Dividend Discount Model

Wuliangye Yibin Co., Ltd. (000858.SZ)

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AI Disclaimer: This article was generated with the assistance of AI. AI is prone to errors. Verify all data independently before making any investment decision. 1. Executive Summary This independent research report provides a comprehensive, data-driven fundamental analysis of Wuliangye Yibin Co., Ltd. (000858.SZ) to assess its suitability for a conservative value investor whose primary … Read more

Where are the Hong Kong Real Estate Opportunities in 2025?

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Executive Summary This report presents a quantitative analysis of a peer group of Hong Kong-listed real estate companies and Real Estate Investment Trusts (REITs). The objective is to estimate the intrinsic value of these securities using the Gordon Growth Model (GGM) and to calculate their implied expected rates of return. The analysis utilizes end-of-day closing … Read more

Dividends Matter More Than Free Cash Flow for Minority Investors

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Introduction Recently a friend posed a question as to why I choose to use dividend investing as the foundation for building my retirement portfolio. To him, and many others, this goes against the conventional wisdom of using Free Cash Flow (FCF) as the primary metric for stock valuation. This article is my amateurish attempt to … Read more

Sino Land – an undervalued Hong Kong developer

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Research Report on Sino Land Company Limited (Stock Ticker: 00083.HK) Date: 2025-02-12Closing price: HKD 7.73 1. Company Background Sino Land Company Limited, founded in 1971, is a leading real estate developer and investment holding company based in Hong Kong. The company is a subsidiary of Tsim Sha Tsui Properties Limited and operates under the umbrella of … Read more

Valuing the large China state-owned Banks using Gordon Growth Model

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Valuing China Banks using Gordon Growth Model

Introduction The Gordon Growth Model, or GGM, is a valuation method for calculating the intrinsic value of a dividend-paying stock. The model is particularly suitable for valuing mature companies with stable operations and sustainable growth in dividends. In this article, a valuation exercise is carried out using the GGM to estimate the intrinsic value of … Read more

Gordon Growth Model – A great method to value dividend stocks

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Gordon Growth Model

Introduction The Gordon Growth Model, commonly known as GGM, is a simplified form of the dividend discount model that is used for estimating the intrinsic value of dividend-paying stocks. The GGM is a straight-forward but effective model that calculates the intrinsic value of a stock based on the present value of its future dividends, which … Read more

Sasseur REIT (CRPU.SI) – Estimating the Intrinsic Value, Return on Investment and Margin of Safety using the Dividend Discount Model

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Sasseur Reit intrinsic value

Summary

This article looks at the valuation of Sasseur Reit shares listed on the Singapore Exchange (Ticker: CRPU.SI). The Dividend Discount Model is used to estimate the share’s Intrinsic Value, Expected Return on Investment, and its Margin of Safety.

Introduction to Sasseur Reit

Sasseur REIT is a Singapore Exchange Mainboard-listed real estate investment trust (REIT) (SGX). It is Asia’s first publicly traded outlet mall REIT, with four outlets in China. Sponsored by Sasseur Cayman Holding Limited (Sponsor), a leading outlet operator with 16 outlets in operation as of 31 December 2022 – four of which are in Sasseur REIT’s portfolio.

Sasseur REIT is well positioned to benefit from China’s rapidly expanding outlet sector, which is being driven by rising consumption from the country’s rapidly expanding middle class. As of December 31, 2022, Sasseur REIT’s portfolio included four locations in Chongqing, Bishan, Hefei, and Kunming, with a total asset value of RMB 8.495 billion.

Dividend Discount Model

The dividend discount model is one of several methods for determining stock value. The procedure is similar to the discounted cash flow model, except that dividends are substituted for free cash flow as the cash flowing to the investor. One advantage of this method is that dividend information is easily accessible from the company’s financial reports. It is also my preferred method for valuing dividend-paying stocks. Dividends are tangible income for the investor and represent the return on investment. Dividend cash allows the investor to reinvest the proceeds in the same stock or in other, more appealing stocks, achieving the all-important compounding effect.

