To value the Barita shares using the average PEG method, we reasonably assumed that Barita, with its lower leverage and high operational efficiency, is poised to grow at a faster pace than its peers. While over the last five years BIL grew its EPS annually on average by over 3.6x more than its peers, we project BIL future growth in EPS amounts to only 1.5x that of its peer average.
If Barita grows at 1.5X its peers’ projected growth, its projected EPS growth equates to 24%. When applied to the industry PEG of 1.18X and forward earnings of J$4.42 the stock is valued at J$125.29.
Given that Barita’s shares are being offered at J$80.00 in this APO, the shares are currently undervalued and present an opportunity for an approximate upside of 56.61%.
Written by JN Fund Managers Ltd.