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Calculating The Intrinsic Value Of Wholetech System Hitech Limited (GTSM:3402) – Simply Wall St News

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Today we will run through one way of estimating the intrinsic value of Wholetech System Hitech Limited (GTSM:3402) by taking the expected future cash flows and discounting them to their present value. This is done using the Discounted Cash Flow (DCF) model. It may sound complicated, but actually it is quite simple!

Remember though, that there are many ways to estimate a company’s value, and a DCF is just one method. 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.

Check out our latest analysis for Wholetech System Hitech

Step by step through the calculation

As Wholetech System Hitech operates in the semiconductor sector, we need to calculate the intrinsic value slightly differently. In this approach dividends per share (DPS) are used, as free cash flow is difficult to estimate and often not reported by analysts. Unless a company pays out the majority of its FCF as a dividend, this method will typically underestimate the value of the stock. We use the Gordon Growth Model, which assumes dividend will grow into perpetuity at a rate that can be sustained. For a number of reasons a very conservative growth rate is used that cannot exceed that of a company’s Gross Domestic Product (GDP). In this case we used the 10-year government bond rate (0.7%). The expected dividend per share is then discounted to today’s value at a cost of equity of 9.6%. Compared to the current share price of NT$32.0, the company appears about fair value at a 4.9% discount to where the stock price trades currently. Remember though, that this is just an approximate valuation, and like any complex formula – garbage in, garbage out.

Value Per Share = Expected Dividend Per Share / (Discount Rate – Perpetual Growth Rate)

= NT$3.0 / (9.6% – 0.7%)

= NT$33.6

GTSM:3402 Intrinsic value, January 26th 2020

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 Wholetech System Hitech 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 9.6%, which is based on a levered beta of 1.439. 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.

Next Steps:

Although the valuation of a company is important, it shouldn’t be the only metric you look at when researching a company. The DCF model is not a perfect stock valuation tool. Rather it should be seen as a guide to “what assumptions need to be true for this stock to be under/overvalued?” If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. For Wholetech System Hitech, I’ve compiled three important factors you should further research:

  1. Financial Health: Does 3402 have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Other High Quality Alternatives: Are there other high quality stocks you could be holding instead of 3402? 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 GTSM every day. If you want to find the calculation for other stocks just search here.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.

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Ford goes hi-tech with EV rival

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The numbers surrounding the first hybrid Ford sold in Australia are worth a closer look.

Based on its medium-sized SUV, the new Ford Escape ST-Line PHEV serves up a plug-in hybrid experience to rival the Mitsubishi Outlander.

Combining a 2.5-litre four-cylinder petrol engine with an electric motor and 14.4kWh lithium-ion battery, the Escape offers an impressive 167kW of power. Able to drive using electricity alone for up to 50 kilometres, the Escape has an official fuel figure of 1.5L/100km.

Like all plug-in hybrids, that figure is the result of a controlled formula rather than a true reflection of its daily consumption. Drive for 30 kilometres and you might use zero fuel. Drive interstate and the battery will be quickly depleted, resulting in fuel consumption comparable to regular models.

media_cameraThe hybrid Escape offers up to 50 kilometres of electric running.

Regenerative braking helps top up the Escape’s battery, though customers will need to plug it into mains power to make the most of its green credentials.

The technology does not come cheap.

Restricted to the sporty mid-grade ST-Line trim, the front-drive plug-in hybrid costs $52,940 plus on-road costs. That’s $14,950 more than the regular front-drive ST-Line which offers more powerful 183kW/387Nm outputs and 8.6L/100km economy. All-wheel-drive traction adds $3000 to the petrol model’s bill – it’s not available on the hybrid.

The Escape will join Ford’s new Puma compact SUV in the third quarter of 2020.
media_cameraThe Escape will join Ford’s new Puma compact SUV in the third quarter of 2020.

The petrol-electric model is priced close to the $53,990 plus on-roads of Mitsubishi’s Outlander PHEV Exceed, and well higher than the non-plug-in Toyota RAV4 Hybrid which starts at $35,140 plus on-roads.

Toyota Australia chooses not to import plug-in hybrid versions of the RAV4.

Ford might face a similar choice surrounding the Mustang Mach-E, the brand’s first fully-electric SUV.

Kay Hart, president of Ford Australia, worked on the Mach-E during her previous posting in Detroit.

The Mach-E isn’t available in right-hand-drive for now, and Hart isn’t convinced Australia is ready for electric cars.

Ford Australia isn’t racing to introduce the electric Mustang Mach-E.
media_cameraFord Australia isn’t racing to introduce the electric Mustang Mach-E.

”The acceptance of EV technology is clearly growing in the Australian market today – you can clearly see that today – across a number of different types of electrification,” she says.

“I have no doubt [acceptance] will come … and then maybe, hopefully, we can bring it to market.”

Ford’s Escape range opens with an entry-level model featuring 18-inch wheels, LED headlights, smart keys, a reversing camera and front and rear parking sensors for $35,990 plus on-road costs.

That car features the same 2.0-litre turbo engine as the ST-Line, one driving the front wheels through an eight-speed automatic transmission.

The Escape shares its bones with Ford’s Focus hatchback.
media_cameraThe Escape shares its bones with Ford’s Focus hatchback.

