Determining the fair value of a stock is a complex task that involves various methodologies and considerations. In this article, we delve into the valuation of Tigere, a company with immense potential that is often overlooked. By employing different valuation methods and incorporating additional information, we aim to provide a comprehensive view of Tigere's true value.
Method 1: Discounted Cash Flow (DCF) Analysis:
The DCF method is a widely used valuation approach that estimates the present value of future cash flows. To apply this method to Tigere, we make certain assumptions based on the information provided:
Step 1: Estimate Free Cash Flow (FCF) for the next five years.
We consider a historical FCF growth rate of 10% and use the FCF of $5.8 million in 2023 as a starting point. Projected FCF for subsequent years are as follows:
- Year 1: $6.38 million
- Year 2: $7.02 million
- Year 3: $7.72 million
- Year 4: $8.49 million
- Year 5: $9.34 million
Step 2: Estimate Terminal Value (TV) after five years.
Using a conservative perpetual growth rate of 3% and a discount rate of 15%, we calculate the TV using the formula: TV = FCF * (1 + g) / (r - g). The resulting TV is $84.87 million.
Step 3: Calculate the present value (PV) of each FCF and TV.
By discounting each FCF and TV using a 15% discount rate, we obtain the following PVs:
- PV of FCF for each year: $5.55 million, $5.29 million, $5.05 million, $4.83 million, $4.63 million
- PV of TV: $41.97 million
Step 4: Determine the enterprise value (EV) and equity value (EQ).
Summing up all the PVs, we arrive at an EV of $67.32 million. Deducting the net debt (ND) of -$12 million, we find the EQ to be $79.32 million.
Step 5: Calculate the fair value per share (FVPS) in USD and ZWL.
Dividing EQ by the number of shares outstanding (SO) of 719,323,000, we determine the FVPS to be approximately $0.11. Converting this value to ZWL using exchange rates of 2000 and 3000, the FVPS ranges between ZWL220 and ZWL330.
(NB: We used forward pricing because ......drum roll....Its Zimbabwe the share price of TIGERE as at 19 May is ZWL 66 and some cents BUT we expect the price to rise because we have unleashed our crystal ball. The exchange ranges between 2000 and 3000 noone really knows how much the government prints so its just guess work of exchange rates)
Method 2: Price-to-Earnings (P/E) Ratio Analysis:
The P/E ratio method compares a company's share price to its earnings per share (EPS) to assess its relative value. Utilizing the following steps:
Step 1: Determine the EPS.
Using the net income of $5.8 million and the number of shares outstanding, we calculate the EPS to be $0.008.
Step 2: Find the average P/E ratio.
Considering the real estate investment trust (REIT) sector's average P/E ratio of 18, we use this value as a benchmark.
Step 3: Calculate the fair value estimate price per share (USD).
Multiplying the average P/E ratio by Tigere's EPS, we arrive at a fair value estimate price per share of approximately $0.14.
Converting this estimate to ZWL using exchange rates of 2000 and 3000, the fair value estimate price per share ranges between ZWL288 and ZWL432.
Method 3: Book Value
Method:
The book value method evaluates a company's net assets by subtracting liabilities from assets. Considering Tigere's financial statements, we determine the book value of equity to be $42.8 million.
Dividing the book value by the number of shares outstanding, we calculate the book value per share to be approximately $0.059. Converting this value to ZWL using exchange rates of 2000 and 3000, the book value per share ranges between ZWL118 and ZWL177.
Average Fair Value Estimate:
To provide a comprehensive fair value estimate for Tigere, we can average the results obtained from the DCF, P/E ratio, and book value methods. By summing up the fair value estimates from each method and dividing by three, we obtain an average fair value estimate price per share.
Considering the previous calculations and using exchange rates of 2000 and 3000, the average fair value estimate price per share ranges between ZWL209 and ZWL313.
Did you know that Tigere has not only been rocking the real estate market but also making their investors super happy? Yep, they have declared dividends not once, but twice in 2023! Cha-ching!
Now, let's get into the nitty-gritty. According to the Finance (No. 2) Act of 2020, the lovely folks over in the Government came up with a rule that gives REITs a sweet tax exemption. If a REIT like Tigere distributes a minimum of 90% of its taxable income to its unit holders within three months after the end of each financial year, it gets to wave goodbye to income tax. Woohoo!
So, to stay on the right side of the law and keep the taxman at bay, Tigere REIT needs to declare dividends at least once a year. And not just that, they have to make sure those dividends reach the eager hands of their unit holders within the specified three-month time frame. Talk about spreading the joy of real estate profits!
So, if you're invested in Tigere REIT, get ready to do a little happy dance when those dividends come knocking on your door. Just make sure to keep an eye out for the announcement and have your dancing shoes ready within the three-month window. You wouldn't want to miss out on the financial party, right?
Remember, as they say, "Dividends are a real estate investor's best friend." And Tigere REIT is doing their part to make sure their investors are grinning from ear to ear. Keep those dividends coming, Tigere, and keep making us real estate enthusiasts jump for joy! 🎉
Now, let's take a step back and remember that these calculations are based on certain assumptions and data from a single source.
Conclusion:
Through a thorough analysis of various valuation methods, we have uncovered Tigere's true potential and determined its average fair value estimate price per share. However, it is crucial to acknowledge that these estimates rely on assumptions and limited information. Investors should conduct further research, evaluate market conditions, and seek professional advice before making investment decisions.
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