This is from the Annual Report of Century Textiles and Indus A CASH FLOW FROM OPERATING ACTIVITIES: Profit For The Year Before Taxation : Add / (Less) : Depreciation and Amortization (Surplus) / Loss on sale / discardment of Fixed Assets Interest and Finance charges (Net) Dividend on Investments Proportionate amounts written off against Miscellaneous Prior Period Adjustments (Net) Operating Profit Before Working Capital Changes Adjustments for : Trade and other receivables Inventories Trade Payables Cash Generated From Operations Add / (Less) : Voluntary Retirement Compensation Direct Taxes Paid Net Cash Generated From Operating Activities B CASH FLOW FROM INVESTING ACTIVITIES : Purchase of Fixed Assets (Includes Borrowing Costs Capi Sale of Fixed Assets Interest Received Dividend on Investments Long term Investments Acquired Current Investments Acquired Current Investments Sold Net Cash Used in Investing Activities C CASH FLOW FROM FINANCING ACTIVITIES : Working Capital and Short Term Borrowings Repayment of Other Borrowings Other Loans taken Interest and Finance Charges paid Dividend Paid Tax on Dividend Net Cash Generated From Financing Activities
Transcript
This is from the Annual Report of Century Textiles and Industries Limited for the year 2008-09
Rs. In Crores2008-09
A CASH FLOW FROM OPERATING ACTIVITIES:
Profit For The Year Before Taxation : 346.95 Add / (Less) : Depreciation and Amortization 206.42 (Surplus) / Loss on sale / discardment of Fixed Assets (Net) -54.09 Interest and Finance charges (Net) 97.2 Dividend on Investments -2.74 Proportionate amounts written off against Miscellaneous Expenditure 99.99 Prior Period Adjustments (Net) -0.71
Operating Profit Before Working Capital Changes 693.02 Adjustments for : Trade and other receivables -4.76 Inventories -57.69 Trade Payables 107.55
Cash Generated From Operations 738.12 Add / (Less) : Voluntary Retirement Compensation -16 Direct Taxes Paid -48.32
Net Cash Generated From Operating Activities 673.8
B CASH FLOW FROM INVESTING ACTIVITIES :
Purchase of Fixed Assets (Includes Borrowing Costs Capitalized) -892.33 Sale of Fixed Assets 72.37 Interest Received 6.59 Dividend on Investments 2.74 Long term Investments Acquired -18.84 Current Investments Acquired -798.67 Current Investments Sold 798.67
Net Cash Used in Investing Activities -829.47
C CASH FLOW FROM FINANCING ACTIVITIES :
Working Capital and Short Term Borrowings -37.93 Repayment of Other Borrowings -368.64 Other Loans taken 748.08 Interest and Finance Charges paid -117.89 Dividend Paid -41.78 Tax on Dividend -7.12
Net Cash Generated From Financing Activities 174.72
NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS 19.05
Cash and Cash equivalents - Opening balance 46.64
Cash and Cash equivalents - Closing balance 65.69
CALCULATION OF FCFF FOR THE CURRENT YEAR FROM THE ABOVE
Net cash generated from Operating activitiesAdd / Less Net cash used in Investing activities
Free Cash Flow to Firm
CALCULATION OF FCFE FOR THE CURRENT YEAR FROM THE ABOVE
Net cash generated from Operating activitiesAdd / Less Net cash used in Investing activitiesAdd / Less Net Cash generated / used from / in Financing activities :
Net debt borrowed Interest and finance charges paid Net Preference shares issued Prefrence dividend paid including tax on dividend Equity shares issued (Equity dividend paid is delebrately not included)
Free Cash Flow to Equity holders
This is from the Annual Report of Century Textiles and Industries Limited for the year 2008-09
Rs. In Crores2007-08
397.73
170.162.88
89.18-8.192.6-0.5
743.95
