Valuation and Recommendation
To arrive at a fair value estimate for the company we utilized two methods, namely a Justified Price-to-Book method and a Justified Price-to-Earnings method. In arriving at our estimate for earnings, we assumed the projected growth in tourism can add to the stevedoring revenues, coupled with profit share from associates and future minimum lease payment receivables, CHL can achieve growth in revenues and profits in FY 2023. Using these assumptions, we arrived at a base case earnings per share (EPS) for the 2023 Financial Year end of $0.85 which compares to the 2022 EPS of $0.77. We then arrived at a justified P/E of 19.41x, using a discount rate of 15.45% and paired with a growth rate of 10.30%. Based on this justified P/E, which we applied to our 2023 EPS forecast, we arrived at a fair value price of $16.50. Our Price to Book Valuation utilized a justified P/B of 5.82x, along with our 2023 financial yearend expected book value of $2.64. This resulted in a valuation of $15.35. Averaging our P/E and P/B estimates, we arrived at a price target of $15.92, a 16.23% upside to the April 25, 2023, price of $13.70, suggesting the stock is undervalued. In light of this fair value estimate and expected financial performance going forward, we recommend investors OVERWEIGHT the stock.
| Stock | CHL |
|---|---|
| Current Price | J$13.70 |
| Estimate Fair Value | J$15.92 |
| YTD Return | -11.76% |
| Trailing P/E | 17.07x |
| Forward P/E | 16.12x |
| Dividend Yield | $1.89% |
| Estimated Fair Value | J$ |
| Potential Upside | 16.23% |
| Recommendation | MARKETWEIGHT |
| Total Return Recommendation | OVERWEIGHT |
as at April 25, 2023
Cargo Handlers Limited | Equity Analysis
