2022) APHWF

Consumer Defensive Household & Personal Products

Based in Ontario Canada the Apollo Healthcare Corp Apollo is one of the largest private label personal care product manufacturers in North America developing and manufacturing retailer branded and private label products for major North American retailers. Apollos products are sold in tens of thousands of stores across North America and its customer base spans across major North American grocery drug and mass merchandise retailers users as well as wholesale clubs. In addition to private label Apollo also manufactures products on a contract basis for many of its clients.

OTCPK:APHWF - Post by User

Apollo Healthcare Corp Warrants (03/01/2022) > Simply Wall St Fair value for AHC is at $76.29/Share

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Post by Birdwatchon Nov 03, 2020 11:04pm

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Post# 31834453

Simply Wall St Fair value for AHC is at $76.29/Share

Below are the data sources, inputs and calculation used to determine the intrinsic value for Apollo Healthcare.

TSX:AHC Discounted Cash Flow Data Sources
Data Point	Source	Value
Valuation Model		2 Stage Free Cash Flow to Equity
Levered Free Cash Flow	Extrapolated from most recent financials.	See below
Discount Rate (Cost of Equity)	See below	7.1%
Perpetual Growth Rate	5-Year Average of CA Long-Term Govt Bond Rate	1.7%

An important part of a discounted cash flow is the discount rate, below we explain how it has been calculated.

Calculation of Discount Rate/ Cost of Equity for TSX:AHC
Data Point	Calculation/ Source	Result
Risk-Free Rate	5-Year Average of CA Long-Term Govt Bond Rate	1.7%
Equity Risk Premium	S&P Global	6.0%
Personal Products Unlevered Beta	Simply Wall St/ S&P Global	0.75
Re-levered Beta	= 0.33 + [(0.66 * Unlevered beta) * (1 + (1 - tax rate) (Debt/Market Equity))] = 0.33 + [(0.66 * 0.746) * (1 + (1 - 26.5%) (20.11%))]	0.903
Levered Beta	Levered Beta limited to 0.8 to 2.0 (practical range for a stable firm)	0.903
Discount Rate/ Cost of Equity	= Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium) = 1.66% + (0.903 * 6.01%)	7.09%

Discounted Cash Flow Calculation for TSX:AHC using 2 Stage Free Cash Flow to Equity

The calculations below outline how an intrinsic value for Apollo Healthcare is arrived at by discounting future cash flows to their present value using the 2 stage method. We use analyst's estimates of cash flows going forward 10 years for the 1st stage, the 2nd stage assumes the company grows at a stable rate into perpetuity.

TSX:AHC DCF 1st Stage: Next 10 years cash flow forecast
	Levered FCF (CAD, Millions)	Source	Present Value Discounted (@ 7.09%)
2021	54.52	Est @ 104.72%	50.91
2022	94.76	Est @ 73.8%	82.63
2023	144.19	Est @ 52.16%	117.4
2024	197.55	Est @ 37.01%	150.21
2025	249.71	Est @ 26.41%	177.3
2026	297.11	Est @ 18.98%	196.99
2027	338.07	Est @ 13.79%	209.3
2028	372.38	Est @ 10.15%	215.28
2029	400.68	Est @ 7.6%	216.31
2030	424	Est @ 5.82%	213.74
Present value of next 10 years cash flows			CA$1,630

TSX:AHC DCF 2nd Stage: Terminal Value
	Calculation	Result
Terminal Value	FCF₂₀₃₀ × (1 + g) ÷ (Discount Rate – g) = CA$424.001 x (1 + 1.66%) ÷ (7.09% - 1.66% )	CA$7,938.66
Present Value of Terminal Value	= Terminal Value ÷ (1 + r)¹⁰ CA$7,939 ÷ (1 + 7.09%)¹⁰	CA$4,001.97

TSX:AHC Total Equity Value
	Calculation	Result
Total Equity Value	= Present value of next 10 years cash flows + Terminal Value = CA$1,630 + CA$4,002	CA$5,631.97
Equity Value per Share (CAD)	= Total value / Shares Outstanding = CA$5,632 / 74	CA$76.29