-30.91-138.51175.08
749.61
-54.35-110.1
585.16
-694.352.373.89
8.1-11.76
-1531.061531.06
-691.75
CASH FLOW FROM FINANCING ACTIVITIES :
17.94 Net debt borrowed-576.49 Preference shares issued674.95 Interest and Finance charges paid
-100.56 Preference dividend paid including tax on dividend0 Equity shares issued0 Equity dividend paid including tax on dividend
15.84
-90.75
137.39
46.64
Valuation of Equity shares using FCFF
Present Value of FCFF including the PV of Terminal ValueAdd: Opening Cash and Cash equivalentsLess : Preference shares outstanding including the preference dividend payable to themLess : Debt outstanding including interest charges payable to themValue of Equity Number of Equity sharesIntrinsic value of equity per share is : Value of Equity / Number of Equity shares
Less : Preference shares outstanding including the preference dividend payable to them
Intrinsic value of equity per share is : Value of Equity / Number of Equity shares
Add DepreciationAdd Other Non Cash ChargesLess Increase / Decrease in WC AddLess Capex Add
Free Cash Flow to the Firm LessLessLess+/-
Discounted Free flow for the Operating periodTerminal Value DiscountedFirm Value
Less Total Debt & Pref CapitalAdd Transferable Liquid Investments Add
Total Equity Value of the CompanyNumber of Shares in issueIntrinsic Value of per shareCurrent Market Value per share
Weighted Average Cost of Capital
WACCCost of EquityRf + B (Rm - Rf)Rf BetaRmCost of Equity
Cost of Debt (pre-tax)Cost of Debt (post-tax)
WACC
Terminal Value (Value driver formula)Terminal Growth Rate (%)Terminal Value Discounted
DCF VALUATION
FCFE
Revenue 1Operating Margin (%) 2Operating Profit 3Depreciation 4EBIT 5Interest Charges paid 6EBT 7Effective Tax Rate (%) 8EAT 9Depreciation 10Other Non Cash Charges 11Increase / Decrease in WC 12Capex 13Pref Dividends Paid 14Net change in Debt 15Free Cash Flow to the Equity shareholders 16
1718
Discounted Free flow for the Operating period 19Terminal Value Discounted 20Equity Value 21
Transferable Liquid InvestmentsTotal Equity Value of the CompanyNumber of Shares in issueIntrinsic Value of per shareCurrent Market Value per share
Cost of EquityRf + B (Rm - Rf)Rf BetaRmCost of Equity
Terminal Value (Value driver formula)Terminal Growth Rate (%)Terminal Value Discounted
GIVEN
Opening Revenue (Rs) 10000Revenue growth per year 25%Operating Margin 15%Depreciation (Rs) 700 per yearEffective Tax Rate 30%Other non-cash charges (Rs) 500 per yearInc / Dec in Working Capital (Rs) 300 per yearCapex 2000 in the third yearPref Div paid per year 1000 per yearDebt raised during the year 700 at the beginning of the 4th yearCost of Debt 14%Risk Free rate of Interest 6%Market Return 16%Beta of the Stock 1.15Terminal Growth Rate 2.50%Debt outstanding 2000Encashable liquid investments 100Total equity shares issued by the company 7500Number of shares in issue 750Current Market Price Cash flow projection period 5 years
A SIMPLE DISCOUNTED CASH FLOW (DCF) MODEL FOR VALUING A SHARE FCFF
Revenue Growth Rate 25%Terminal Growth Rate 2.50%Operating Margin 15%Tax Rate 30%Capex Growth as % of incremental revenue 5%Inc WC as % of incremental revenues 2%Cost of Debt 12%Cost of Equity using CAPM 16.80%Debt Equity Ratio Weighted Avg Cost of Capital 16.27%Equity 7500 RsNo.of Shares at Rs.10 Face Vale per Share 750Total Capital 100 Rs
FCFF Year 0 Year 1
Revenues 10000.00 17000.00Operating Margin 0.15 0.15EBIT 1500.00 2550.00Taxes 450.00 765.00EBIT(1-t) 1050.00 1785.00 + Depreciation+Other non cash cha 1200.00 1200.00 - Capital Expenditures 0.00 0.00 - Chg WC 300.00 300.00Free Cash Flow to the Firm (FCFF) 1950.00 2685.00