In the following discussion, the Dividend Discount Model is used to determine the Intrinsic Value, Expected Return on Investment, and Margin of Safety of Sasseur Reit (CRPU.SI) shares listed on the Singapore Exchange.

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Estimating the Intrinsic Value, Return on Investment and Margin of Safety of Chongqing Rural Commercial Bank using the Dividend Discount Model

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Chongqing Rural Commercial Bank (3618.HK)

Summary

This article looks at the valuation of Chongqing Rural Commercial Bank shares listed on the Stock Exchange of Hong Kong (Ticker: 03618.HK). The Dividend Discount Model is used to estimate the share’s Intrinsic Value, Expected Return on Investment, and its Margin of Safety.

Introduction to Chongqing Rural Commercial Bank

Chongqing Rural Commercial Bank Co., Ltd., formerly Chongqing Rural Credit Cooperative, was founded in 1951 and has a 70-year history. Chongqing was selected as one of the first batch of pilot provinces and cities for the nationwide rural credit cooperative reform in 2003.

The rural commercial bank was established in 2008 as a limited liability joint stock company to acquire all assets and liabilities of 38 County (District) Rural Credit Cooperative Unions.

The bank’s H-share was successfully listed on the Main Board of the Hong Kong Stock Exchange in 2010, making it the first listed rural commercial bank in China as well as the first listed bank in western China.

The bank successfully listed on the main board of the Shanghai Stock Exchange in 2019, becoming China’s first rural commercial bank with A+H dual listing and the first bank with A+H dual listing in western China.

The main businesses of the bank are corporate finance, inclusive finance, retail finance, and financial markets:

  • The corporate finance business primarily offers a wide range of corporate finance products and services to businesses and public institutions, government agencies, and financial institutions, such as corporate loans and deposits, trade financing loans, bills, and guarantees.
  • The primary business of Inclusive Finance is to provide financial services to new agricultural business entities such as small and micro enterprises, farmers, and farmers’ professional cooperatives.
  • The retail finance business consists of personal loan and deposit business, bank card business, and intermediary business.
  • The financial market business consists primarily of capital operation, investment banking, and asset custody.

Dividend Discount Model

The Dividend Discount Model is one of several methods for determining stock value. The procedure is similar to the Discounted Cash Flow model, except that dividends are substituted for free cash flow as the cash flowing to the investor. One advantage of this method is that dividend information is easily accessible from the company’s financial reports. It is also my preferred method for valuing dividend-paying stocks. Dividends are tangible income for the investor and represent the return of investment and return on investment. Dividend cash allows the investor to reinvest the proceeds in the same stock or in other more appealing stocks, achieving the all-important compounding effect.

This article describes the use of the Dividend Discount Model to determine the Intrinsic Value, Expected Return on Investment, and Margin of Safety of Chongqing Rural Commercial Bank (03618.HK) shares listed on the Stock Exchange of Hong Kong.

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Estimating the Intrinsic Value, Return on Investment and Margin of Safety of China Telecom using the Dividend Discount Model

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Share Valuation of China Telecom H-share (00728.HK)

Summary

This article looks at the valuation of China Telecom shares trading on the Stock Exchange of Hong Kong (Ticker: 00728.HK). The Dividend Discount Model is used to estimate the share’s Intrinsic Value, Expected Return on Investment, and its Margin of Safety.

Introduction

China Telecom is one of the 3 giant state-owned companies which dominate the telecommunications industry in China, the other two being China Mobile and China Unicom. On November 12, 2020, Trump issued Executive Order 13959 prohibiting US investors from owning securities of Chinese companies which have been tagged by the US as being Chinese military companies, including China Telecom. ADRs of China Telecom trading on the New York Stock Exchange were suspended on January 11, 2021 and were subsequently delisted.

