7,947,664.33
FCFF RM 139,450,427.00 RM 145,140,004.42
Error DCF

Terminal value in year 2 = Cash flow in year ( 2 + 1 ) / ( Discount rate - Perpetual growth rate)

Cash flow in year (2+1) RM 157,225,034.64

Discount rate 9.72%
Perpetual growth rate 4.08%
Terminal value in year 2 RM 2,785,752,843.79

DCF Model RM 296,253,503,221.08

Shares outstanding 470,913,442
Value 629.1039431002
w debt issued )
pers.ssrn.com/sol3/papers.cfm?abstract_id=3358901

2020 (Year 2) 2021 (Year 3) 2022 (Year 4) 2023 (Year 5)

RM 8,271,929.03 RM 8,609,423.74 RM 8,960,688.23 RM 9,326,284.31
RM 151,061,716.60 RM 157,225,034.64 RM 163,639,816.05 RM 170,316,320.55

ets are sold in the terminal year.

46.96%

Cost of equity - Expected growth rate )

RM 9,706,796.71
53.04%
 0.1140
3%

2020 (Year 2) 2021 (Year 3) 2022 (Year 4) 2023 (Year 5)

RM 8,186,094.26 RM 8,431,677.09 RM 8,684,627.40 RM 8,945,166.22
RM 151,061,716.60 RM 157,225,034.64 RM 163,639,816.05 RM 170,316,320.55
l growth rate)

Cash flow in year (5+1) RM 177,265,226.43

Discount rate 9.72%
Perpetual growth rate 4.08%
Terminal value in year 5 RM 3,140,830,019.55

DCF Model RM 3,743,434,131.65

Shares outstanding 470,913,442
Value 7.9493040499
 Change in non-cash working capital (CINCWC)

2018 2017
Trade and other receivables 22,482,668 26,232,806
Tax assets 2,980,326 2,678,433

Trade and other payables 20,731,477 15,189,043

Tax liabilities 85,848 647,022

Non-cash Working Capital 4,645,669 13,075,174

2018 2017
Drawdown of term loans 1,246,579 0
Drawdown of medium-term notes 148,701,500 0
(Repayment)/Drawdown of finance lease liabilities -1,519,983 194,408
Repayment of term loans -4,796,512 -7,900,450

Issuance (Retirement) of Debt, Net 143,631,584 -7706042

 2024 (Year 6)
RM 9,706,796.71
RM 177,265,226.43
 2024 (Year 6)
RM 9,213,521.21
RM 177,265,226.43
ital (CINCWC)

