A Look At The Intrinsic Value Of Focus Lumber Berhad (KLSE:FLBHD)

editorial-team@simplywallst.com (Simply Wall St)

Sat, May 10, 2025, 7:58 PM 4 min read

• Focus Lumber Berhad's estimated just worth is RM0.23 based connected Dividend Discount Model

• With RM0.24 stock price, Focus Lumber Berhad appears to beryllium trading adjacent to its estimated just value

• When compared to theindustry mean discount of -1,715%, Focus Lumber Berhad's competitors look to beryllium trading astatine a greater premium to just value

Today we'll bash a elemental tally done of a valuation method utilized to estimation the attractiveness of Focus Lumber Berhad (KLSE:FLBHD) arsenic an concern accidental by taking the forecast aboriginal currency flows of the institution and discounting them backmost to today's value. Our investigation volition employment the Discounted Cash Flow (DCF) model. Believe it oregon not, it's not excessively hard to follow, arsenic you'll spot from our example!

Remember though, that determination are galore ways to estimation a company's value, and a DCF is conscionable 1 method. If you inactive person immoderate burning questions astir this benignant of valuation, instrumentality a look astatine the Simply Wall St investigation model.

Our escaped banal study includes 3 informing signs investors should beryllium alert of earlier investing successful Focus Lumber Berhad. Read for escaped now.

We person to cipher the worth of Focus Lumber Berhad somewhat otherwise to different stocks due to the fact that it is simply a forestry company. Instead of utilizing escaped currency flows, which are hard to estimation and often not reported by analysts successful this industry, dividends per stock (DPS) payments are used. Unless a institution pays retired the bulk of its FCF arsenic a dividend, this method volition typically underestimate the worth of the stock. The 'Gordon Growth Model' is used, which simply assumes that dividend payments volition proceed to summation astatine a sustainable maturation complaint forever. The dividend is expected to turn astatine an yearly maturation complaint adjacent to the 5-year mean of the 10-year authorities enslaved output of 3.6%. We past discount this fig to today's worth astatine a outgo of equity of 12%. Compared to the existent stock terms of RM0.2, the institution appears astir just worth astatine the clip of writing. Remember though, that this is conscionable an approximate valuation, and similar immoderate analyzable look - garbage in, garbage out.

Value Per Share = Expected Dividend Per Share / (Discount Rate - Perpetual Growth Rate)

= RM0.02 / (12% – 3.6%)

= RM0.2

The calculation supra is precise babelike connected 2 assumptions. The archetypal is the discount complaint and the different is the currency flows. You don't person to hold with these inputs, I urge redoing the calculations yourself and playing with them. The DCF besides does not see the imaginable cyclicality of an industry, oregon a company's aboriginal superior requirements, truthful it does not springiness a afloat representation of a company's imaginable performance. Given that we are looking astatine Focus Lumber Berhad arsenic imaginable shareholders, the outgo of equity is utilized arsenic the discount rate, alternatively than the outgo of superior (or weighted mean outgo of capital, WACC) which accounts for debt. In this calculation we've utilized 12%, which is based connected a levered beta of 1.499. Beta is simply a measurement of a stock's volatility, compared to the marketplace arsenic a whole. We get our beta from the manufacture mean beta of globally comparable companies, with an imposed bounds betwixt 0.8 and 2.0, which is simply a tenable scope for a unchangeable business.