Wind energy holding company limited: investment valuation on free cash flow to the firm (FCFF) approach.

Abstract

This paper aims to find the intrinsic value of Wind Energy Holding Company Ltd. (WEH). The concept on valuation in this study builds on the view that the stock price of a firm should reflect the firm's fundamentals in term of cash flows, growth and risk. The fair values derived are analyzed by using the discounted cash flow valuation (DCF), focusing on free cash flow to firm (FCFF). The result of the company's intrinsic value in 2014 is 43,128.02 million baht or 409.57 baht per share. As government support for the use of renewable energy increases, WEH has the opportunity to grow in the future and has a strong possibility of further expansion throughout Asia and other continents. However, such expansion is not without risk. The direction, strength and flow of air movement by its very nature is unpredictable and can impact significantly on the company's levels of electricity production. In conclusion, the valuation within this study is only a suggestion of the company's fair value. The method must be looked at cautiously and with an awareness of its limitations. However, with a view to possible future investment, the concept on valuation and the process of estimating intrinsic value provided in this study can still give useful guidance for investors researching and analyzing renewable energy companies.

KEY WORDS: Valuation/Discount cash flow/FCFF/Renewable energy/Wind energy