Using the 2 Stage Free Cash Flow to Equity, Mah Sing Group Berhad fair value estimate is RM1.14
With RM1.03 share price, Mah Sing Group Berhad appears to be trading close to its estimated fair value
The RM1.75 analyst price target for MAHSING is 54% more than our estimate of fair value
How far off is Mah Sing Group Berhad (KLSE:MAHSING) from its intrinsic value? Using the most recent financial data, we’ll take a look at whether the stock is fairly priced 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. Believe it or not, it’s not too difficult to follow, as you’ll see from our example!
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.
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We’re using the 2-stage growth model, which simply means we take in account two stages of company’s growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. In the first stage we need to estimate the cash flows to the business over the next ten years. 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, and so the sum of these future cash flows is then discounted to today’s value:
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
Levered FCF (MYR, Millions)
RM325.2m
RM381.5m
RM348.9m
RM332.0m
RM324.4m
RM322.8m
RM325.3m
RM330.6m
RM338.1m
RM347.3m
Growth Rate Estimate Source
Analyst x2
Analyst x2
Est @ -8.54%
Est @ -4.86%
Est @ -2.29%
Est @ -0.49%
Est @ 0.77%
Est @ 1.65%
Est @ 2.27%
Est @ 2.70%
Present Value (MYR, Millions) Discounted @ 13%
RM287
RM297
RM240
RM202
RM174
RM153
RM136
RM122
RM110
RM100
(“Est” = FCF growth rate estimated by Simply Wall St) Present Value of 10-year Cash Flow (PVCF) = RM1.8b
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 3.7%. We discount the terminal cash flows to today’s value at a cost of equity of 13%.
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= RM3.8b÷ ( 1 + 13%)10= RM1.1b
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 RM2.9b. To get the intrinsic value per share, we divide this by the total number of shares outstanding. Compared to the current share price of RM1.0, the company appears about fair value at a 9.5% discount to where the stock price trades currently. The assumptions in any calculation have a big impact on the valuation, so it is better to view this as a rough estimate, not precise down to the last cent.
KLSE:MAHSING Discounted Cash Flow November 9th 2025
We would point out that 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 Mah Sing Group Berhad 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 13%, which is based on a levered beta of 1.594. 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 Mah Sing Group Berhad
Strength
Weakness
Opportunity
Threat
Although the valuation of a company is important, it shouldn’t be the only metric you look at when researching a company. It’s not possible to obtain a foolproof valuation with a DCF model. Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued. For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. For Mah Sing Group Berhad, there are three further items you should assess:
Risks: Every company has them, and we’ve spotted 1 warning sign for Mah Sing Group Berhad you should know about.
Future Earnings: How does MAHSING’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. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the KLSE every day. If you want to find the calculation for other stocks just search here.
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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.
