The WACC of LVGEM (China) Real Estate Investment Co Ltd (95.HK) is 5.4%.
Range | Selected | |
Cost of equity | 6.2% - 8.2% | 7.2% |
Tax rate | 18.3% - 30.2% | 24.25% |
Cost of debt | 7.0% - 7.0% | 7% |
WACC | 5.7% - 5.0% | 5.4% |
Category | Low | High |
Long-term bond rate | 2.9% | 3.4% |
Equity market risk premium | 6.0% | 7.0% |
Adjusted beta | 0.55 | 0.62 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 6.2% | 8.2% |
Tax rate | 18.3% | 30.2% |
Debt/Equity ratio | 26.54 | 26.54 |
Cost of debt | 7.0% | 7.0% |
After-tax WACC | 5.7% | 5.0% |
Selected WACC | 5.4% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
95.HK | LVGEM (China) Real Estate Investment Co Ltd | 26.54 | 1.91 | 0.09 |
1125.HK | Lai Fung Holdings Ltd | 26.35 | 0.42 | 0.02 |
124.HK | Guangdong Land Holdings Ltd | 58.3 | 0.82 | 0.02 |
1240.HK | CNQC International Holdings Ltd | 22.95 | 0.22 | 0.01 |
185.HK | Zensun Enterprises Ltd | 105.08 | 0.13 | 0 |
34.HK | Kowloon Development Co Ltd | 5.11 | 0.64 | 0.13 |
432.HK | Pacific Century Premium Developments Ltd | 23.33 | 0.38 | 0.02 |
563.HK | Shanghai Industrial Urban Development Group Ltd | 12.52 | 0.84 | 0.08 |
627.HK | Fullsun International Holdings Group Co Ltd | 2.54 | -0.11 | -0.04 |
845.HK | Glorious Property Holdings Ltd | 316.75 | 1.36 | 0.01 |
Low | High | |
Unlevered beta | 0.01 | 0.02 |
Relevered beta | 0.33 | 0.43 |
Adjusted relevered beta | 0.55 | 0.62 |
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 95.HK:
cost_of_equity (7.20%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (0.55) + 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.