<div id="readability-page-1"><div><h3>Key Insights</h3><ul><li> The projected fair value for Riverstone Holdings is S$1.43 based on 2 Stage Free Cash Flow to Equity </li> <li> Riverstone Holdings' S$0.72 share price signals that it might be 49% undervalued </li> <li>  Analyst price target for AP4 is RM0.85 which is 40% below our fair value estimate </li> </ul><p>Today we will run through one way of estimating the intrinsic value of Riverstone Holdings Limited (SGX:AP4) by taking the expected future cash flows and discounting them to today's value.  One way to achieve this is by employing the Discounted Cash Flow (DCF) model.  It may sound complicated, but actually it is quite simple!</p><p> We generally believe that a company's value is the present value of all of the cash it will generate in the future. However, a DCF is just one valuation metric among many, and it is not without flaws.  Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model. </p><p>Trump has pledged to &#34;unleash&#34; American oil and gas and these 15 US stocks have developments that are poised to benefit.</p><h2> Step By Step Through The Calculation </h2> <p> We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate.  In the first stage we need to estimate the cash flows to the business over the next ten years.   Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.  </p><p> A DCF is all about the idea that a dollar in the future is less valuable than a dollar today,  so we discount the value of these future cash flows to their estimated value in today's dollars: </p><h4> 10-year free cash flow (FCF) estimate </h4><table><tbody><tr><td> </td><td><strong>2026</strong></td><td><strong>2027</strong></td><td><strong>2028</strong></td><td><strong>2029</strong></td><td><strong>2030</strong></td><td><strong>2031</strong></td><td><strong>2032</strong></td><td><strong>2033</strong></td><td><strong>2034</strong></td><td><strong>2035</strong></td></tr><tr><td><strong> Levered FCF (MYR, Millions) </strong></td><td>RM248.0m</td><td>RM284.5m</td><td>RM262.0m</td><td>RM286.0m</td><td>RM294.9m</td><td>RM303.4m</td><td>RM311.8m</td><td>RM320.0m</td><td>RM328.2m</td><td>RM336.5m</td></tr><tr><td><strong>Growth Rate Estimate Source</strong></td><td>Analyst x3</td><td>Analyst x3</td><td>Analyst x1</td><td>Analyst x1</td><td>Est @ 3.10%</td><td>Est @ 2.89%</td><td>Est @ 2.75%</td><td>Est @ 2.65%</td><td>Est @ 2.57%</td><td>Est @ 2.53%</td></tr><tr><td><strong> Present Value (MYR, Millions) Discounted @ 6.3% </strong></td><td>RM233</td><td>RM252</td><td>RM218</td><td>RM224</td><td>RM217</td><td>RM210</td><td>RM203</td><td>RM196</td><td>RM189</td><td>RM182</td></tr></tbody></table><p><i>(&#34;Est&#34; = FCF growth rate estimated by Simply Wall St)</i><br/><strong>Present Value of 10-year Cash Flow (PVCF)</strong> = RM2.1b</p><p> The second stage is also known as Terminal Value, this is the business's cash flow after the first stage.  The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.4%. We discount the terminal cash flows to today's value at a cost of equity of 6.3%. </p><p><strong>Terminal Value (TV)</strong>= FCF<sub>2035</sub> × (1 + g) ÷ (r – g) = RM337m× (1 + 2.4%) ÷ (6.3%– 2.4%) = RM8.8b</p><p><strong>Present Value of Terminal Value (PVTV)</strong>= TV / (1 + r)<sup>10</sup>= RM8.8b÷ ( 1 + 6.3%)<sup>10</sup>= RM4.8b</p><p> The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value,  which in this case is RM6.9b.  In the final step we divide the equity value by the number of shares outstanding.  Relative to the current share price of S$0.7, the company appears   quite good value    at a 49% discount to where the stock price trades currently.   Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out. </p><figure><img height="760" src="https://imageproxy.pbkrs.com/https://images.simplywall.st/asset/chart/22654388-dcf-1-dark-2/1758935292120?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="1706" original-src="https://imageproxy.pbkrs.com/https://images.simplywall.st/asset/chart/22654388-dcf-1-dark-2/1758935292120"/><figcaption>SGX:AP4 Discounted Cash Flow September 27th 2025</figcaption></figure> <h2> Important Assumptions </h2><p> We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows.  If you don't agree with these result, have a go at the calculation yourself and play with the assumptions.  The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance.  Given that we are looking at Riverstone Holdings as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt.  In this calculation we've used 6.3%, which is based on a levered beta of 0.929. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. </p> <p><span> See our latest analysis for Riverstone Holdings </span></p><h3>SWOT Analysis for Riverstone Holdings</h3><div><div><p><strong>Strength</strong></p><ul><li>Currently debt free.</li></ul> <ul><li>Dividend is in the top 25% of dividend payers in the market.</li></ul> <ul> Dividend information for AP4.</ul> </div><div><p><strong>Weakness</strong></p><ul><li>Earnings declined over the past year.</li></ul> </div><div><p><strong>Opportunity</strong></p><ul><li>Annual revenue is forecast to grow faster than the Singaporean market.</li></ul> <ul><li>Good value based on P/E ratio and estimated fair value.</li></ul> </div><div><p><strong>Threat</strong></p><ul><li>Dividends are not covered by earnings and cashflows.</li></ul> <ul><li> Annual earnings are forecast to grow slower than the Singaporean market.</li></ul> <ul> See AP4's dividend history.</ul> </div></div><h2> Looking Ahead: </h2><p> Although the valuation of a company is important, it  shouldn't be the only metric you look at when researching a company.  It's not possible to obtain a foolproof valuation with a DCF model.  Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation.  For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation.   Why is the intrinsic value higher than the current share price?   For Riverstone Holdings, we've put together three  relevant  aspects  you should assess: </p><ol> <li> <strong>Risks</strong>: You should be aware of the <strong>1 warning sign for Riverstone Holdings</strong> we've uncovered before considering an investment in the company. </li> <li><strong>Future Earnings</strong>: How does AP4's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.</li><li> <strong>Other High Quality Alternatives</strong>: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing! </li> </ol><p>PS. Simply Wall St updates its DCF calculation for every Singaporean stock every day, so if you want to find the intrinsic value of any other stock just search here.</p></div></div>

<p>Riverstone Holdings Limited (SGX:AP4) is currently assessed to be 49% undervalued, with a projected fair value of S$1.43 against its share price of S$0.72. Analysts estimate a price target of RM0.85, which is 40% below the fair value. The valuation is based on a Discounted Cash Flow (DCF) model, considering future cash flows and discounting them to present value. The total equity value is calculated at RM6.9 billion, indicating a significant discount relative to the current share price. However, the DCF model has limitations and should be approached with caution.</p>

Is There An Opportunity With Riverstone Holdings Limited's (SGX:AP4) 49% Undervaluation?