Change
-3,750,138
301,893

5,542,434
-561,174

-8,429,505
 GFM FTFBMSCAP
Price Open High Low Vol. Change % Date Price Open High
0.425 0.44 0.44 0.42 9.93M -3.41% Jul 14, 2019 13,641.02 13,740.23 13,808.89
0.44 0.455 0.46 0.435 13.56M -2.22% Jul 07, 2019 13,702.77 13,488.35 13,790.70
0.45 0.44 0.51 0.44 51.03M 3.45% Jun 30, 2019 13,460.79 13,086.80 13,509.60
0.435 0.445 0.455 0.43 7.12M -1.14% Jun 23, 2019 12,996.06 12,960.50 12,996.06
0.44 0.435 0.465 0.435 7.90M 1.15% Jun 16, 2019 12,930.25 12,860.65 12,951.50
0.435 0.44 0.465 0.435 7.52M 0.00% Jun 09, 2019 12,846.05 12,637.63 12,965.82
0.435 0.445 0.445 0.43 1.11M -1.14% Jun 02, 2019 12,592.82 12,504.97 12,593.57
0.44 0.46 0.46 0.425 4.47M -3.30% May 26, 2019 12,546.52 12,423.42 12,609.47
0.455 0.435 0.465 0.435 3.70M 4.60% May 19, 2019 12,403.58 12,847.44 12,847.44
0.435 0.46 0.46 0.415 4.98M -4.40% May 12, 2019 12,878.26 13,086.13 13,091.64
0.455 0.475 0.475 0.45 5.65M -5.21% May 05, 2019 13,088.56 13,379.96 13,379.96
0.48 0.49 0.49 0.445 14.33M -1.03% Apr 28, 2019 13,502.93 13,771.20 13,771.20
0.485 0.51 0.535 0.48 23.62M -5.83% Apr 21, 2019 13,745.69 13,338.99 13,836.62
0.515 0.55 0.56 0.485 13.96M -6.36% Apr 14, 2019 13,243.08 13,401.99 13,424.16
0.55 0.525 0.565 0.52 44.78M 4.76% Apr 07, 2019 13,365.62 13,178.00 13,534.27
0.525 0.505 0.53 0.49 9.86M 5.00% Mar 31, 2019 13,123.83 12,760.23 13,130.85
0.5 0.49 0.51 0.475 7.30M 1.01% Mar 24, 2019 12,711.30 12,685.12 12,733.78
0.495 0.53 0.535 0.485 15.65M -6.60% Mar 17, 2019 12,805.82 13,134.39 13,152.03
0.53 0.49 0.54 0.48 25.91M 7.07% Mar 10, 2019 13,102.14 12,954.03 13,102.14
0.495 0.505 0.51 0.48 7.92M -1.98% Mar 03, 2019 12,914.13 12,648.71 12,932.66
0.505 0.53 0.55 0.455 22.76M -3.81% Feb 24, 2019 12,638.02 13,084.16 13,102.05
0.525 0.515 0.535 0.51 14.43M 1.94% Feb 17, 2019 13,015.47 12,713.09 13,123.04
0.515 0.465 0.52 0.46 17.72M 10.75% Feb 10, 2019 12,670.18 12,389.13 12,747.72
0.465 0.435 0.485 0.435 2.83M 5.68% Feb 03, 2019 12,352.35 12,129.56 12,352.35
0.44 0.455 0.46 0.435 533.70K -2.22% Jan 27, 2019 12,108.48 12,277.45 12,283.28
0.45 0.45 0.45 0.425 842.60K 1.12% Jan 20, 2019 12,248.81 12,295.07 12,296.49
0.445 0.455 0.469 0.44 3.42M -2.20% Jan 13, 2019 12,254.46 12,130.83 12,292.97
0.455 0.428 0.465 0.428 5.08M 9.90% Jan 06, 2019 12,104.83 11,452.69 12,108.84
0.414 0.4 0.414 0.386 1.28M 1.22% Dec 30, 2018 11,333.73 11,286.77 11,409.65
0.409 0.409 0.414 0.391 1.22M 0.00% Dec 23, 2018 11,280.78 11,110.05 11,287.77
0.409 0.391 0.409 0.373 1.63M 2.25% Dec 16, 2018 11,130.64 11,525.33 11,525.33
0.4 0.4 0.409 0.391 1.19M -8.05% Dec 09, 2018 11,556.75 12,009.38 12,009.38
0.435 0.47 0.485 0.435 4.13M -6.45% Dec 02, 2018 12,023.53 12,231.68 12,407.34
0.465 0.51 0.53 0.46 17.41M -8.82% Nov 25, 2018 12,161.37 12,777.49 12,800.62
0.51 0.46 0.52 0.46 8.40M 10.87% Nov 18, 2018 12,802.79 13,114.47 13,130.88
0.46 0.425 0.46 0.415 3.75M 8.24% Nov 11, 2018 13,103.81 13,028.98 13,108.93
0.425 0.44 0.44 0.42 3.89M -4.49% Nov 04, 2018 13,034.59 13,109.51 13,203.46
0.445 0.455 0.47 0.41 6.17M -3.26% Oct 28, 2018 13,101.69 12,568.23 13,116.35
0.46 0.425 0.48 0.42 4.75M 4.55% Oct 21, 2018 12,538.99 13,387.66 13,387.66
0.44 0.42 0.46 0.41 1.47M 4.76% Oct 14, 2018 13,384.24 13,450.45 13,610.92
0.42 0.445 0.445 0.365 2.88M -7.69% Oct 07, 2018 13,427.66 14,161.56 14,161.56
0.455 0.47 0.48 0.45 2.30M -4.21% Sep 30, 2018 14,195.06 14,405.81 14,553.45
0.475 0.485 0.49 0.455 2.16M -2.06% Sep 23, 2018 14,366.90 14,228.09 14,424.76
0.485 0.475 0.495 0.475 2.01M 1.04% Sep 16, 2018 14,195.84 14,015.56 14,221.48
0.48 0.475 0.485 0.465 1.60M 0.00% Sep 09, 2018 14,030.31 14,091.66 14,101.30
0.48 0.5 0.5 0.475 2.89M -4.95% Sep 02, 2018 14,084.16 14,392.52 14,463.90
0.505 0.505 0.515 0.495 2.00M 0.00% Aug 26, 2018 14,453.18 14,881.77 14,899.95
0.505 0.51 0.53 0.505 2.86M 0.00% Aug 19, 2018 14,857.47 15,128.65 15,132.51
0.505 0.515 0.52 0.5 3.81M -2.88% Aug 12, 2018 15,097.25 15,076.31 15,194.90
0.52 0.54 0.54 0.5 12.39M -4.59% Aug 05, 2018 15,096.59 14,761.97 15,128.07
0.545 0.535 0.59 0.53 11.36M 1.87% Jul 29, 2018 14,742.20 14,865.44 14,880.63
0.535 0.535 0.55 0.535 4.18M -2.73% Jul 22, 2018 14,870.64 14,548.11 15,029.42
Low Vol. Change % Beta
13,518.50 - -0.45% 0.61
13,348.19 - 1.80% ###
13,086.80 - 3.58% 0.608754
12,838.76 - 0.51%
12,667.84 - 0.66%
12,637.63 - 2.01%
12,400.48 - 0.37%
12,319.91 - 1.15%
12,349.63 - -3.69%
12,476.47 - -1.61%
13,041.08 - -3.07%
13,429.86 - -1.77%
13,338.99 - 3.80%
12,987.86 - -0.92%
13,164.91 - 1.84%
12,739.53 - 3.25%
12,614.28 - -0.74%
12,755.73 - -2.26%
12,775.93 - 1.46%
12,639.21 - 2.18%
12,422.55 - -2.90%
12,690.25 - 2.73%
12,373.01 - 2.57%
12,111.20 - 2.01%
12,016.64 - -1.15%
12,012.18 - -0.05%
11,930.59 - 1.24%
11,452.69 - 6.80%
11,109.65 - 0.47%
11,056.48 - 1.35%
10,910.52 - -3.69%
11,526.33 - -3.88%
11,995.81 - -1.13%
12,147.50 - -5.01%
12,777.07 - -2.30%
12,813.21 - 0.53%
12,964.68 - -0.51%
12,243.75 - 4.49%
12,430.05 - -6.32%
13,285.44 - -0.32%
13,058.63 - -5.41%
14,141.60 - -1.20%
14,138.90 - 1.21%
13,940.85 - 1.18%
13,726.91 - -0.38%
14,037.87 - -2.55%
14,427.84 - -2.72%
14,819.42 - -1.59%
14,924.32 - 0.00%
14,721.50 - 2.40%
14,643.12 - -0.86%
14,548.11 - 2.14%
 CAPM: return = risk free rate + Beta
Cost of equity = Risk-free rate + Beta * ERP

