Fair Value & Recommendation
We performed a valuation exercise on the shares of CPFV using the dividend discount model (DDM) and Price to Adjusted Funds From Operation (P/AFFO). The valuation methods assumed an investment horizon of five (5) years.
We decided to use FY 2026 as we believe that the underlying value of the company’s pipeline will be realized over a five year horizon. Also there would be a material improvement in the environment in a post-COVID environment.
Our resulting base case estimate for FY 2021 Book Value is US$95.97 million which translates to a NAV per share of J$52.84. This book value estimate is informed by an exchange rate of J$/B$ of 75.29, the company growing profit to $2.07 million and paying out 75% of earnings as dividends.
Utilizing the DDM model, we obtained a fair value estimate of J$56.24, which is higher than the NAV per share at the end of FY 2021 at J$52.84. The P/AFFO of 30.09x approach yielded a fair value of J$52.94. By averaging the three estimates, we obtained a fair value of J$54.07, which is 32.07% above the current price of J$40.94. It is of note that this estimate of fair value is in line with the company’s last reported NAV of B$0.70 (J$52.5).
In view of the foregoing, BIL recommends an Overweight rating.
| Stock | CPFV |
| Last Price (J$) | 40.94 |
| Year to Date Return | -16.31% |
| Dividend Yield | 15.57% |
| Trading Price Discount to NAV | 22% |
| Forward Price/FFO | 23.3x |
| AFFO Yield | 4.3% |
| Estimated Fair Value | 54.07 |
| Total Return Upside | 47.64% |
| Reccomendation | OVERWEIGHT |
As at May 6th, 2021
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