Benjamin Graham's Growth Valuation - APOLLO (6432)

What will be the intrinsic value for APOLLO based on the Benjamin Graham's Growth Valuation?

 To answer this question, we have to understand what is the component on Benjamin Graham's Growth Valuation and determine the value for each component

(1) Normalized EPS
Based on Jae Jun's writeup, we shouldn't take the EPS based on single 12 month period. It have to be adjusted to a normalized number by ignoring one time hugre or depressed earnings based on 5 year or 10 year history.





Above figure show that APOLLO's EPS was in uptrend mode and it have been growth at 10Yr CAGR of 7.89%. I am not intend to use the average EPS from pass 5 or 10 years as normalized EPS as it is a little too conservative for a growth company like APOLLO.

Thus, I decided to use the average of  T4Q , FY2013 and FY 2012 EPS . Based on this assumption, 0.334 have been selected as the Normalized EPS.

(2) EPS Growth Rate

Based on Jae Jun's writeup, we could just use the analyst 5yr predictions or, a regression of the historical EPS to project the following year growth rate.



APOLLO's EPS  have been growth at 10Yr CAGR of 7.89%, with a 5 year / 10 Year Multi-Year Growth Rate of 1.30% and 6.41% respectively. I am using the average of these 3 figures as my EPS growth rate, i.e. 5.20%

(3) Growth Multiplier

The “2 x G” is quite aggressive as Graham never experienced companies with growth rates of 20-30% which is common today (There was no Amazon or Facebook in Graham's time). So I tend to agree to  Jae Jun's writeup, and reduced the multiplier to 1.5 instead of 2.

 (4) No Growth P/E

I am using a no growth P/E of 8 (EY of 12.5%) instead of 8.5.

(5) 20 Years Grade A Bond Rate



Based on Yahoo Finance, the 20 Years Grade A Bond Rate should be 4.39%

From the (1) - (5), the intrinsic value of APOLLO can be derrived based on formula:-
V = 0.334 x (8 + 1.5g) X 4.4 / 4.39%, and I am using the BGG's worksheet on Financial Statement Analysis Template to perform the calculation.




From the calculation result, APOLLO's intrinsic value is 5.291. If compare to its share price of 4.980, it provide a 5.88% of MOS and 6.25% of Up Side. 
 
References:-

• Benjamin Graham's Growth Valuation Formula
• Benjamin Graham's Growth Valuation on Financial Statement Analysis Template (v1.60)
• APOLLO (6432) Quarterly Result
• APOLLO (6432) Annual Result