Posted by DK66 > 2019-09-29 19:24 | Report Abuse

The capital structure of all Vietnam BOT contracts in power plant has debt/equity ratio of 75:25. This is not a coincident, it is the capital structure agreed with the Vietnam government.

The capital requirement is too huge and hence the borrowing cost is too big to be left out of consideration in decision making.

Even the loan is on non-recourse basis so as not to cause to much leverage to hinder future borrowing capacity of the parent companies.

Finally, I wish to thank Kcchongnz for his constructive inputs. Thank you.

Posted by DK66 > 2019-09-29 19:35 | Report Abuse

Valuelurker,

RM300-500m is my own unsubstantiated estimates.

The rests are derived from various methodologies which I have provided clear workings.

Even if you think your estimates are more superior than mine, there is no need to call name unless I have in some ways got into your nerves. Do you have other identities?

I never insisted on anyone to believe in my estimates Why force me to believe in your estimates which you are unable to elaborate ?

You are not obligated to me and neither am I to you. Why bother me ?


p/s I m saving this for future reference.

----------------------------
valuelurker Management said in AGM 2019 that its RM80-100mil..?

And here in this post, you say its RM197-263mil (previously it was RM300-500mil lol)

That's why its dangerous to give stupid people who are nerds (no, nerds are not sharp theyre dumb people who read a lot but are really slow and never quite get it) the internet, they read a little and think they know how its done

No, I do not have access to management, neither am I related to JAKS in anyway whatsoever

1. A long time ago, I mentioned the construction 'profits' are not real, they are merely accounting profits

2. I shared articles / links on the payback period and IRR from Jaks management

3. I mentioned profits attributable to Jaks was RM80-100mil a long time ago

And still this donkey66 doesnt wanna believe

Make sure you dont delete this article. A

nd make sure you hold your stock, in fact better keep adding and sialang since by your calculations, NPV per share is worth min RM2.93

Sometimes, you have to lose money to learn the one truth:

Youre pro or youre a noob, thats life
29/09/2019 5:59 PM

Posted by DK66 > 2019-09-29 20:09 | Report Abuse

Let me try to explain why I have to add the interest cost to get the net operating cash flow. It is mathematical.

Project investment = US$1870m
Payback Period = 8 years

Calculation to determine the payback period;

Project Investment (PI)/(Net operating cash flow (OCF) - Interest costs(I)) = Payback period (P)

Hence,

PI/(OCF - I) = P
OCF = PI/P + I

OCF = 1870/8 + I
Operating Cash Flow = US$233.7m + Interest costs
29/09/2019 8:08 PM

Posted by SarifahSelinder > 2019-09-29 21:30 | Report Abuse

Assume USD 1870m all PPE

Assume...

PAT = OCF - Depreciation 

PAT = USD 234m - 1870/25m Depreciation

PAT = USD 234m - 75m 

PAT = RM 159m x 4.2

PAT = RM 668m 

30% PAT = RM 200m

40% PAT = RM 267m 

Jz taking the calculation a bit further..

Posted by kcchongnz > 2019-09-29 22:21 | Report Abuse

Posted by DK66 > Sep 29, 2019 8:09 PM | Report Abuse
Let me try to explain why I have to add the interest cost to get the net operating cash flow. It is mathematical.
Project investment = US$1870m
Payback Period = 8 years
Calculation to determine the payback period;
Project Investment (PI)/(Net operating cash flow (OCF) - Interest costs(I)) = Payback period (P)
Hence,
PI/(OCF - I) = P
OCF = PI/P + I
OCF = 1870/8 + I
Operating Cash Flow = US$233.7m + Interest costs


I think I can see where you have gone wrong now, doubly wrong.

