Australian (ASX) Stock Market Forum

FGE - Forge Group

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prawn_86 said:
Welcome to ATF IV :)

Care to share how you came to this conclusion with a few basic facts and figures? We have seen you post a few targets in various threads but have not stated or shown you analysis (which is an important part otherwise people could just say anything).
Click to expand...

Actually it is a bit more than that, see below, I used a spreadsheet someone else posted on here and plugged in the figures ...please feel free to disagree.


Enter in Require Return between 8% and 14% 10


Year 2011

Enter the Values From Comsec/Yahoo in Pink
Starting Equity Per Share (Book Value per Share) 1.19

Forecast Earnings Per Share (EPS) 0.403

Forecast Dividends Per Share (DPS) 0.07

Calculated Forecast Equity Per Share 1.523

Forecast Earnings Per Share 0.403

Shares Outstanding 78.8

Forecast Net Profit 31.7564

Net Profit 31.7564
BOY Equity 93.772
EOY Equity 120.0124
Average Equity 106.8922
Forecast Return on Equity (Using the average equity value) 29.71%

Pay Out Ratio 0.17369727

Company Intrinsic Value $8.50
 
Intrinsic Value said:
Actually it is a bit more than that, see below, I used a spreadsheet someone else posted on here and plugged in the figures ...please feel free to disagree.


Enter in Require Return between 8% and 14% 10


Year 2011

Enter the Values From Comsec/Yahoo in Pink
Starting Equity Per Share (Book Value per Share) 1.19

Forecast Earnings Per Share (EPS) 0.403

Forecast Dividends Per Share (DPS) 0.07

Calculated Forecast Equity Per Share 1.523

Forecast Earnings Per Share 0.403

Shares Outstanding 78.8

Forecast Net Profit 31.7564

Net Profit 31.7564
BOY Equity 93.772
EOY Equity 120.0124
Average Equity 106.8922
Forecast Return on Equity (Using the average equity value) 29.71%

Pay Out Ratio 0.17369727

Company Intrinsic Value $8.50
Click to expand...

Hope you are right but I am not so sure they can maintain this rate of organic growth to keep the ROE ~30% and the payout ratio so low.

Also they have a stated goal of pursuing a bolt on aquisition I will be watching them like a hawk and hoping they do not overpay.

Having said that I believe FGE has a lot more growth ahead sp but is probably getting fairly close to iv. I will have a good look at the 1/2 year report with interest.
 
robusta said:
Hope you are right but I am not so sure they can maintain this rate of organic growth to keep the ROE ~30% and the payout ratio so low.

Also they have a stated goal of pursuing a bolt on aquisition I will be watching them like a hawk and hoping they do not overpay.

Having said that I believe FGE has a lot more growth ahead sp but is probably getting fairly close to iv. I will have a good look at the 1/2 year report with interest.
Click to expand...

Things can change very quickly but for me it is a stock to hold and not sell until I see something better out there or circumstances change for the worse for FGE.
 
I've been putting a lot of time and effort into my own spreadsheet and trading plan recently. Forge has basically ticked all boxes in regards to my plan and within my spreadsheet which has a rating system within the spreadsheet.

The intrinsic value my spreadsheet came up with is approx $7.10 (from memory, i'm at work currently - was definitely above $7.00 anyway) as a current valuation, and the 12-month target was above that as well.

In terms of the recent movement through the $5.00 mark, volume was up and it pushed through a resistance area with relative ease, which if had i had the spare cash would have triggered me to buy into Forge.

So I think there is plenty of potential upside here, however must agree with robusta, now that they are in a good position its important that management don't squander it.
 
Hi everyone

Kermit: My valuation for FGE at 2010 is quite similar to yours at $7.33 (my calculations below). I've used a RR of 14%. Are you calculations similar?

