CTOS Digital Berhad's (KLSE:CTOS) Intrinsic Value Is Potentially 25% Above Its Share Price
CTOS Digital Berhad's RM1.20 share price signals that it might be 20% undervalued
Analyst price target for CTOS is RM1.67, which is 11% above our fair value estimate
How far off is CTOS Digital Berhad (KLSE:CTOS) 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 forecast future cash flows of the company and discounting them back to today's value. The Discounted Cash Flow (DCF) model is the tool we will apply to do this. Believe it or not, it's not too difficult to follow, as you'll see from our example!
We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. 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.
See our latest analysis for CTOS Digital Berhad
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. To start off with, we need to estimate the next ten years of cash flows. 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, so we need to discount the sum of these future cash flows to arrive at a present value estimate:
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
Levered FCF (MYR, Millions)
RM112.5m
RM139.6m
RM160.5m
RM179.1m
RM195.5m
RM210.1m
RM223.4m
RM235.6m
RM247.2m
RM258.4m
Growth Rate Estimate Source
Analyst x4
Analyst x3
Est @ 14.96%
Est @ 11.55%
Est @ 9.16%
Est @ 7.48%
Est @ 6.31%
Est @ 5.49%
Est @ 4.92%
Est @ 4.52%
Present Value (MYR, Millions) Discounted @ 8.7%
RM103
RM118
RM125
RM128
RM129
RM127
RM125
RM121
RM117
RM112
("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = RM1.2b
We now need to calculate the Terminal Value, which accounts for all the future cash flows after this ten year period. 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 (3.6%) 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 8.7%.
Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = RM258m× (1 + 3.6%) ÷ (8.7%– 3.6%) = RM5.2b
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= RM5.2b÷ ( 1 + 8.7%)10= RM2.3b
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 RM3.5b. In the final step we divide the equity value by the number of shares outstanding. Relative to the current share price of RM1.2, the company appears a touch undervalued at a 20% 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.
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 CTOS Digital 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 8.7%, which is based on a levered beta of 0.918. 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.
Strength
Earnings growth over the past year exceeded the industry.
Debt is not viewed as a risk.
Weakness
Dividend is low compared to the top 25% of dividend payers in the Professional Services market.
Opportunity
Annual earnings are forecast to grow faster than the Malaysian market.
Trading below our estimate of fair value by more than 20%.
Threat
Dividends are not covered by cash flow.
Revenue is forecast to grow slower than 20% per year.
Although the valuation of a company is important, it 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. 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. What is the reason for the share price sitting below the intrinsic value? For CTOS Digital Berhad, there are three essential factors you should further examine:
Risks: As an example, we've found 1 warning sign for CTOS Digital Berhad that you need to consider before investing here.
Future Earnings: How does CTOS'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. Simply Wall St updates its DCF calculation for every Malaysian stock every day, so if you want to find the intrinsic value of any other stock 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.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
3 hours ago
- Yahoo
US High Growth Tech Stocks To Watch In Your Portfolio
As the U.S. market navigates through fluctuating economic indicators and trade discussions, with key indices like the S&P 500 and Nasdaq Composite experiencing recent highs, investors are keenly observing high-growth tech stocks that could potentially offer robust returns amidst this dynamic environment. In such a climate, identifying stocks with strong fundamentals and innovative potential can be crucial for those looking to enhance their portfolios in the fast-evolving technology sector. Name Revenue Growth Earnings Growth Growth Rating Super Micro Computer 24.99% 39.09% ★★★★★★ Circle Internet Group 32.27% 61.44% ★★★★★★ Mereo BioPharma Group 50.84% 58.22% ★★★★★★ Ardelyx 21.02% 61.29% ★★★★★★ TG Therapeutics 26.46% 38.75% ★★★★★★ AVITA Medical 27.42% 61.04% ★★★★★★ Alnylam Pharmaceuticals 23.72% 59.95% ★★★★★★ Alkami Technology 20.53% 76.67% ★★★★★★ Ascendis Pharma 35.07% 59.92% ★★★★★★ Lumentum Holdings 23.02% 103.97% ★★★★★★ Click here to see the full list of 225 stocks from our US High Growth