397.HK WACC - Weighted Average Cost of Capital
The WACC of Power Financial Group Ltd (397.HK) is 6.4%.
| Range | Selected | |
| Cost of equity | 5.3% - 8.0% | 6.65% |
| Tax rate | 1.2% - 2.3% | 1.75% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 5.2% - 7.6% | 6.4% |
| Category | Low | High |
| Long-term bond rate | 2.9% | 3.4% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 0.4 | 0.59 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.3% | 8.0% |
| Tax rate | 1.2% | 2.3% |
| Debt/Equity ratio | 0.16 | 0.16 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 5.2% | 7.6% |
| Selected WACC | 6.4% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| 397.HK | Power Financial Group Ltd | 0.16 | 0.38 | 0.33 |
| 188.HK | Sunwah Kingsway Capital Holdings Ltd | 0.43 | 0.49 | 0.34 |
| 2263.HK | Fu Shek Financial Holdings Ltd | 0.01 | 0.48 | 0.48 |
| 290.HK | China Fortune Financial Group Ltd | 0 | 0.01 | 0.01 |
| 510.HK | CASH Financial Services Group Ltd | 0.91 | 1.88 | 1 |
| 619.HK | South China Financial Holdings Ltd | 7.03 | 0.52 | 0.07 |
| 8001.HK | Orient Securities International Holdings Ltd | 0.01 | -1.73 | -1.71 |
| 8098.HK | CL Group (Holdings) Ltd | 0.31 | 0.02 | 0.02 |
| 8333.HK | Astrum Financial Holdings Ltd | 0.22 | 0.49 | 0.41 |
| 8540.HK | Victory Securities (Holdings) Company Ltd | 0.23 | 0.13 | 0.11 |
| Low | High | |
| Unlevered beta | 0.09 | 0.33 |
| Relevered beta | 0.1 | 0.39 |
| Adjusted relevered beta | 0.4 | 0.59 |
397.HK's CAPM model and how its cost of Equity is calculated
The Cost of Equity reflects the return a company needs to deliver to shareholders to justify the risk of investing in its shares. It’s computed using the Capital Asset Pricing Model (CAPM), which blends the risk-free rate, the stock’s beta, and the market risk premium.
This method evaluates the stock’s risk compared to a safe investment and the market’s overall volatility.
Here’s how we figure out the cost of equity for 397.HK:
cost_of_equity (6.65%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (0.4) + risk_adjustments (0.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.