Jaks Resources - Average Valuation of Jaks Hai Duong Power Plant (JHDP)
Hypothesis
This article explores the hypothesis that an average value of the valuation derived by the different evaluation methodologies is more accurate and reliable.
Rationale
Rationale behind the hypothesis came from the following ideas;
I have used various evaluation methods to value JHDP but each worked on limited and incomplete information. Each method has its own merits and limitations and works under different set of assumptions. Therefore, using the average value of all derivations enhances confidence.
I have summarised all the estimated values derived from the various valuation methodologies in the table below.
Hypothesis
This article explores the hypothesis that an average value of the valuation derived by the different evaluation methodologies is more accurate and reliable.
Rationale
Rationale behind the hypothesis came from the following ideas;
- An experiment should be carried out a few times and the average results of all the experiments is taken.
- More than one independent property valuation should be sought, and the average value is used.
I have used various evaluation methods to value JHDP but each worked on limited and incomplete information. Each method has its own merits and limitations and works under different set of assumptions. Therefore, using the average value of all derivations enhances confidence.
I have summarised all the estimated values derived from the various valuation methodologies in the table below.
| Methodology | Estimates (RM) |
Value Per share |
Average |
| Comparison With Mong Duong II | 180m - 300m | 4.2 - 6.9 | 5.5 |
| Comparison With MFCB Don Sahong Hydropower | 200m - 267m | 4.6 - 6.2 | 5.4 |
| Discounted Cash Flow Method | NPV1.9b - 3.4b | 2.9 - 5.2 | 4.0 |
| Based on Vietnam Government Data | 160m - 213m | 3.7 - 4.9 | 4.3 |
| Based on Vinh Tan 1 Operating Data | 287m - 383m | 6.6 - 8.8 | 7.7 |
| Average | 206m - 290m | 4.4 - 6.4 | 5.4 |
*Based on 30%-40% Ownership in JHDP. Value Per share are calculated based on 651m shares and 15 times price earnings ratio (PE).
Discussions:
- The various valuation methods evaluate Jaks Hai Duong Power Plant using independent sources of information.
- Each method was based on unrelated set of data and information.
- Almost all the most widely used evaluation methods have been employed to derive the potential value of the power plant.
- There is no correlation ship between the values derived from the various different methods.
Observations:
Considering
the use of vastly different methodologies for evaluation, the average
values derived are rather narrow ranged. The close proximity of average
values provides testimony of accuracy and reliability of the values
derived by each of the valuation methods. In other words, the various
valuation methods prove the accuracy of each other.
The average values range from RM4.0 to RM7.7
Overall average valuation is RM5.4
Conclusions :
It
is always more comfortable to use average value for estimation purposes
as you are more likely to be closer to the intrinsic value. When
confronted with limited data for various evaluation purposes, using
overall average value does provide added confidence.
Thank you for reading.
DK66
P/S: Please visit my blog for the detailed computations of the various valuation methods
https://klse.i3investor.com/blogs/Jaks%20resources/2020-02-16-story-h1483823173-Jaks_Resources_A_More_Accurate_And_Reliable_Average_Valuation.jsp
