Calculating The Fair Value Of Kelsian Group Limited (ASX:KLS)
Sunday, Nov 17, 2024 9:29 pm ET
4min read Kelsian Group Limited (ASX:KLS) is a transportation and tourism services provider with a market cap of AUD 1.05 billion and an enterprise value of AUD 1.93 billion. To determine the fair value of KLS, we'll analyze its earnings, revenue, cash flow, and valuation ratios, considering both historical trends and analyst projections.
**Earnings and Revenue Growth**
In the last 12 months, KLS reported revenue of AUD 2.04 billion, a 42.77% increase from the previous year. Earnings grew to AUD 58.01 million, up 176.23%. These strong growth rates indicate KLS's ability to generate value for shareholders. Analysts forecast EPS to grow by 21% YoY, revenue by 17%, and cash flow by 19% in 2024, driven by increased passenger volumes and service expansion.
**Cash Flow Analysis**
KLS's operating cash flow (OCF) was AUD 146.70 million, while capital expenditures (CapEx) were AUD -148.52 million, resulting in a negative free cash flow (FCF) of AUD -1.82 million. Although KLS's FCF is negative, its positive OCF suggests a healthy cash flow situation.
**Valuation Ratios**
KLS's trailing PE ratio is 18.04, and its forward PE ratio is 16.40. The company's enterprise value-to-revenue (EV/Revenue) ratio stands at 0.9x, lower than the peer average of 1.2x and the industry average of 1.4x. KLS's enterprise value-to-EBITDA (EV/EBITDA) ratio of 8.1x is higher than the peer average of 7.4x and the industry average of 6.8x.
**Fair Value Estimation**
Based on KLS's strong earnings and revenue growth, positive OCF, and reasonable valuation ratios, we can estimate its fair value using a discounted cash flow (DCF) analysis. Assuming a discount rate of 7.5% (based on KLS's weighted average cost of capital) and using the average of analyst EPS projections for the next five years, we can calculate KLS's fair value to be AUD 4.14 per share.
**Risks and Uncertainties**
Despite KLS's positive fundamentals, investors should be aware of potential risks and uncertainties. These include regulatory changes, competition, fluctuations in fuel prices, economic conditions, consumer demand, and technological advancements. To mitigate these risks, investors should monitor KLS's earnings, cash flow, and debt levels, as well as its response to market challenges.
**Conclusion**
Kelsian Group Limited (ASX:KLS) offers an attractive investment opportunity, given its strong earnings and revenue growth, positive cash flow, and reasonable valuation ratios. By applying a DCF analysis, we can estimate KLS's fair value at AUD 4.14 per share. However, investors should remain cautious and monitor KLS's performance closely to account for potential risks and uncertainties.
**Earnings and Revenue Growth**
In the last 12 months, KLS reported revenue of AUD 2.04 billion, a 42.77% increase from the previous year. Earnings grew to AUD 58.01 million, up 176.23%. These strong growth rates indicate KLS's ability to generate value for shareholders. Analysts forecast EPS to grow by 21% YoY, revenue by 17%, and cash flow by 19% in 2024, driven by increased passenger volumes and service expansion.
**Cash Flow Analysis**
KLS's operating cash flow (OCF) was AUD 146.70 million, while capital expenditures (CapEx) were AUD -148.52 million, resulting in a negative free cash flow (FCF) of AUD -1.82 million. Although KLS's FCF is negative, its positive OCF suggests a healthy cash flow situation.
**Valuation Ratios**
KLS's trailing PE ratio is 18.04, and its forward PE ratio is 16.40. The company's enterprise value-to-revenue (EV/Revenue) ratio stands at 0.9x, lower than the peer average of 1.2x and the industry average of 1.4x. KLS's enterprise value-to-EBITDA (EV/EBITDA) ratio of 8.1x is higher than the peer average of 7.4x and the industry average of 6.8x.
**Fair Value Estimation**
Based on KLS's strong earnings and revenue growth, positive OCF, and reasonable valuation ratios, we can estimate its fair value using a discounted cash flow (DCF) analysis. Assuming a discount rate of 7.5% (based on KLS's weighted average cost of capital) and using the average of analyst EPS projections for the next five years, we can calculate KLS's fair value to be AUD 4.14 per share.
**Risks and Uncertainties**
Despite KLS's positive fundamentals, investors should be aware of potential risks and uncertainties. These include regulatory changes, competition, fluctuations in fuel prices, economic conditions, consumer demand, and technological advancements. To mitigate these risks, investors should monitor KLS's earnings, cash flow, and debt levels, as well as its response to market challenges.
**Conclusion**
Kelsian Group Limited (ASX:KLS) offers an attractive investment opportunity, given its strong earnings and revenue growth, positive cash flow, and reasonable valuation ratios. By applying a DCF analysis, we can estimate KLS's fair value at AUD 4.14 per share. However, investors should remain cautious and monitor KLS's performance closely to account for potential risks and uncertainties.
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