Valuation
We conducted a valuation exercise on the shares of GHL with two (2) valuation methodologies; Justified Price-to-Earnings (P/E) and Justified Price-to-Book (P/B). We performed this assessment on our projected 2021 financial year performance.
We utilized the 2021 FY for both the EPS and BVPS. The base case estimate for Net Income is approximately $1.33 billion which translates to an EPS of $5.73 (J$125.81). Applying the Justified P/E multiple of 6.58X, we obtained a fair value estimate of approximately J$828.41. Our resulting base case estimate for 2021 FY Book Value is $5.74 billion, which translates to a BVPS of $23.60 (J$517.92) Applying the Justified P/B of 1.47X, we obtained a fair value of J$763.53.
Using an average of the two values results in our fair value estimate of J$795.97, which is just 0.12% above the offer price; indicating that the offer is fairly priced. We reiterate the view that while the security appears to be fairly valued, on a relative basis and on the expectations of GHL’s prospective financial performance, there could an opportunity for investors to realize upside through valuation multiple expansion as GHL’s earnings grow.
| P/B Valuation | J$763.53 |
| P/E Valuation | J$828.41 |
| Average Fair Value Estimate | J$795.97 |
| Current Price | J$795.00 |
| Implied Upside | 0.12% |
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