Current Shares on Issue 78,759,014
Beginning Equity (Last year's ending) 48,782,590
Ending or current Equity 93,375,523
Net Profit After Tax 29,450,235
Dividends Paid 3,418,888

Current Earnings Per Share (EPS) 0.374
Current Dividends Per Shares (DPS) 0.043
Payout Ratio 11.61%
Ending or Current Equity / Current Shares (EQPS) 1.19
Return on Equity (Using Starting Equity) 60.37%
Return on Equity (Using Average Equity) 41.43%

Select ROE 40.00%

Company Intrinsic Value $7.33


and my 2011 valuation (using Comsec forcast figures only came out to $5.51. I can't seem to figure out where I went wrong. Also using a RR of 14%

Current Shares on Issue (Assuming No Buy Back/Split) 78,759,014
Forecast Beginning Equity (Last year's ending) 93,375,523
Forecast Ending or current Equity 119,602,275
Forecast Net Profit After Tax 31,739,883
Forecast Dividends Paid 5,513,131

Forecast Earnings Per Share (EPS) 0.403
Forecast Dividends Per Shares (DPS) 0.070
Forecast Payout Ratio 17.37%
Forecast Ending or Current Equity / Current Shares (EQPS) 1.52
Calculated Return on Equity (Using Starting Equity) 33.99%
Calculated Return on Equity (Using Average Equity) 29.81%

Select ROE 30.00%

Future Intrinsic Value $5.51

I hope someone can comment on my calculations and figures as I am very eager to get this down and I can't seem to figure out where I went wrong.

Thanks all. :)
 
stud_ming said:
Hi everyone

Current Shares on Issue (Assuming No Buy Back/Split) 78,759,014
Forecast Beginning Equity (Last year's ending) 93,375,523
Forecast Ending or current Equity 119,602,275
Forecast Net Profit After Tax 31,739,883
Forecast Dividends Paid 5,513,131

Forecast Earnings Per Share (EPS) 0.403
Forecast Dividends Per Shares (DPS) 0.070
Forecast Payout Ratio 17.37%
Forecast Ending or Current Equity / Current Shares (EQPS) 1.52
Calculated Return on Equity (Using Starting Equity) 33.99%
Calculated Return on Equity (Using Average Equity) 29.81%

Select ROE 30.00%

Future Intrinsic Value $5.51

I hope someone can comment on my calculations and figures as I am very eager to get this down and I can't seem to figure out where I went wrong.

Thanks all. :)
Click to expand...

The problem is with commsec's forecast EPS. If you look at Forge's profit guidence:

http://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01118654

you will see that they are anticipating more than 1.5% growth. I would (loosely) expect that the ROE will be closer to 40% rather than 30%. Roger's method is very sensitive to ROE which is why the IV has gone down when you assume the ROE dropped from 40% to 30%.

We will see what happens within the next few weeks! Bring on the reporting season :D
 
Your forecast has also included an assumption that equity has increased quite considerably which I would guess has a pretty major impact on the valuation.

I don't actually use Roger Montgomery's valuation techinique (which it looks like you do) so can't really comment on where you may be going wrong.

In terms of the figures I used for current valuation, I use rounded numbers and used the following to make up parts of my valuation technique:

NPAT: 29,500,000
SH Equity: 93,400,000
EPS: 39.7c
DPS: 7.0c
Cash Assets: 51,921,000
Debt: 11,900,000

Thats the basics of the elements I use. Of I remember, i'll take a look at my spreadsheet on my lunch break at home and see what else I can post. Can also give you my exact IV and forecast IV as well.
 
kermit345 said:
Your forecast has also included an assumption that equity has increased quite considerably which I would guess has a pretty major impact on the valuation.

I don't actually use Roger Montgomery's valuation techinique (which it looks like you do) so can't really comment on where you may be going wrong.

In terms of the figures I used for current valuation, I use rounded numbers and used the following to make up parts of my valuation technique:

NPAT: 29,500,000
SH Equity: 93,400,000
EPS: 39.7c
DPS: 7.0c
Cash Assets: 51,921,000
Debt: 11,900,000

Thats the basics of the elements I use. Of I remember, i'll take a look at my spreadsheet on my lunch break at home and see what else I can post. Can also give you my exact IV and forecast IV as well.
Click to expand...

I would suggest that next year's beginning equity would be around 119,602,275 considering the forecast profit and the low payout ratio. I actually expect equity to be higher than that because I expect NPAT to be higher than 31,739,883!

