RDCF Valuation - APOLLO (6432)

Few days ago, I have performed DCF valuation on APOLLO, and came into conclusion that the intrinsic value is 6.656.  But however, DCF valuation required us to perform the forecast on the growth in order to determine the intrinsic value. However, forecasting involve too much uncertainty, and a small error can result in a drastic change in the value.

Reverse DCF (RDCF) is the twin borther for DCF and it help to eliminate the need to forecast. The main objective of RDCF is to calculate what growth rate the market is applying to the current stock price. And, you can see whether the implied growth rate by the market is higher or lower than what the company is capable of.

APOLLO Stock Price as of now: 4.980
Initial Free Cash Flow: 21,216 (I am using the average of T4Q and latest 4 year Free Cash Flow)



Discount Rate
Discount Rate is the Cost of Equity, which equal to Risk Free Rate + Equity Premium. Based on today context, the interest rate for 1 year FD is around 3.2% and I will use it as my risk free rate. I would required a premium of 8% in order to risk my money in the equity market. But in view of the clean balance sheet and company was involve in consumer staple sector, I perform some adjustments to my risk premium.




And, my required discount rate is 3.20% + 6.48% = 9.68%

Balance Sheet Items

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Based on above input, the required growth rate in order to justify for today stock price of 4.980 will be 3.35%

So, now we have to answer "Is the expected growth rate realistic?"


References:-

• Discounted Cash Flow Analysis & Reverse Discounted Cash Flow
• APOLLO (6432) Quarterly Result
• APOLLO (6432) Annual Result