1. XYZ Public Company Limited expects that the company will have a constant growth (g) at 3% per annum.  CEO would like to know the fundamental value of the company's share.  As a CFO, please prepare the share valuation based on the following methodologies and assumptions:                                                                   (10 points)
   1. Market Comparable Method (P/E ratio)

 

            Assumptions for CAPM      r = Rf + (Rm-Rf)*b

- Average return of the stock market is 10% per annum ....(Rm)

- 30 years Government Bond yield = 3.5% .....(Rf)

- b (beta) of XYZ stock = 1.2 ......(b or beta)

 

1.1  Dividend Growth Model

 

a. Please find Cost of Equity by using the CAPM model

                     

r                 =         ____________%

 

Share Price Valuation (Dividend Growth Model) 

The Company paid dividend at 2 Baht/Share in 2018.

b. Dividend per share for 2019 (D1)   =     _________Baht/Share

c. Market Value per Share (Po)         =     _________Baht/Share 

Formula:           Po = D1 / (r - g)     

 

 

 

• The company forecast to have an Earning per Share (EPS) (or Net Profit/Share) for 2019 = 2.5 Baht/Share.
• P/E Ratio of the Industry = 15 times
• P/E Ratio of the comparable stocks are as follows:
  • Stock A:            P/E = 15 times
  • Stock B:            P/E = 17 times
  • Stock C:            P/E = 16 times
  • Stock D:            P/E = 17 times

 

d. Please find the market share price for XYZ stock by using the Market Comparable method: (Price = EPS x P/E)

Market Value per Share   =          ______________Baht/Share       

 

1. Recommendation

 

If the current market price for XYZ company is 30 Baht/share, what is your recommendation? 

 

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