Tech and AI Stocks screener. We're going to check out a few of the best picks from our screener tool. Simply Wall St Growth Rating: ★★★★☆☆ Overview: Tripadvisor, Inc. is an online travel company that offers travel guidance products and services globally, with a market capitalization of approximately $1.54 billion. Operations: Tripadvisor generates revenue primarily through its Brand Tripadvisor segment ($928 million), Viator ($855 million), and Thefork ($186 million). Tripadvisor has shown a robust earnings growth of 120.8% over the past year, significantly outpacing its industry's average of 16.4%. Despite recent volatility, including being dropped from several Russell indexes and then added to others, the company's strategic positioning in interactive media and services continues to evolve. Notably, its R&D investment aligns with an aggressive pursuit of innovation, crucial for maintaining competitive edge in a rapidly changing digital landscape. With an expected annual profit growth rate of 21.2%, Tripadvisor is poised to leverage its technological advancements and market adaptability for sustained growth. Unlock comprehensive insights into our analysis of Tripadvisor stock in this health report. Examine Tripadvisor's past performance report to understand how it has performed in the past. Simply Wall St Growth Rating: ★★★★☆☆ Overview: Olo Inc. provides an open SaaS platform tailored for restaurant operations across the United States, with a market capitalization of approximately $1.49 billion. Operations: The company generates revenue primarily through its Internet Software & Services segment, amounting to $299.11 million. Operating within the restaurant industry, it leverages a SaaS platform to enhance operational efficiency for its clients across the United States. Olo's recent inclusion in multiple Russell 2000 indexes underscores its growing relevance in the tech sector, particularly after turning profitable this year with a substantial earnings jump to $1.81 million from a previous loss. This shift is mirrored by a robust annual revenue growth forecast at 16%, outpacing the US market average of 8.7%. The firm's strategic re-engagement with Red Lobster, expanding into first-party catering and enhancing digital capabilities through AI-driven platforms like Sentiment, reflects its adaptive approach in a competitive landscape. These moves not only boost operational efficiency but also align with broader industry trends towards specialized tech partnerships over internal development, setting Olo up for sustained advancement in restaurant technology solutions. Delve into the full analysis health report here for a deeper understanding of Olo. Assess Olo's past performance with our detailed historical performance reports. Simply Wall St Growth Rating: ★★★★★☆ Overview: Similarweb Ltd. offers digital data and analytics services that support crucial business decision-making across various regions, including the United States, Europe, Asia Pacific, the United Kingdom, Israel, and other international markets; its market cap is approximately $654.94 million. Operations: Similarweb Ltd. generates revenue primarily from its online financial information provider segment, totaling $258.02 million. The company operates across multiple regions, delivering digital data and analytics to facilitate critical business decisions. Similarweb, despite a net loss of $9.26 million in Q1 2025, up from $2.73 million the previous year, demonstrates a robust commitment to innovation with its new AI-driven tools aimed at transforming digital market analytics. The company's recent product launches, including AI Agents that analyze real-time SEO trends and automate sales processes, leverage data from over 100 million websites and 4 million apps. This strategic focus on specialized AI solutions not only addresses specific customer needs but also positions Similarweb to capitalize on the growing demand for advanced digital intelligence tools. With revenues rising to $67.09 million this quarter and projected sales between $68.6 million and $69.0 million next quarter, Similarweb is navigating its growth trajectory by enhancing user engagement through technology that outpaces traditional methods. Dive into the specifics of Similarweb here with our thorough health report. Gain insights into Similarweb's past trends and performance with our Past report. Unlock more gems! Our US High Growth Tech and AI Stocks screener has unearthed 222 more companies for you to here to unveil our expertly curated list of 225 US High Growth Tech and AI Stocks. Already own these companies? Link your portfolio to Simply Wall St and get alerts on any new warning signs to your stocks. Simply Wall St is your key to unlocking global market trends, a free user-friendly app for forward-thinking investors. Explore high-performing small cap companies that haven't yet garnered significant analyst attention. Fuel your portfolio with companies showing strong growth potential, backed by optimistic outlooks both from analysts and management. Find companies with promising cash flow potential yet trading below their fair value. 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. Companies discussed in this article include TRIP OLO and SMWB. Have feedback on this article? Concerned about the content? with us directly. Alternatively, email editorial-team@