Payback period = PI/Operation Cash inflows of the firm

Note PI is the total cost of the project
Hence to be consistent, the operation cash flows must be the total cash inflows for the shareholders + debt holders

Total operation cash inflows, OCF = inflows for equity shareholders (E) + Inflows for debt holders (D+I)

Hence OCF = E+D+I

Whereas you call your OCF as E+D

Where D is the principle repayment = 77.8m, I is interest repayment

Inflow for debt holders = principle payment + Interest payment
= $77.8 + I

Hence payback period is 1870/(E+D+I)

Instead, you use payback period as 1870/(E+D-I), a double whammy.

You have the wrong interpretation of the article by Kavous Ardalan, where he was talking about when computing the present value of a project, one must use not deduct the interest expense, or should not use(OCF - I), or {(E+D+I)-I}, because you use WACC, which is the discount rate for the firm, not just for the equity shareholder, to be consistent.

Posted by cheoky > 2019-09-29 22:23 | Report Abuse

TADMAX

Posted by DK66 > 2019-09-29 23:06 | Report Abuse

I think I have been terrible at explaining myself. I should have known adding Interest costs to cash flow is very confusing to many.

Let me digest your points and I shall find a better way to express my logic.

Please wait till tomorrow as I m not feeling well. Feeling sleepy after medication.

Thanks

----------------------------
I think I can see where you have gone wrong now, doubly wrong.

Payback period = PI/Operation Cash inflows of the firm

Note PI is the total cost of the project
Hence to be consistent, the operation cash flows must be the total cash inflows for the shareholders + debt holders

Total operation cash inflows, OCF = inflows for equity shareholders (E) + Inflows for debt holders (D+I)

Hence OCF = E+D+I

Whereas you call your OCF as E+D

Where D is the principle repayment = 77.8m, I is interest repayment

Inflow for debt holders = principle payment + Interest payment
= $77.8 + I

Hence payback period is 1870/(E+D+I)

Instead, you use payback period as 1870/(E+D-I), a double whammy.

You have the wrong interpretation of the article by Kavous Ardalan, where he was talking about when computing the present value of a project, one must use not deduct the interest expense, or should not use(OCF - I), or {(E+D+I)-I}, because you use WACC, which is the discount rate for the firm, not just for the equity shareholder, to be consistent.
29/09/2019 10:21 PM

Posted by qqq3 > 2019-09-29 23:12 | Report Abuse

forget kc...he got no common sense one, some times I suspect , he is a robot...........................

Posted by qqq3 > 2019-09-29 23:23 | Report Abuse

dk....


I have read a lot of literature recently that prices of alternative energies dropping so fast so far that variable cost of some coal plants cannot compete with full costing of the newer solar plants.......resulting in closures of coal plants in America left, right and center..........


so...if that is correct......the only protection for this plant are the signed agreements..............that is not a good basis for investors, and the reason it is still below $ 1............

one has to be a coal plant expert to dig through all the data ...well....who can say he is an expert? so even fund managers who has no idea would stay away for now.............

Posted by qqq3 > 2019-09-29 23:29 | Report Abuse

20 years ago, maybe even 10 years ago, IPP was a popular play..........

Malakof has been disappointing to those who bought during IPO, YTL have gone no where in recent years.............

its a different era compared to those days............

Posted by edkfc > 2019-09-29 23:56 | Report Abuse

i am reposting to get your opinion...tks

DK66 and KCChongnz and others with interest in finding DCF for Jaks ! Seeking your opinion if the following formula is technically correct and can be reliably used for forecasting Jaks's Vietnam Power Project Free Cashflow with stated assumptions ?

Scenarios when cash inflows are even for all periods :

NPV = [R ×1 − (1 + i)power-n− PV]/i

In the above formula,
PV = Initial Investment
R is the net cash inflow expected to be received in each period;
i is the required rate of return per period;
n are the number of periods during which the project is expected to operate and generate cash inflows.

If we take i=IRR; NPV = 0
Therefore :

NPV = [R ×1 − (1 + i)power-n− PV]/i = 0

Hence R = PV/ {1 − (1 + i)power-n }/i

Thanks guys...hope to start a fruitful discussion !

