SMR is a young finance professional who is pursuing his career into the equity market, after a long efforts he got the position in equity firm where initial job description is to pitch clients for long term investments into different sector of Pakistan equity market. After meeting two or three clients he decided to use the relative valuation approach in order provide a useful insight to clients and convince them for investments. He gather the data of few firms which are mentioned below in the exhibit 1

PSO

LUCK

OGDC

SEARL

EFERT

Current Market Price

158.36

460.33

114.60

200.86

59.78

Last year EPS

22.55

32.44

27.53

12.43

12.63

BVPS

253.86

267.08

145.40

68.34

32.41

Industry P/E Ratio

7.72

9.54

9.36

18.59

9.59

Industry P/B ratio

0.80

1.50

0.95

1.80

2.00

Earnings growth rate

-35%

-80%

-15%

5%

-20%

Book value growth rate

5%

10%

5%

5%

5%

Exhibit 1

Now find the intrinsic value based on the relative valuation approach by using the above statistics, however, SMR will use the 60% weight to PE and 40% weight to PB approach to find the expected intrinsic value, furthermore, he'll only invest in company which produces the more than 25% of return.

Instructions:

Write down the brief report with complete steps of your working.