Yahoo
3 hours ago
- Yahoo
E-Commerce Update - Brizy Expands Into E-Commerce With New Shops Feature
Brizy, a well-known website creation platform, has expanded into the e-commerce space with the launch of Brizy Shops. This new Cloud add-on, integrating with Ecwid, allows users to build and manage online stores without the need for coding, maintaining the simplicity Brizy is known for. The launch aims to simplify the e-commerce journey by eliminating technical complexities, enabling quicker market entry, and providing full creative control over store design. Brizy Shops also supports the seamless integration of e-commerce with other Brizy Cloud content, offering a versatile solution for online retail. With these advancements, Brizy seeks to make e-commerce as accessible as content creation. In other market news, was trading firmly up 23.6% and finishing the session at HK$11.14. To gain an edge in the fast-evolving E-Commerce landscape, revisit our Market Insights article highlighting the transformative impact of logistics automation. Get in fast! closed at $76.39 up 4.1%. ended the day at $219.92 down 0.2%. Xockets filed patent infringement lawsuits against the company and AWS four days ago. settled at $110.71 down 2.9%. Last quarter, the company repurchased 56 million shares for $805 million. is rapidly advancing AWS and AI-driven services enhancing potential revenue growth. Discover the full narrative on this transformative shift. Get an in-depth perspective on all 259 E-Commerce Stocks, including Yunnan Botanee Bio-Technology GroupLTD, Intellect Design Arena and IONOS Group, by using our screener here. Interested In Other Possibilities? Trump has pledged to "unleash" American oil and gas and these 22 US stocks have developments that are poised to benefit. 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. Sources: Simply Wall St "Brizy Launches Brizy Shops: Design Your Dream Online Store, Code-Free" from on GlobeNewswire (published 30 June 2025) Companies discussed in this article include SEHK:2586 NYSE:NKE NasdaqGS:AMZN NYSE:BABA and OTCPK:MALG. This article was originally published by Simply Wall St. Have feedback on this article? Concerned about the content? with us directly. Alternatively, email editorial-team@
Yahoo
4 hours ago
- Yahoo
Investors more bullish on BorgWarner (NYSE:BWA) this week as stock grows 7.2%, despite earnings trending downwards over past year
We believe investing is smart because history shows that stock markets go higher in the long term. But if when you choose to buy stocks, some of them will be below average performers. For example, the BorgWarner Inc. (NYSE:BWA), share price is up over the last year, but its gain of 11% trails the market return. However, the stock hasn't done so well in the longer term, with the stock only up 8.3% in three years. Since it's been a strong week for BorgWarner shareholders, let's have a look at trend of the longer term fundamentals. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement. During the last year, BorgWarner actually saw its earnings per share drop 52%. So we don't think that investors are paying too much attention to EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics. We are skeptical of the suggestion that the 1.2% dividend yield would entice buyers to the stock. Revenue was pretty flat year on year, but maybe a closer look at the data can explain the market optimism. You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values). BorgWarner is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling BorgWarner stock, you should check out this free report showing analyst consensus estimates for future profits. BorgWarner provided a TSR of 13% over the last twelve months. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 4% per year over five year. It is possible that returns will improve along with the business fundamentals. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 3 warning signs for BorgWarner that you should be aware of. If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation). Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) 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.
