Valuation Summary
To value Massy Holdings Limited, we utilized a free cash flow to equity valuation method. The core result from our valuation was a price target of TT$126.04 (J$2,925.37), assuming an average revenue growth rate over the 6-yr forecasted period of 5.90%, cost of equity of 11.48%, and a long-term growth rate of 4.75%. Cost of equity was determined using an average of the CAPM method and a transposed calculation of equity cost, based on the Group’s stated WACC of 9.60%.
The share price determined equates to a P/E of 15.72x relative to net profit attributable to shareholders and 19.37x relative to net profit from continuing operations attributable to shareholders. Forward P/E relative to net profit from continuing operations attributable to shareholders under these assumptions equates to approximately18.10x. Note that the P/E for the Main Index is 12.33x at present, and we expect Massy to outperform the Main Index, as a collective.
Utilizing varying estimates of the company’s cost of equity and long-term growth within a reasonable range (reasonable is determined to be at least 10.00% given the Company’s stated WACC of 9.60%) suggest that the value of the stock could range from TT$114.99 (J$2,668.77) at the low end to $164.87 (J$3,826.59) at the high end.
As at January 31, 2021, the stock traded at a share price of TT$ 105.99 (J$ 2,439.47) which implies an upside of 18.9% in TT$ and 19.9% in J$, relative to the core price target of TT$126.04 (J$2,925.37). Based on our estimate for FY2022 dividend payout of TT$2.73, coupled with the current price of TT$105.99, the Company’s expected dividend yield, assuming purchase at this price, would be 2.6%, thereby reflecting a total return of 21.5% in TT$ and 22.5% in J$.
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