Posted by kcchongnz > 2019-09-30 00:41 | Report Abuse

Posted by qqq3 > Sep 29, 2019 11:12 PM | Report Abuse
forget kc...he got no common sense one


Common sense?

Lets see who has common sense and who doesn't.

In the last two to three years, the idiot qqq3, aka Desa6767, Brightsmart, Loneranger, Stockmanny, etc. has been shouting sailang and margin on the stock mentioned here, Jaks, when it was trading at RM1.80+, and Sendai when it was trading at RM1.40+ in i3investor.

KC has written tens of articles here to to give detail analysis why investors must be caution about these two stocks at those prices.

Today, Jaks and Sendai are trading at 75 sen and 40 sen respectively, for a whopping loss of 58% and 71% respectively.

So who has common sense and who doesn't?

More recently, KC has written a few articles about London Biscuit and its the various irregularities about it when it was trading at 20+sen, and the same idiot qqq3, aka Desa6767, Brightsmart, Loneranger, Stockmanny, etc. wrote numerous comments and bought loads of it, and also shouting buy buy buy in this forum. London Biscuit is trading at 10 sen now, a loss of more than 50% in just a few weeks.

Who has common sense, and who doesn't?

isn't that pretty clear?

Posted by qqq3 > 2019-09-30 01:04 | Report Abuse

kc...how to make money? when there is chance to make money, u sailang, all in and margin...when substantial shareholder is disposing, u step aside lah....its basic....


no need DCF one..............................

Posted by Sslee > 2019-09-30 07:33 | Report Abuse

Hahahaha,
Qqq3 to you know what is the NG price compare to cosl price in US?

Posted by SarifahSelinder > 2019-09-30 08:39 | Report Abuse

25 75 10 6 WACF 8.5

Posted by qqq3 > 2019-09-30 08:54 | Report Abuse

by Sslee > Sep 30, 2019 7:33 AM | Report Abuse

Hahahaha,
Qqq3 to you know what is the NG price compare to cosl price in US?
=========

I will assume its not just solar, its also the shale gas that is replacing the coal plants in US..........

Posted by DK66 > 2019-09-30 08:55 | Report Abuse

edkfc,

Thanks for joining the discussion.

Please carry on, I need to see what you can achieve with

R = PV/ {1 − (1 + i)power-n }/i

Posted by DK66 > 2019-09-30 09:42 | Report Abuse

Kcchongnz,

---------------------------------------------------------------------
Payback period = PI/Operation Cash inflows of the firm

Note PI is the total cost of the project
Hence to be consistent, the operation cash flows must be the total cash inflows for the shareholders + debt holders

Total operation cash inflows, OCF = inflows for equity shareholders (E) + Inflows for debt holders (D+I)

Hence OCF = E+D+I

Whereas you call your OCF as E+D

Where D is the principle repayment = 77.8m, I is interest repayment

Inflow for debt holders = principle payment + Interest payment
= $77.8 + I

Hence payback period is 1870/(E+D+I)

-----------------------------------------------------------------
I think maybe it is best that I carry on my explanation within your context

Yes, I agree that the total cash flow from the power plant has to include E,D and I which are all included in my definition of OCF. ie, my OCF = E+D+I

My point is to determine the Payback period of the JV, the interest component (I) must be excluded because it represents a cost item to the JV. This is precisely the point made in the article by Kavous Ardalan on Payback Period. I wasn’t referring to his point on NPV.

Hence payback period should be PI/((E+D+I) – I) in your context, or PI/(OCF – I) in my context.

Posted by DK66 > 2019-09-30 10:00 | Report Abuse

A country must have a diversified power supply landscape. That is why vietnam is still developing coal power plant.

Solar power has its limitations, unpredictable weather conditions, limited operating hours, etc

Jaks Hai Duong power plant is protected by the PPA. I trust that the vietnam government has its reasons for coal power plants.

Even US today is still very dependent on coal power albeit a smaller amount.

