4 Comments
May 8·edited May 8Liked by Kairos research

Hey there, thanks for the great writeup. I'm going over your numbers for your model and am not able to confirm you Forward PE of 12.14. Based on the cal for forward EPS, I'd assume you use 31/2.91 = 10.64 as opposed to 12.14 in your calculations.

I also tried to recreate your forecasted revenue, using either 2023 revenues as a base or 2024 forecast as a base and applying your growth rate. For example, if I start with $3,935 and grow this at 7% pa, I get $5,158.5 by year 5. If I use 2023's $3,748 as a base and grow that at 7% pa instead and ignore the 2024 forecast, I get $5,256.8 which is still below your 2029 forecast.

I'm also unable to reconcile your expected firm value in 2029. If I assume $38.1 sp and 106 s/o, and cash/debt are constant, I get $4,367.8

Please advise on where my calculations may be incorrect

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author

Hello, yes the forward P/E should be 10.64. Thanks for pointing that out, I will fix that.

Concerning the forecasting, what I did was project 2023's revenue out one year at 5%, then I took that figure and projected it out another 5 years at at 7%. Year one (2023-2024) is grown at 5% then the following 5 years (2024-2029) are grown at 7%.

If you start with 2023's revenue of $3,748, The formula in excel is 3,748 * (1+.05) = $3,935

Then I took 2024's projected revenue of $3,935 and grew that at 7% for 5 years. The formula is 3,935 * (1+.07) ^ 5 = $5,519.04106 but excel rounds it up to $5,520.

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May 8Liked by Kairos research

Thank you for the clear writeup. A lot of things to like, but do you know why the Return on participating equite fall a lot this quarter?

Also, margins are not as good as NVRs. Do you expect that to change as they get bigger?

Thank you.

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author

Hello, thank you very much. Sometimes acquisitions can cause ROE to decline if the the acquisition increases the equity base and profits don't catch up immediately. I suspect over time DFH's margins and ROE will be somewhere near NVR's. However, NVR is extremely efficient because they've had many years to perfect their operations, so I don't expect DFH to be quite on par, at least yet.

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