An Intrinsic Calculation For HKT Trust and HKT Limited (HKG:6823) Suggests It's 39% Undervalued

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Key Insights Using the 2 Stage Free Cash Flow to Equity, HKT Trust and HKT fair value estimate is HK$19.13 Current share price of HK$11.66 suggests HKT Trust and HKT is potentially 39% undervalued ...

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St.","content":"<div>\n<p>Key Insights Using the 2 Stage Free Cash Flow to Equity, HKT Trust and HKT fair value estimate is HK$19.13   Current share price of HK$11.66 suggests HKT Trust and HKT is potentially 39% undervalued  ...</p>\n\n<a href=\"https://simplywall.st/stocks/hk/telecom/hkg-6823/hkt-trust-and-hkt-shares/news/an-intrinsic-calculation-for-hkt-trust-and-hkt-limited-hkg68-2\">Source Link</a>\n\n</div>\n","source":"simplywall_highlight","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>An Intrinsic Calculation For HKT Trust and HKT Limited (HKG:6823) Suggests It's 39% Undervalued</title>\n<style 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value estimate is HK$19.13   Current share price of HK$11.66 suggests HKT Trust and HKT is potentially 39% undervalued  ...</p>\n\n<a href=\"https://simplywall.st/stocks/hk/telecom/hkg-6823/hkt-trust-and-hkt-shares/news/an-intrinsic-calculation-for-hkt-trust-and-hkt-limited-hkg68-2\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU0572940350.SGD","symbol_name":"Janus Henderson Horizon Asian Dividend Income A3 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Using the 2 Stage Free Cash Flow to Equity, HKT Trust and HKT fair value estimate is HK$19.13   Current share price of HK$11.66 suggests HKT Trust and HKT is potentially 39% undervalued   When compared to theindustry average discount to fair value of 64%, HKT Trust and HKT's competitors seem to be trading at a greater discount   Today we'll do a simple run through of a valuation method used to estimate the attractiveness of HKT Trust and HKT Limited (HKG:6823) as an investment opportunity  by taking the expected future cash flows and discounting them to their present value.  We will take advantage of the Discounted Cash Flow (DCF) model for this purpose.  Models like these may appear beyond the comprehension of a lay person, but they're fairly easy to follow.  Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation.  If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model. AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early. The Calculation   We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase.  To begin with, we have to get estimates of the next ten years of cash flows.   Seeing as no analyst estimates of free cash flow are available to us, we have extrapolate the previous free cash flow (FCF) from the company's last reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.   Generally we assume that a dollar today is more valuable than a dollar in the future,  and so the sum of these future cash flows is then discounted to today's value:  10-year free cash flow (FCF) estimate  2026202720282029203020312032203320342035 Levered FCF (HK$, Millions) HK$6.74bHK$6.80bHK$6.90bHK$7.03bHK$7.18bHK$7.35bHK$7.53bHK$7.72bHK$7.93bHK$8.14bGrowth Rate Estimate SourceEst @ 0.05%Est @ 0.88%Est @ 1.46%Est @ 1.87%Est @ 2.15%Est @ 2.35%Est @ 2.49%Est @ 2.59%Est @ 2.66%Est @ 2.71% Present Value (HK$, Millions) Discounted @ 7.2% HK$6.3kHK$5.9kHK$5.6kHK$5.3kHK$5.1kHK$4.8kHK$4.6kHK$4.4kHK$4.2kHK$4.1k(\"Est\" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = HK$50b After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage.  The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.8%. We discount the terminal cash flows to today's value at a cost of equity of 7.2%. Terminal Value (TV)= FCF2035 × (1 + g) ÷ (r – g) = HK$8.1b× (1 + 2.8%) ÷ (7.2%– 2.8%) = HK$190bPresent Value of Terminal Value (PVTV)= TV / (1 + r)10= HK$190b÷ ( 1 + 7.2%)10= HK$95b The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value,  which in this case is HK$145b.  In the final step we divide the equity value by the number of shares outstanding.  Compared to the current share price of HK$11.7, the company appears   quite undervalued    at a 39% discount to where the stock price trades currently.   Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out. SEHK:6823 Discounted Cash Flow December 18th 2025  The Assumptions  Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows.  If you don't agree with these result, have a go at the calculation yourself and play with the assumptions.  The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance.  Given that we are looking at HKT Trust and HKT as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt.  In this calculation we've used 7.2%, which is based on a levered beta of 0.863. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business.   Check out our latest analysis for HKT Trust and HKT SWOT Analysis for HKT Trust and HKTStrength Earnings growth over the past year exceeded its 5-year average. Debt is well covered by earnings and cashflows. Balance sheet summary for 6823. Weakness Earnings growth over the past year underperformed the Telecom industry. Dividend is low compared to the top 25% of dividend payers in the Telecom market.Opportunity Annual earnings are forecast to grow for the next 3 years. Trading below our estimate of fair value by more than 20%. Threat Dividends are not covered by earnings.  See 6823's dividend history.  Next Steps:  Although the valuation of a company is important, it  ideally won't be the sole piece of analysis you scrutinize for a company.  DCF models are not the be-all and end-all of investment valuation.  Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation.  For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result.   Why is the intrinsic value higher than the current share price?   For HKT Trust and HKT, there are three  further  items  you should consider:   Risks: Take risks, for example - HKT Trust and HKT has   2 warning signs   we think you should be aware of.  Future Earnings: How does 6823's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart. Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!   PS. Simply Wall St updates its DCF calculation for every Hong Kong stock every day, so if you want to find the intrinsic value of any other stock just search here.The New Payments ETF Is Live on NASDAQ:Money is moving to real-time rails, and a newly listed ETF now gives investors direct exposure. Fast settlement. Institutional custody. Simple access.Explore how this launch could reshape portfoliosSponsored ContentValuation is complex, but we're here to simplify it.Discover if HKT Trust and HKT might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.Access Free AnalysisHave feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0,"need_auth":false,"code":"91000000","status":"200"}}}