You are 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 Stock 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

FFBL EFERT FFC ENGRO AHCL FATIMA

Current Market Price 21.40 66.49 111.00 303.50 43.50 28.80

EPS (7.00) 9.50 14.36 16.86 2.09 6.82

Total Equities value 2,626 45,111 37,682 86,209 15,486 80,971

(IN MILLIONS)

No. of shares (In mn) 934 1,335 1,272 576 408 2,100

Expected growth of 5.00% 7.00% 2.00% 3.00% 7.00% 5.00%

EPS

Expected growth of 2.00% 7.50% 3.50% 4.00% 5.50% 7.00%

BV

REQUIRED :

Now find the intrinsic value based on the relative valuation approach by using the above statistics, however, you will use the 70% weight to PE and 30% weight to PB approach to find the expected intrinsic value, furthermore, he'll only invest in company which produces the more than 15% of return.

(Comment on each value why investor invest and why invest should not invest)