TB Auction - rates down again (02-01-2013)

VISA · 1 TB Auction - rates down again (02-01-2013) Wed Jan 02, 2013 2:01 pm

VISA

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http://www.cbsl.gov.lk/pics_n_docs/latest_news/press_20130102ea.pdf

Arena · 2 Re: TB Auction - rates down again (02-01-2013) Wed Jan 02, 2013 2:14 pm

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WOW....all the best

Redbulls · 3 Re: TB Auction - rates down again (02-01-2013) Wed Jan 02, 2013 2:21 pm

Redbulls

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TB rate is coming down couldn't make any impact on CSE.
Block trading give some sort of relive to the brokers hut.

speculater · 4 Re: TB Auction - rates down again (02-01-2013) Wed Jan 02, 2013 2:26 pm

speculater

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TB rate is the risk free rate and as per my knowledge it has a huge impact on finding value of a share........

Arena · 5 Re: TB Auction - rates down again (02-01-2013) Wed Jan 02, 2013 2:40 pm

Arena

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Yes defa...........

U take TB rate in Capital assets pricing model to find out the cost of equity.
RF + ( Mkt rate - RF ) * beta = COE

So TB will directly effect to the mkt interest rates. Eg. LB is going to cut their FD rates in next month.

An example from my analysis.

I had a valuation of 7.3 for one of our companies Subsidiary at Cost of capital of 20. But with all these things if we value TB at 10% the entire valuation goes to 8.5b with out any cash flow amendment. only effect is TB rate reduction and it gave me a new COC of 17.5.

1) So the overall value of companies goes up. +
2) We get new investors who diverts their money from TB to CSE.

Above is the full impact on the TB rate cut. Hope i am correct and any contradictory view is well come for me to learn

Please ignore the PE and other methods when u do a FCF valuation. we need cash flows and COC. Terminal value is highly subjective.

sanju351 · 6 Re: TB Auction - rates down again (02-01-2013) Wed Jan 02, 2013 2:44 pm

sanju351

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speculater wrote:TB rate is the risk free rate and as per my knowledge it has a huge impact on finding value of a share........

When TB rates are coming down - I strongly feel investments will attracted to CSE as the yield is more than the TB .
Lets wait and see from tomorrow

Slstock · 7 Re: TB Auction - rates down again (02-01-2013) Wed Jan 02, 2013 3:04 pm

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Arena,
Yes TB rate will certainly have an impact. Also when you have time it would be good for the forum if you can take some exame( some company) and show the step to do a Free Cash Flow valuation. Some brokers alos use FCF instead of PE NAV to value shares.

Arena wrote:Yes defa...........

U take TB rate in Capital assets pricing model to find out the cost of equity.
RF + ( Mkt rate - RF ) * beta = COE

So TB will directly effect to the mkt interest rates. Eg. LB is going to cut their FD rates in next month.

An example from my analysis.

I had a valuation of 7.3 for one of our companies Subsidiary at Cost of capital of 20. But with all these things if we value TB at 10% the entire valuation goes to 8.5b with out any cash flow amendment. only effect is TB rate reduction and it gave me a new COC of 17.5.

1) So the overall value of companies goes up. +
2) We get new investors who diverts their money from TB to CSE.

Above is the full impact on the TB rate cut. Hope i am correct and any contradictory view is well come for me to learn

Please ignore the PE and other methods when u do a FCF valuation. we need cash flows and COC. Terminal value is highly subjective.

Redbulls · 8 Re: TB Auction - rates down again (02-01-2013) Wed Jan 02, 2013 3:11 pm

Redbulls

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Those who wants to do know more about FCF and Discounted Cash Flow method. Refer this link.
http://forum.srilankaequity.com/t12537-discounted-cash-flow-how-much-is-a-stock-really-worth?highlight=flow

K.Haputantri · 9 Re: TB Auction - rates down again (02-01-2013) Wed Jan 02, 2013 3:14 pm

K.Haputantri

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Arena, kindly tell us what RF stands for in your formula.

chamith · 10 Re: TB Auction - rates down again (02-01-2013) Wed Jan 02, 2013 3:21 pm

chamith

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RF = Risk Free rate (TB is a risk free investment)

Arena
I was just studying this WACC for my ACCA F9 exam. hate calculating beta. Are you an accountant? When studying bit into investments only realize why these companies are paying such a premium to buy into good companies. PE, EPS and not what big companies worried about. They focus on DVM, DCF, COC etc...

Last edited by chamith on Wed Jan 02, 2013 3:24 pm; edited 1 time in total

Arena · 11 Re: TB Auction - rates down again (02-01-2013) Wed Jan 02, 2013 3:22 pm

Arena

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Yep bro .

But the thing is this.

1) I also did learn it from Google but now use the knowledge for commercial activities. Not for CSE related companies. ( But always feel the requirement of a good analyst who can guide )

2) If we want to do a FCF valuation for a company we should know the Exact future developments ( Cash flows ) if not it becomes a mad analysis like what we do in exams.

3) No point of doing a FCF analysis if we dont buy a huge stake with a long term consideration. And also if u do a company take over u can any way change the cash flows in the long term.

So traders . speculate , and mid term investors has no need to do this.

Just type FCF of DCF will get all the examples and learning materials.

Arena · 12 Re: TB Auction - rates down again (02-01-2013) Wed Jan 02, 2013 3:30 pm

Arena

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@ chamith

Yes u are spot on. I do valuations but didnt train under a good investment company so practical knowledge is very very minimal.

For beta u need cor-variance and variance. Then security market line ?

budu ammo....... those are deep mathematics where u need to practice over and over...........Did those in CIMA then UNI in very detail but cant remember the steps even.

The most important is CASH.......not the profit...............

i am not an accountant. Accountants dont know these but need a fair understanding. financial analyst do know. I am a overall employee who does all the craps and also accounts if needed some times audits also........ lol

worthiness · 13 Re: TB Auction - rates down again (02-01-2013) Wed Jan 02, 2013 8:10 pm

worthiness

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Cash is the king at all times.

I prefer current cash flow generated from operations ( without window dressing) & the DCF used for future cash flows where the cost of capital is the key factor...