Using the 2 Stage Free Cash Flow to Equity, IFCA MSC Berhad fair value estimate is RM0.18
Current share price of RM0.21 suggests IFCA MSC Berhad is potentially trading close to its fair value
IFCA MSC Berhad’s peers seem to be trading at a higher premium to fair value based onthe industry average of -690%
How far off is IFCA MSC Berhad (KLSE:IFCAMSC) from its intrinsic value? Using the most recent financial data, we’ll take a look at whether the stock is fairly priced by taking the expected future cash flows and discounting them to today’s value. One way to achieve this is by employing the Discounted Cash Flow (DCF) model. There’s really not all that much to it, even though it might appear quite complex.
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 want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model.
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. Seeing as no analyst estimates of free cash flow are available to us, we have extrapolate the previous free cash flow (FCF) from the company’s last 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.
A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, 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)
RM9.30m
RM8.72m
RM8.43m
RM8.33m
RM8.35m
RM8.46m
RM8.63m
RM8.85m
RM9.11m
RM9.39m
Growth Rate Estimate Source
Est @ -10.59%
Est @ -6.30%
Est @ -3.30%
Est @ -1.19%
Est @ 0.28%
Est @ 1.31%
Est @ 2.03%
Est @ 2.53%
Est @ 2.89%
Est @ 3.13%
Present Value (MYR, Millions) Discounted @ 10%
RM8.4
RM7.2
RM6.3
RM5.6
RM5.1
RM4.7
RM4.3
RM4.0
RM3.7
RM3.5
(“Est” = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = RM53m
Story Continues
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 10%.
Terminal Value (TV)= FCF2035 × (1 + g) ÷ (r – g) = RM9.4m× (1 + 3.7%) ÷ (10%– 3.7%) = RM146m
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= RM146m÷ ( 1 + 10%)10= RM55m
The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is RM108m. To get the intrinsic value per share, we divide this by the total number of shares outstanding. Compared to the current share price of RM0.2, the company appears around fair value at the time of writing. 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:IFCAMSC Discounted Cash Flow February 1st 2026
Now 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 IFCA MSC 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 10%, which is based on a levered beta of 1.112. 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 IFCA MSC Berhad
Valuation is only one side of the coin in terms of building your investment thesis, and it ideally won’t be the sole piece of analysis you scrutinize for a company. DCF models are not the be-all and end-all of investment valuation. 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 example, changes in the company’s cost of equity or the risk free rate can significantly impact the valuation. For IFCA MSC Berhad, there are three fundamental aspects you should look at:
Risks: Every company has them, and we’ve spotted 2 warning signs for IFCA MSC Berhad (of which 1 doesn’t sit too well with us!) you should know about.
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!
Other Environmentally-Friendly Companies: Concerned about the environment and think consumers will buy eco-friendly products more and more? Browse through our interactive list of companies that are thinking about a greener future to discover some stocks you may not have thought of!
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.
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.