Please explain how you come out with the figure you do .
As in what factors you use to determine the intrinsic value.
on a side note do the same for cba .
I know this wasn't directed towards me but as I have been working on calculating the intrinsic value of CBA recently.
A
very basic intrinsic value estimation would involve reading the financials. If you did this and had a required IRR of 8%, CBA would come back as a strong buy thanks to its current earnings yield.
A more details intrinsic value calculation would require calculating the intrinsic value of all the external factors that affect the value of its balance sheet components and future earnings.And this is where it gets difficult.
One of CBA's major assets is loans to Residential property holders. Now if I listened to some, I would estimate that this is one of the safest assets in the world so accept the value of this loan book as guaranteed and may even discount some of the corresponding impairments.
I like to go a bit further than this. My research (and it may well be flawed), suggests that Australia could well be heading towards the recession we never had last year, thanks to global influences I won't go into now.
This will cause unemployment to rise, bank margins to fall, property values to fall and mortgage stress really expected to ramp up. With a $270 billion resi loan book, I am predicting a 5% writedown of these loans over the next few years which is $13 billion. (note 5% is nothing compared to the % losses of US and UK bank loan books).
Needless to say, my estimation of CBA's intrinsic value is significantly lower than its current share price. So much in fact that I have a short position.
Someone else with different intrinsic valuation techniques or views of the global economy or the resilience of the Aust property market may come up with a higher valuation of CBA. This is great, as it allowed me to go short when CBA had a fairly high price. If everyone came to the same price concusion as me, it would not be worth going short unless I was betting on an even larger negative suprise.
In summary and IMHO, the potential upside of CBA is a lot less than the potential downside so one should either have no position, or be short.