Present Value of FCFF 2309.28
The ValuationPV of FCFF during growth phase = 13232.67PV of Terminal Value = 23914.76Value of Operating Assets of the fir 37147.43Value of Cash & Non-operating asset 100Value of Firm = 37247.43 - Value of Outstanding Debt = 2000Value of Equity = 35247.43
Value of Equity per share = 47.00
A SIMPLE DISCOUNTED CASH FLOW (DCF) MODEL FOR VALUING A SHARE FCFF
Risk Free Rate of Return 6.00%Market Return 15%Beta of the Stock 1.2
3934.50 2693.13 5641.41 6826.76 50816.46 Free Cash Flow to the Equity Shareholders (FCFE)
2910.41 1713.38 3086.86 3212.74 23914.76 PV of FCFE
PV of FCFE during growth phasePV of Terminal ValueValue of Operating Assets of the firmValue of Cash & Non-operating assetsValue of EquityValue of Equity per share
Earnings after Tax+Depreciation-Capital Expenditures
+Net Debt IssuedFree Cash Flow to the Equity Shareholders (FCFE)
PV of FCFE
PV of FCFE during growth phasePV of Terminal ValueValue of Operating Assets of the firmValue of Cash & Non-operating assetsValue of EquityValue of Equity per share
date : 8-Apr-23 basis : 0 freq : 2security maturity coupon price ytm curr. Yld Mod Dur Duration
7.55% goi 2010 #VALUE! 7.55% 98.65 ### 7.65% #VALUE! #VALUE!9.39% goi 2011 #VALUE! 9.39% 107.43 ### 8.74% #VALUE! #VALUE!7.40% goi 2012 3-May-12 7.40% 97.05 Err:502 7.62% Err:502 Err:5027.27% goi 2013 #VALUE! 7.27% 95.80 ### 7.59% #VALUE! #VALUE!7.37% goi 2014 #VALUE! 7.37% 95.72 ### 7.70% #VALUE! #VALUE!7.59% goi 2016 #VALUE! 7.59% 96.31 ### 7.88% #VALUE! #VALUE!8.07% goi 2017 #VALUE! 8.07% 99.64 ### 8.10% #VALUE! #VALUE!7.49% goi 2017 #VALUE! 7.49% 95.26 ### 7.86% #VALUE! #VALUE!6.25% goi 2018 #VALUE! 6.25% 85.40 ### 7.32% #VALUE! #VALUE!6.05% goi 2019 #VALUE! 6.05% 82.20 ### 7.36% #VALUE! #VALUE!6.35% goi 2020 #VALUE! 6.35% 84.20 ### 7.54% #VALUE! #VALUE!7.94% goi 2021 #VALUE! 7.94% 115.35 ### 6.88% #VALUE! #VALUE!10.25% goi 2021 #VALUE! 10.25% 115.35 ### 8.89% #VALUE! #VALUE!10.18% goi 2026 #VALUE! 10.18% 116.50 ### 8.74% #VALUE! #VALUE!7.95% goi 2032 #VALUE! 7.95% 94.10 ### 8.45% #VALUE! #VALUE!8.33% goi 2036 #VALUE! 8.33% 98.15 ### 8.49% #VALUE! #VALUE!
YIELD Err:502 PRICE Err:502 DURATION Err:502 Yrs
Dt of Trade 8-Apr-23 Dt of Trade 8-Apr-23 Dt of Trade 8-Apr-23 Dt of Maturity 12-Nov-14 Dt of Maturi 12-Nov-14 Dt of Maturity 12-Nov-14Coupon 11.83% Coupon 11.83% Coupon 11.83%Price 113.65 Yield 9.9471% Yield 9.9471%
100 100 100 100 Frequency of c 2Freq of coupon (2) 2 Freq of coup 2 Basis of Acc In 0Basis of Accrued Int ( 0 Basis of Acc 0 Term to Matur -8.41 Years
A SIMPLE DISCOUNTED CASH FLOW (DCF) MODEL FOR VALUING A SHARE FCFE
Revenue Growth Rate 25%Terminal Growth Rate 5%Operating Margin 15%Tax Rate 30%Capex Growth as % of incremental revenues 5%Inc WC as % of incremental revenues 2%Cost of Debt 12%Cost of Equity using CAPM 16.80%Debt Equity Ratio 200000Weighted Avg Cost of Capital 11.20%Equity 100000 RsNo.of Shares at Rs.10 Face Vale per Share 10000Total Capital 100 Rs
FCFE Year 0 Year 1
Revenues 20000.00 34000.00Operating Margin 0.15 0.15EBIT 3000.00 5100.00Interest paidEBTTaxes 900.00 1530.00EAT 2100.00 3570.00 + Depreciation 500.00 500.00 - Capital Expenditures 0.00 0.00 - Chg WC 300.00 300.00+/- Net change in debt- Dividends to Pref sharesFree Cash Flow to the Firm (FCFF) 2300.00 3770.00
Present Value of FCFF 3390.29
The ValuationPV of FCFE during growth phase = 26089.82PV of Terminal Value = 183572.05Value of Operating Assets of the firm = 209661.86Value of Cash & Non-operating assets= 2000Value of Equity = #REF!Value of Equity per share = #REF!