So, the way stud_ming calculated next year's equity was:

Last years equity + NPAT * (retained percentage) = next years equity

93,375,523 + 31,739,883 * (1 - 0.1737) = 119,602,188.32

I think that is quite reasonable. FGE should be a compounding machine for a few years to come!

kermit345, I am interested to see your IVs for FGE.

Disclosure: I hold.
 
Ok i'm at home now, my valuations are as follows:

Current Valuation : $7.40
Future IV : $9.01

The figures i've used are as previously quoted, my ROE last year, this year and next year have been consistent at around 31-32%. My future estimated shareholders equity is approximately $116 million.

Also even though this won't mean much to anyone on here, in my valuation spreadsheet which applies value ratings to companies by comparing their financials in a value investing manner, FGE scored 83.51%.

I'm seriously looking at investing in Forge now, but i'm tossing up between this and MML.
 
Hi Kermit and Drlog. Thanks for helping me out.

I have now upgraded my profit forecast for 2011 by 40% and this now brings my intrinsic value to $7.94.

Still using 14%. These are my upgraded calculations.

Current Shares on Issue (Assuming No Buy Back/Split) 78,759,014
Forecast Beginning Equity (Last year's ending) 93,375,523
Forecast Ending or current Equity 129,092,721
Forecast Net Profit After Tax 41,230,329
Forecast Dividends Paid 5,513,131

Forecast Earnings Per Share (EPS) 0.523
Forecast Dividends Per Shares (DPS) 0.070
Forecast Payout Ratio 13.37%
Forecast Ending or Current Equity / Current Shares (EQPS) 1.64
Calculated Return on Equity (Using Starting Equity) 44.16%
Calculated Return on Equity (Using Average Equity) 37.07%

Select ROE 35.00%

Future Intrinsic Value $7.94

Kermit: May I ask what sort of calculations you use? and my friend did very well on MML. He bought 12k worth at 60cents and is still holding atm which brings his holding value to $120K. May also ask what your valuation of them is atm?
 
wow I did a big reply and my browser crashed....

When you say still using 14% do you mean required rate of return or something else?

My equation or formula is something i've developed over the last 6-12 months myself through trial and error to get it where it is now. I'm a bit like Roger and don't want to disclose my exact equation but I can tell you the components that make up the essence of it. It basically revolves around, EPS, DPS, growth and required rate of return.

I then apply premiums or discounts based on management, sector and debt. I think my valuation method seems to work as i've identified a lot of the same stocks as Roger and seem to get valuations reasonably close to a lot of others i've talked to interested in value investing.

My valuations for MML are as follows:

Current Valuation $9.19
Forecast IV $10.93

If you'd like to discuss other value stocks further feel free to PM me as I don't want to hijack the FGE thread.

Cheers
 
Interesting. I wish I studied Finance instead of Accounting at Uni. Oh well, there's always time to learn again.

Yes, I was talking about the RR.

I am currently looking at topping up my FGE holdings again. One thing that I am a bit confused about is what's the entry point for doing so (I have no idea about technical analysis) and the Margin of Safety and Future Value on Roger's blog (See below).

http://blog.rogermontgomery.com/wp-content/uploads/2010/12/Valueable-Graduate-
Class-of-2010-and-Roger-Montgomery-reveal-their-top-A1-stock-picks-for-2011.jpg


Safety Margin was identified at 47% and the future value at 31%. Does that mean the intrinsic value of Forge is estimated to be around $8.74 (Safety Margin of 47%) and there is room for more growth at 31%.

Pardon my ignorance but all this is quite new to me. Thanks in advance for the help.

and I will PM you at a later stage when I know more about MML and discover other shares. :)
 
Hi stud,

The link you posted didn't work so you may want to try doing it again using the link button (little earth picture with the chain/link with it).

Your guess is as good as mine regarding the safety margin etc that they have identified but the way your stating it sounds right to me. I'm finalising my Commerce and Applied Finance double degree however i've learnt more by reading forums and websites then I have through uni.

I'm very weak at the technical analysis side of things as well and still learning quite a bit. Although for me the most recent buy signal was when it broke through the $5.00 resistance level. Because it keeps setting new highs now, its hard to gauge what is a good entry level. Because the consensus amongst value investors seems that the target is $7.00+, since its in a good uptrend now i guess any time is the right time to buy. Disclaimer: Not advice, just my point of view.

