(07-06-2021, 10:31 AM)corydorus Wrote: [ -> ]Need some help here. Anyone know what is the Beta of NLT ?
What is your reference to get the Beta value ?
Using the past 5 years of yahoo closing price data, I get that NLT has a beta of 0.33 compared to STI.
In other words, NLT's stock price was 67% less volatile than the STI. There are many days when NLT's stock price closes unchanged from the previous day.
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(06-06-2021, 12:56 PM)tanjm Wrote: [ -> ]It is entirely possible that cost of equity is 10%.
The following study estimated a COE (for healthcare infrastructure) of between 12 and 15% (see box 5 on pg 22) for a number of developing markets, not counting a illiquidity premium. No doubt, Singapore is a better bet, but 10% is within the ballpark.
https://ppiaf.org/documents/5838/download
Thanks tanjm. Looking at the study, in box 5, they:
1) Estimate that country's market's equity risk premium (EMPR).
They get 8.55-9.75% for these countries.
The estimate because emerging markets do not have a long price history. Normally we would use the price history (historical risk premium approach).
Googling for Singapore Equity Risk Premium I get:
4.72% from
NYU, Jan 2021
5.7% (
Bank of Portugal Economic Bulletin) average from 1995 to 2008
These numbers are a lot lower than the study.
If anyone has the Singapore Equity Risk Premium a good source like Bloomberg, I'd appreciate it.
2) Calculate the project's beta. They do a lot of work to find comparable sectors, deliver them, and de-lever therm, re-lever them. Giving "Adjusted Beta". All their values are more than 1.
I calculated NLT's beta (compared to STI) at 0.33, based on 5 years' closing prices.
3) Calculate the cost of equity. Can't see exactly how they did it, but its usually "Market Risk Premium" times "stocks beta", with the risk free rate thrown in.
My market risk premium and beta are so much lower than theirs, the cost of equity would be drastically lower. I can easily get 5% or below.
Summary for WACC:
They might decrease it because:
- Lower interest rates, NLT's low share price volatility and STI's low market risk premium.
- More popular to lower everyone's phone bills than to maintain dividends.
- Relief to squeezed telcos.
Why they might maintain or limit the decrease:
- An tanjm said: "it makes no sense that the net WACC would gyrate so violently. It scares off investors".
- No election coming up. Save ammo to use it later.
We don't know what IMDA will do, but either could be justified. I think they lower it a bit to see how much they can get away with.
