Wednesday, March 5, 2014

CDW Holding

This is a post on the intrinsic value of CDW Holding Ltd.

Parameter 2013 2012 2011 2010 2009
Net Income 11,330 11,000 5,000 3,000 1,000
Depreciation 2,840 3,000 3,000 3,000 4,000
Changes in Working Capital -1,523 -2,000 -1,000 -5,000 7,000
Capital Expenditures -2,117 -2,000 -3,000 -1,000 -2,000
FCF 10,531 10,000 4,000 0 10,000
Total Current Liabilities 35,785 48,000 46,000 37,000 32,000
Total Equity 68,987 63,000 58,000 55,000 52,000
Total Liabilities 41,000 56,000 51,000 45,000 41,000
Common Shares Outstanding 469,859 477,942 499,150 503,534 503,534
Capital Employed 74,202 71,000 63,000 63,000 61,000


These above are the salient factors to do up my model for long term cash flow, book value and equity growth.

You will notice that equity growth rate is around 7.32% p.a, while outstanding shares are declining slightly at 1.72% p.a, leading to a book growth rate of 9.2% p.a

Equity Growth 7.32%
Shares Growth -1.72%
BV Growth 9.20%

Book Value 0.15 0.13 0.12 0.11 0.10
Using my normal simulation model, the range of intrinsic value provides us with a range of price for the share between 0.20-0.29, using a 10.76% discount rate for future cash flow.

At current dividend rates, it is a 10.28% yield, using annual divided of 1.2 US Cents and current share price of 14 Singapore Cents .

Yes, there is concentration risk of one customer, however, this stock to me screams value at current prices and I am likely to purchase a position in the next week or so.


2 comments:

  1. Hi,
    I am learning about DCF.
    Could you share how you arrive at a range of share between 0.2-0.29 and how you determine a discount rate of 10.76%?
    Thank you

    ReplyDelete
  2. Hi MetaModel,

    Essentially, I projected the DCF for a twenty year period and then discounted it back by 10.76%.

    10.76% is 4% risk free rate,4.76% is the 20 year bond rate and additional 2% is for small cap illiquidity

    Cheers

    ReplyDelete