Is FM Global Logistics Holdings Berhad (KLSE:FM) Trading At A 38% Discount?

Key Insights The projected fair value for FM Global Logistics Holdings Berhad is RM0.98 based on 2 Stage Free Cash Flow to Equity Current share price of RM0.60 suggests FM Global Logistics Holdings Berhad is potentially 38% undervalued Industry average discount to fair value of 17% suggests FM Global Logistics Holdings Berhad's peers are currently trading at a lower discount How far off is FM Global Logistics Holdings Berhad (KLSE:FM) 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 their present value.

We will use the Discounted Cash Flow (DCF) model on this occasion. 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. For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you. This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality. The Calculation We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows.

Generally the first stage is higher growth, and the second stage is a lower growth phase. 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.

Generally we assume that a dollar today is more valuable than a dollar in the future, so we discount the value of these future cash flows to their estimated value in today's dollars: 10-year free cash flow (FCF) estimate 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Levered FCF (MYR, Millions) RM60.3m RM51.2m RM46.3m RM43.8m RM42.5m RM42.2m RM42.4m RM43.1m RM44.0m RM45.1m Growth Rate Estimate Source Est @ -23.21% Est @ -15.13% Est @ -9.48% Est @ -5.52% Est @ -2.75% Est @ -0.81% Est @ 0.54% Est @ 1.49% Est @ 2.16% Est @ 2.62% Present Value (MYR, Millions) Discounted @ 10% RM54.6 RM42.0 RM34.4 RM29.5 RM26.0 RM23.3 RM21.3 RM19.6 RM18.1 RM16.8 ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = RM286m 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 (3.7%) 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 10%. Terminal Value (TV)= FCF2035 × (1 + g) ÷ (r – g) = RM45m× (1 + 3.7%) ÷ (10%– 3.7%) = RM703m Present Value of Terminal Value (PVTV)= TV / (1 + r)10= RM703m÷ ( 1 + 10%)10= RM262m 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 RM548m.

The last step is to then divide the equity value by the number of shares outstanding. Relative to the current share price of RM0.6, the company appears quite good value at a 38% 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:FM Discounted Cash Flow January 13th 2026 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 FM Global Logistics Holdings 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 1.114. 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.

See our latest analysis for FM Global Logistics Holdings Berhad Moving On: Whilst important, the DCF calculation is only one of many factors that you need to assess for a company. DCF models are not the be-all and end-all of investment valuation. Rather it should be seen as a guide to "what assumptions need to be true for this stock to be under/overvalued?" For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. Why is the intrinsic value higher than the current share price? For FM Global Logistics Holdings Berhad, we've compiled three essential items you should further research: Risks: For instance, we've identified 2 warning signs for FM Global Logistics Holdings Berhad that you should be aware of.

Future Earnings: How does FM'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. 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.