Case Study: Calculated Value for Wellcall (For Illustration Purpose Only)

A month ago, there was a reader asking me on how to utilize the my method on calculating the value of Mah Sing Group or Wellcall.

As my method of calculation involves in Cash Flow from Operation, after studying the cash flow statement of respective company, I realized the inconsistency of Mah Sing's cash flow from operation.  In particular, Mah Sing's recent financial statement shows negative cash flow which has make the calculation impossible.  Therefore, I decided to use Wellcall as an example.


From the research, I found Wellcall's cash flow from operation as follow:

2007 $11,299k
2008 $14,736k
2009 $27,828k
2010 $17,750k
2011 $11,299k

Based on the above, I found the average growth of Wellcall's cash flow from operation was about 11.68%.

To find the future value of Wellcall's cash flow from operation, I must find out the FV factor for Wellcall.  So, I use FV formula $11299k * (1+0.1168)^1 + $11299k * (1+0.1168)^2 + ... + $11299k * (1+0.1168)^10.

Subsequently, divide each future cash flow with corresponding rate of return.  For now, I am using BLR of 6.6%.  Therefore, the formula become ($11299k * (1+0.1168)^1) / (1+0.066)^1 + ($11299k * (1+0.1168)^2) / (1+0.066)^2 ... + ($11299k * (1+0.1168)^10) / (1+0.066)^10.

After the calculation, I got a figure of $147,238k.  This is the PV of Wellcall's future cash flow.  From Wellcall's EPS as well as Net Profit, I understand that its share outstanding was 131,998,277.  Therefore, by dividing $147,238k by 131,998,277 shares, I got RM1.12/share.  As of 27/8/2012, Wellcall is trading at RM2.58 level, so, you should able to make your own judgement based on the above calculation.

Do note that the calculation is purely based on assumption of growth and return.  Therefore, there is no absolute right or wrong answer.  Do use your own judgement intelligently. Furthermore, do note that the above illustration is for education purpose only and I do not recommend any buy, hold or sell of the counter.  Therefore, I disclaim for any liability should there is any.