----------------------------------
qqq3 dk....


I have read a lot of literature recently that prices of alternative energies dropping so fast so far that variable cost of some coal plants cannot compete with full costing of the newer solar plants.......resulting in closures of coal plants in America left, right and center..........


so...if that is correct......the only protection for this plant are the signed agreements..............that is not a good basis for investors, and the reason it is still below $ 1............

one has to be a coal plant expert to dig through all the data ...well....who can say he is an expert? so even fund managers who has no idea would stay away for now.............
29/09/2019 11:23 PM

Posted by DK66 > 2019-09-30 10:03 | Report Abuse

US has abundant natural gas nowadays. Naturally, it becomes a better choice for them to develop gas power. Can it be the same for Vietnam ?

Posted by DK66 > 2019-09-30 10:06 | Report Abuse

That is why Trump is demanding Vietnam to buy Coal from the US

Posted by DK66 > 2019-09-30 13:34 | Report Abuse

Kcchongnz,

You are right, whatever discussion we are having now won't change the fact that Jaks is definitely undervalued at 75 cents.

I thank you for sharing your views.

-----------------------------------------
kcchongnz
Jaks' worth in this power plant per share basis, in my opinion, is definitely worth a lot more than its 75 sen per share, no matter how we slice it. If you are investing in Jaks based on this assumption, I don't think you should worry about it. There is a big margin of safety.

However, when we invest in Jaks, bear in mind we are not investing in the power plant, but the whole of Jaks; its other businesses, its management especially. In this respect, I think may be good to be in it, but if one sailang on it, it is another matter. This is just my opinion.

Good luck.
29/09/2019 6:10 PM

Posted by Hanyeong1105 > 2019-09-30 14:53 | Report Abuse

Dear DK66, i have deeply appreciated your contribution on the forum and fellow who join the discussion.

I strongly believe JAKS will success in this BOT and gain lucrative cash flow in future but my stool brain really can't understand so many calculation on IRR, payback period on interest and principal.

I just know Hai Duong power plant is 3rd BOT in Vietnam which AES Corportion have completed Mong Duong 2-BOT on YR2015 and China Southern Power Grid Company have completed Vinh Tan-BOT on YR2018.
Base on my own research, both company annual report show positive accounting profit on Vietnam project.
Now the CPECC should have more enough competent to complete on this BOT and contribute more profit to JAKS account in future.

Second. Recent year AES corporation have sign more and more MOU with Vietnam government.It mean is profitable from previous project and Vietnam government so far is reliable and trusted for the IPP project.

Third. ALP have inject so much of his personal fund for this BOT project who sure will keep in view to successful, otherwise he will loss million and million.

Now, i am very jealous who still got bullet to acquire JAKS with cost 0.74 because is really undervalued.

Posted by DK66 > 2019-09-30 15:05 | Report Abuse

Hanyeong1105,

Jaks management was rather muted in giving earnings guidance on its Hai Duong power plant. Hence, I had to use various methodologies to provide some valuations to the power plant with certain degree of comfort.

I m glad that you like my sharing. Thanks.

------------------
Hanyeong1105 Dear DK66, i have deeply appreciated your contribution on the forum and fellow who join the discussion.

Posted by DK66 > 2019-09-30 23:18 | Report Abuse

Personally, among the various methods including IRR, Payback and DCF, used to forecast the cash flow or profit of Hai Duong power plant, I found peer comparison with Mong Duong II the most convincing. Especially the capacity charge of US$253m in 2018 gave me a base price for evaluation purposes.

Mong Duong II is a very close model for Hai Duong Plant, much closer than any business comparison you can find. I m very confident in their resemblance; their capital structures, the locations, their sizes, their PPAs, CSAs, BOT contracts etc.

If you are interested, you can visit;

"Jaks Resources – Peer Comparison With Mong Duong II"

https://klse.i3investor.com/blogs/Jaks%20resources/204451.jsp