A SIMPLE DISCOUNTED CASH FLOW (DCF) MODEL FOR VALUING A SHARE FCFE
Risk Free Rate of Return 6.00%Market Return 15%Beta of the Stock 1.2
Less Depreciation & Amortization Less Change in StockOperating Profit (EBIT) Gross Margin
Less Net interest Less Staff ExpensesProfit Before Tax Less (Other Operating Expenses)
Less Taxation EBITDANet Profit Less Depreciation
EBIT Less Interest
Cash flow Summary Other IncomePBT
Cash flow from operations (essentially EBITDA) Less TaxLess Capex PATLess Dividends Minority Interest+ / - Change in net debt Reported PATLess Change in WC
FCFE
Relative Valuation data
EV/ SalesEV / EBITDAEV / Invested CapitalPEP/ Book Value
Raw MaterialChange in StockGross MarginStaff Expenses(Other Operating Expenses)
Depreciation
Other Income
Minority InterestReported PAT
A SIMPLE DISCOUNTED CASH FLOW (DCF) MODEL FOR VALUING A SHARE
Revenue Growth Rate 25% Risk Free Rate of ReturnTerminal Growth Rate 4% Market ReturnOperating Margin 15% Beta of the StockTax Rate 30%Capex Growth as % of incremental revenues 5%Inc WC as % of incremental revenues 2% Value of Equity Per ShareCost of Debt 10%Cost of Equity using CAPM 16.70%Debt Equity Ratio 20%Weighted Avg Cost of Capital 14.76%Equity 80 RsNo.of Shares at Rs.10 Face Vale per Share 8Total Capital 100 Rs
FCFF Year 0 Year 1 Year 2 Year 3
Revenues 100.00 125.00 156.25 195.31Operating Margin 0.15 0.15 0.15 0.15EBIT 15.00 18.75 23.44 29.30Taxes 4.50 5.63 7.03 8.79EBIT(1-t) 10.50 13.13 16.41 20.51 + Depreciation 5.00 4.50 4.00 5.00 - Capital Expenditures 2.50 1.25 1.56 1.95 - Chg WC 1.00 0.50 0.63 0.78Free Cash Flow to the Firm (FCFF) 12.00 15.88 18.22 22.77Terminal year Present Value of FCFF 13.83 13.83 15.07Present Value of Terminal year cash flow
The ValuationPV of FCFF during growth phase = 74.68PV of Terminal Value = 154.28Value of Operating Assets of the firm = 228.95Value of Cash & Non-operating assets= 50Value of Firm = 278.95 - Value of Outstanding Debt = 20Value of Equity = 258.95Value of Equity per share = 32.37
A SIMPLE DISCOUNTED CASH FLOW (DCF) MODEL FOR VALUING A SHARE
Risk Free Rate of Return 6.50%Market Return 15%Beta of the Stock 1.2
Value of Equity Per Share 32.37
Year 4 Year 5 Terminal Year FCFE
244.14 305.180.15 0.15
36.62 45.7810.99 13.73 Earnings after Tax25.63 32.04 +Depreciation
27.72 31.77 Free Cash Flow to the Equity Shareholders (FCFE)307.08
15.98 15.96 PV of FCFE154.28
PV of FCFE during growth phasePV of Terminal ValueValue of Operating Assets of the firmValue of Cash & Non-operating assetsValue of EquityValue of Equity per share
Net operating profit after tax (NOPAT) AddAdd Depreciation AddAdd Amortization AddAdd Deferred taxes (non cash charges) LessAdd Minority interestAdd Income from affiliates LessAdd Other noncash items +/-Less Changes in net working capital (NWC) +/-
Less Capital expenditures
Other Free cash flowTerminal value (EBITDA multiple)Total free cash flows to capital providers
FCFE Model FCFF Model adjusted for leverage of the firm
DCF Analysis: Equity Residual Method DCF Analysis: Adjusted Present Value (for leverage)Net income (PAT) Net income (PAT)Depreciation Add Interest ExpenseAmortization Less Tax Effect of Interest ExpenseDeferred Taxes = After Tax Interest ExpenseMinority Interest NOPATIncome from Affiliates Add DepreciationOther Non-Cash Items Add AmortizationChanges in Net Working Capital Add Deferred Taxes Equity Cash Flow from Operations Add Minority InterestCapital Expenditures Add Income from AffiliatesChange in Debt Add Other Non-Cash ItemsChange in Preferred Less Changes in Net Working CapitalPreferred Dividends (includes convertible) Other Less Capital Expenditures
Other Residual Cash Flows Unlevered Free Cash Flow Terminal Value (P/E Multiple) Terminal Value (EBITDA Multiple) Cash Flows to Common Equity Holders Cash Flows to Capital Providers
Valuation ValuationEquity Value Unlevered Free Cash FlowsValue per Share Add Debt Tax Shield
Firm ValuePlus: Debt Outstanding Plus: Excess CashPlus: Minority Interest Less: Debt OutstandingPlus: Preferred Stock Less: Minority InterestLess: Excess Cash Less: Preferred StockFirm Value Equity ValueCost of Equity Calculation Value per ShareDebt/Market EquityRelevered BetaKe
FCFF Model adjusted for leverage of the firm
DCF Analysis: Adjusted Present Value (for leverage)
