Valuation
In order to ascertain a target price for JP, we used a justified Price to Earnings approach applied to forward financial expectations based on JP owning 34.5% of PanJam shares as its primary operating asset following the merging of current JP operations with PanJam. In arriving at our target price based on the justified P/E approach, we forecasted the earnings of PanJam, given the merging of JP’s current operations, for its 2023 financial year. Our forecast for JP’s 2023 result incorporates organic revenue growth, and an increase in the share of profit of associates and was directly applied to ascertain our forward expectations for PanJam’s result. Comprehensive coverage of the assumptions made to determine PanJam’s forward expectations can be found in the valuation section of our PanJam review. Following our determination of a forward estimate of PanJam’s results, we were able to estimate the share of earnings JP would be entitled to, given its proposed 35.4% ownership in the group. Against this backdrop, our target EPS for 2023 was J$2.24 compared to the current J$2.19 for FY 2022.
We used the capital asset pricing model (CAPM) to arrive at a discount rate for JP of 15.62% and assumed a long-term growth rate of 6.88%, which was determined using forward expectations for PanJam’s potential return on equity and dividend payout ratio after the amalgamation of JP, giving us a justified P/E ratio of 11.44x. We applied this multiple to our 2023 EPS target to arrive at a valuation of J$25.63. At the last closing price of J$21.00, this represents a potential upside of 22.06%. As a result, we have assigned an OVERWEIGHT recommendation for JP given the impending change in Company structure.
| Stock | JPG |
|---|---|
| Last Closing Price | J$21 |
| 52 Week High | J$28 |
| 52 Week Low | J$17.10 |
| YTD | -4.33% |
| Target Price | $J 25.63 |
| Potential Return | 22.06% |
| Trailing P\E | 9.60x |
| Trailing P\B | 0.43x |
| Dividend Yield (TTM) | 1.15% |
| Total Return | 23.20% |
| Recommendation | MARKETWEIGHT |
| Date | April 6, 2023 |
as at April 6, 2023 , 2023
Panjam Investments Limited | Equity Analysis