Back to MML for a second, I think there was also a good buy signal for MML recently too, when it dipped to around $6.50 briefly, which is close to its resistance of recent months AND its the bottom of the 6 month trend channel on close. If I had the cash, i would've bought at this point, seems i missed out for now :(.
 
here's that link again.

One thing I am finding challenging about value investing is the RR and discounts. Even though my valuations are around the low and high $7 mark for 2010 and 2011. Others have came in with much lower figures. At $5 - $6 which is quite scary.

I guess overtime as I read and understand more. I will be able to confidently value a company.

and are there any subscriptions and newsletters that anyone could recommend?
 
stud_ming said:
Hi Kermit and Drlog. Thanks for helping me out.

I have now upgraded my profit forecast for 2011 by 40% and this now brings my intrinsic value to $7.94.

Still using 14%. These are my upgraded calculations.

Current Shares on Issue (Assuming No Buy Back/Split) 78,759,014
Forecast Beginning Equity (Last year's ending) 93,375,523
Forecast Ending or current Equity 129,092,721
Forecast Net Profit After Tax 41,230,329
Forecast Dividends Paid 5,513,131

Forecast Earnings Per Share (EPS) 0.523
Forecast Dividends Per Shares (DPS) 0.070
Forecast Payout Ratio 13.37%
Forecast Ending or Current Equity / Current Shares (EQPS) 1.64
Calculated Return on Equity (Using Starting Equity) 44.16%
Calculated Return on Equity (Using Average Equity) 37.07%

Select ROE 35.00%

Future Intrinsic Value $7.94

Kermit: May I ask what sort of calculations you use? and my friend did very well on MML. He bought 12k worth at 60cents and is still holding atm which brings his holding value to $120K. May also ask what your valuation of them is atm?
Click to expand...

Your Forecast Net Profit is much higher than my estimate. Where did you get that figure from? 41,230,329

I also think the RR of 14 is too high but that is always going to be subjective.
 
I use an RR of 10.5% which is probably too low as well, but as you say Intrinsic Value, it depends a bit on personal preference. Also for comparisons sake I think my equation seems to come out with similar figures as other people using the 10.5% so thats why i'm sticking with it.

In terms of your valuations for forge stud, i wouldn't be too worried that your IV's are in the $7 range, thats where mine is and i've seen others around this mark. Some people are always going to be more cautious or aggressive then others which will inadvertently effect the valuation.
 
kermit345 said:
I use an RR of 10.5% which is probably too low as well, but as you say Intrinsic Value, it depends a bit on personal preference. Also for comparisons sake I think my equation seems to come out with similar figures as other people using the 10.5% so thats why i'm sticking with it.

In terms of your valuations for forge stud, i wouldn't be too worried that your IV's are in the $7 range, thats where mine is and i've seen others around this mark. Some people are always going to be more cautious or aggressive then others which will inadvertently effect the valuation.
Click to expand...

Well my figures taken from Commsec website indicate EPS of .403 for 2011 compared to Forecast Earnings Per Share (EPS) of 0.523.

I was wondering where that figure had come from?
 
Based on their last announcement, their half yearly profit had increased by 40%. I just increased last year's next profit by 40%. Probably not the best method but I did not like Comsec's forecast which was only 1.5% of last year's next profit.

I was using RR of 14% to be conservative which scares me because I still get a value in the high $7. Oh well, I bought more in today. *crosses fingers*

Bring on the reporting season. :D
 
hardcoremike said:
Hi all
Was wondering what the difference is between Current Valuation and Forecasted IV?
Click to expand...

The idea behind IV is that it applies to a year of company performance. The current Valuation is based on the latest financial report. The Forecasted IV is "what do I think the IV will be after their next report". Since you can not possibly know with complete accuracy what the next IV will be, it based on forecast profit values.

Speaking of forecast profit values - go and look at FGE's profit guidance - They are basically saying "we had it wrong before, lets just add a few more million to NPBT for the last 6 months".

What an awesome company!
 

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