Risk free rate 3.80%

Equity risk premium 0.03
Beta 0.61
CAPM 5.813%

Cost of equity= 5.813

######

FCFE = Net income - Net capital expenditure - Net change in working capital + new debt issued

Net income 7636111

Net capital expenditure -1222081
Net change in non-cash working capital 8858192
New debt issued 143631584

Depreciation 638982
Accounts Receivable 9694070
Accounts Payable 3053879
Net change in non-cash working capital 6640191

Capital expenditure
Depreciation
Net capital expenditure

Table 10.9: Working Capital versus Non-cash Working Capital: Marks and Spencer

1999 2000
Cash & Near Cash 282 301
Marketable Securities 204 386
Trade Debtors (Accounts Receivable) 1980 2186
Stocks (Inventory) 515 475
Other Current Assets 271 281
Total Current Assets 3252 3629
Non-Cash Current Assets 2766 2942

Trade Creditors (Accounts Payable) 215 219

Short Term Debt 913 1169
Other Short Term Liabilities 903 774
Total Current Liabilities 2031 2162
Non-debt current liabilities 1118 993

Working Capital 1221 1467

Non-cash Working Capital 1648 1949

2007 2006
Accounts receivable — net of allowances of $75 and $71 3,362 3,102
Total inventories 2,852 2,601
Other current assets 1,149 1,325
Non-cash current assets 7,363 7,028

Accounts payable 1,505 1,402

Other current liabilities 1,833 1,761
Non-debt current liabilities 3,338 3,163

Non-cash working capital 4,025 3,865

Change in non-cash working capital 160
nd Spencer
335

103
72
175

160