Standard safety kit includes autonomous emergency braking with pedestrian detection, lane keeping assistance, blind spot monitoring and more. An 8-inch infotainment system brings wireless phone charging, Apple CarPlay, Android Auto and sat nav with “Australian accent recognition”. Strewth.

The new “FordPass”connectivity suite also features, giving customers a chance to remotely access key features through their smartphone.

ST-Line models add a body kit, dark cabin elements, a 12.3-inch digital instrument cluster and more for $37,990 plus on-roads.

ST-Line models look purposeful on the road.
media_cameraST-Line models look purposeful on the road.

A range-topping Escape Vignale builds on all of the above with chrome exterior styling, smarter LED headlamps, 19-inch wheels and niceties such as smart keys, heated leather-trimmed seats with 10-way front adjustment, a power tailgate, self-parking system and more for $46,590 plus on-roads.

The Escape arrives locally in the third quarter of 2020.

Originally published as Ford goes hi-tech with EV rival

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SambaNova Systems raises $250 million for software-defined AI hardware

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The infrastructure required to handle AI workloads is often as complex as it is sprawling, but a cottage industry of startups has emerged whose focus is developing solutions for end customers. SambaNova Systems is one such startup — the Palo Alto, California-based firm, which was founded in 2017 by Rodrigo Liang and Stanford Professors Kunle Olukotun and Chris Ré, provides systems that run AI and data-intensive apps from the datacenter to the edge. In a reflection of investors’ ravenous appetite for the market, it today announced that it’s raised $250 million in series C funding.

“Raising $250M in this funding round with support from new and existing investors puts us in a unique category of capitalization,” said CEO Liang, a veteran of Sun Microsystems and Oracle. “This enables us to further extend our market leadership in enterprise computing.”

SambaNova’s products — and its customers, for that matter — remain largely under lock and key, but the company previously revealed it’s developing “software-defined” devices inspired by DARPA-funded research in efficient AI processing.  Leveraging a combination of algorithmic optimizations and custom board-based hardware, SambaNova claims it’s able to dramatically improve the performance and capability of most AI-imbued apps.

According to Olukotun, SambaNova’s platform is designed to scale from tiny electronic devices to enormous remote datacenters. “SambaNova’s innovations in machine learning algorithms and software-defined hardware will dramatically improve the performance and capability of intelligent applications,” he added. “The flexibility of the SambaNova technology will enable us to build a unified platform providing tremendous benefits for business intelligence, machine learning, and data analytics.”

One thing’s for certain: SambaNova’s founders are a decorated bunch. Olukotun — who recently received the IEEE’s Computer Society’s Harry H. Goode Memorial Award — is the leader of the Stanford Hydra Chip Multiprocessor (CMP) research project, which produced a chip design that pairs four specialized processors and their caches with a shared secondary cache. As for Ré, he’s an associate professor in the Department of Computer Science at Stanford University in the InfoLab and a MacArthur Genius Award recipient who’s also affiliated with the Statistical Machine Learning Group, Pervasive Parallelism Lab, and Stanford AI Lab.

The AI chip market is anticipated to be worth $91.18 billion by 2025, and dedicated AI chip startups raised $1.5 billion in 2017 alone, among them Kneron, Blaize, AIStorm, Graphcore, Quadric, and Esperanto Technologies. But SambaNova’s total raised — over $450 million to date, following a $56 million series A funding round in March 2018 and a $150 million serise B funding round in April 2019 — is nothing to shake a stick at.BlackRock led the series C round with participation from existing investors including GV, Intel Capital, Walden International, WRVI Capital, and Redline Capital.

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Tesla and Industry Criticized at Hearing on Autopilot System

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Tesla did not respond to a request for comment, but the company has previously said that Autopilot makes its vehicles safer. In the fourth quarter of 2019, the company reported one accident for every three million miles driven in a Tesla with Autopilot engaged. Over all, the national rate was one accident for every 498,000 miles driven in 2017, according to N.H.T.S.A.

Still, the electric carmaker faces scrutiny on multiple fronts. The N.T.S.B. and the traffic safety administration are currently investigating more than a dozen crashes in which Autopilot might have played a role.

In the 2018 accident, Autopilot had been engaged for nearly 19 minutes, according to the safety board’s investigation. Mr. Huang put his hands on and off the wheel several times during that period and, in the final minute before the crash, the vehicle detected his hands on the wheel three times for a total of 34 seconds. It did not detect his hands on the wheel in the six seconds before impact.

Tesla’s event data recorders routinely collect a wide variety of information, such as location, speed, seatbelt status, the position of the driver’s seat, the rotation angle of the steering wheel and pressure on the accelerator pedal.

Mr. Huang had been traveling in his 2017 Tesla Model X sport utility vehicle on U.S. 101 in Mountain View when the car struck a median barrier at about 71 miles per hour. The speed limit was 65 m.p.h. The collision spun the car, which later hit two other vehicles and caught fire.

Mr. Huang had previously complained to family of problems with Autopilot along that stretch of highway, his brother told investigators. Data from the vehicle confirmed at least one similar episode near the area dividing the two highways, according to documents from the investigation.

The first known fatal crash with Autopilot in use occurred in May 2016 in Florida, when a Tesla failed to stop for a truck that was turning in front of it on a Florida highway. The vehicle hit the trailer, continued traveling underneath it and veered off the road. The driver of that car, Joshua Brown, was killed in the accident.

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