Following the US action against its ADRs, China Telecom successfully applied for secondary listing on the Shanghai Stock Exchange and its A-shares began trading in August 2021, raising over 54 billion RMB for the company. The IPO was a resounding success, attracting 20 strategic investors, including Huawei Technologies and Bilibili.

As part of the requirement for its secondary listing on the Shanghai Stock Exchange, China Telecom made some important changes to its dividend policy:

China Telecom announces new Dividend Policy
China Telecom announces new Dividend Policy

Three important points to note here with regards to the new dividend policy.

  • China Telecom to its increase dividend payout ratio for FY2021 to not less than 60%.
  • China Telecom also committed “that within three years after the A Share Offering and Listing, the profit to be distributed by the Company in cash for each year will gradually increase to 70% or above of the profit attributable to equity holders of the Company for that year.” (Source: Company announcement 21 June 2021)
  • In contrast to the current policy of annual payouts, dividends shall be paid on an interim basis starting from FY 2022.

The new dividend policy is important in the sense that it increases the frequency of cash flow for investors, and it also serves to reduce the amount of surplus cash held on China Telecom’s books and will potentially boost the Return on Equity.

Dividend Discount Model is one of many methods for valuing stocks. The procedure is similar to the Discounted Cash Flow model, with the free cash flow being substituted dividends as the cash flowing to the investor. One advantage of using this method is that dividends data are easily available from the company’s financial reports. It is also my preferred valuation method for dividend-paying stocks. The reason being that dividends are tangible income to the investor and it represents the return of investment and return on investment. The cash from dividends allows the investor to reinvest the proceeds into the same stock or into other more attractive stocks to achieve the all important compounding effect.

This article describes the use of the Dividend Discount Model to determine the Intrinsic Value, Expected Return on Investment, and Margin of Safety of China Telecom (00728.HK) shares trading on the Stock Exchange of Hong Kong.

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Purchasing H-shares of China CITIC Bank (0998.HK) for my Dividend Income Portfolio

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China CITIC Bank - Share Valuation

Summary

In this article, I examine the valuation of the H-share of China CITIC Bank (0998.HK) from the view point of a Dividend Investor. The Dividend Discount Model (DDM) is used to determine its Intrinsic Value, Expected Return on Investment, and its Margin of Safety. DDM is a form of Discounted Cash Flow Analysis in which the type of cash flow used in the analysis is the Company’s regular dividend payments, discounted at the appropriate rate of return to determine the Intrinsic Value of the stock.

Introduction

The recent Evergrande debt crisis has resulted in a substantial sell down in the Hong Kong equities market, with the bulk of the price decline hitting China H-shares. A few companies on my watch list experienced price corrections which brought them into value stock territory, at least that is my humble opinion. I have recently published articles on 2 of them, namely Ping-An Insurance, Agricultural Bank of China. In this article, I would like to share my thoughts on another recent addition to my Dividend Income Portfolio, China Citic Bank (0998.HK).

As my investment philosophy evolves over time, I find myself favoring stocks which provide attractive dividends at inexpensive valuations. I used the following set of questions to help determine the Bank’s investment worthiness:

  • Does the Bank have a good long-term dividend track record?
  • Does the Bank currently offer an attractive dividend yield (above the average yield of Hang Seng Index constituents)?
  • Is the current payout ratio safe and sustainable?
  • What is the expected return on investment of the share over a 10-year period? Majority of recommendations by financial analysts have a 12 month time horizon. I find the 10-year period to be more suitable for a dividend income stock, especially one which is part of a retirement dividend income portfolio.
  • Does the stock price offer a sufficient margin of safety to its intrinsic value?
  • Are the shares considered attractive when measured against the traditional value investing yardsticks? A good dividend stock with inexpensive valuation will minimize the risk of capital impairment and increase the probability of capital gains.
  • Does the stock have a history of consistent earnings growth?

With the above questions in mind, let us delve into the analysis of the company to find the answers.

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