Key Insights

Genting Singapore's estimated fair value is S$0.65 based on 2 Stage Free Cash Flow to Equity Current share price of S$0.71 suggests Genting Singapore is potentially trading close to its fair value The S$0.95 analyst price target for G13 is 46% more than our estimate of fair value

Today we will run through one way of estimating the intrinsic value of Genting Singapore Limited (SGX:G13) by projecting its future cash flows and then discounting them to today's value. This will be done using the Discounted Cash Flow (DCF) model. Before you think you won't be able to understand it, just read on! It's actually much less complex than you'd imagine.

We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you.

Our free stock report includes 1 warning sign investors should be aware of before investing in Genting Singapore. Read for free now.

What's The Estimated Valuation?

We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or 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, so we need to discount the sum of these future cash flows to arrive at a present value estimate:

10-year free cash flow (FCF) estimate

2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF (SGD, Millions)  S$289.0m S$408.5m S$424.5m S$419.5m S$418.9m S$421.3m S$425.9m S$432.0m S$439.3m S$447.5m Growth Rate Estimate Source Analyst x2 Analyst x2 Analyst x2 Est @ -1.18% Est @ -0.14% Est @ 0.58% Est @ 1.09% Est @ 1.44% Est @ 1.69% Est @ 1.86% Present Value (SGD, Millions) Discounted @ 6.9%  S$270 S$357 S$347 S$321 S$299 S$282 S$266 S$253 S$240 S$229

("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = S$2.9b

Story Continues

The second stage is also known as Terminal Value, this is the business's cash flow after the first stage. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (2.3%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 6.9%.

Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = S$448m× (1 + 2.3%) ÷ (6.9%– 2.3%) = S$9.8b

Present Value of Terminal Value (PVTV)= TV / (1 + r)10= S$9.8b÷ ( 1 + 6.9%)10= S$5.0b

The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is S$7.9b. The last step is to then divide the equity value by the number of shares outstanding. Compared to the current share price of S$0.7, the company appears around fair value at the time of writing. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out.SGX:G13 Discounted Cash Flow May 16th 2025

The Assumptions

Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. 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 Genting Singapore 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 6.9%, which is based on a levered beta of 1.079. 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 Genting Singapore

SWOT Analysis for Genting Singapore

Strength

Currently debt free.

Weakness

Earnings declined over the past year.

Dividend is low compared to the top 25% of dividend payers in the Hospitality market.

Opportunity

Annual revenue is forecast to grow faster than the Singaporean market.

Good value based on P/E ratio compared to estimated Fair P/E ratio.

Threat

Dividends are not covered by cash flow.

Annual earnings are forecast to grow slower than the Singaporean market.

Moving On:

Whilst important, the DCF calculation is only one of many factors that you need to assess for a company. The DCF model is not a perfect stock valuation tool. Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation. If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. For Genting Singapore, there are three essential aspects you should further research:

Risks: As an example, we've found 1 warning sign for Genting Singapore that you need to consider before investing here. Future Earnings: How does G13'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 Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered!

PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the SGX every day. If you want to find the calculation for other stocks just search here.

Have 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.

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