To determine a fair value for JMMBGL, a 5-year dividend discount and a Price toEarnings (P/E) valuation methods were used.
Dividend Discount Model (DDM)
Our dividend discount model utilized a dividend payout ratio of 21.1% coupled with our estimate of the Group’s earnings over the 5-year forecast period. We determined a cost of equity of 9.65%. Our long-term growth rate was determined using the sustainable growth rate formula to arrive at 6.48%. Using these assumptions, we arrived at an intrinsic value per share of $39.98.
Price to Earnings Value (P/E)
Our dividend discount model was coupled with a P/E valuation approach. We estimated a FY2022 earnings per share of $5.04. Our P/E multiple was determined using the harmonic mean of the Group’s P/E multiple over a 4-year historical period from 2018 to 2021. The average multiple determined was 10.74x; resulting in an intrinsic value per share of $54.15.
Averaging both values results in our fair value estimate for the stock of $47.07. This represents an upside of 24.92% relative to the July 5, 2021 close price of $37.68 and underpins our OVERWEIGHT recommendation.
|Stock||JMMB Group Limited|
|Close Price (J$)||$37.68|
|Estimated Fair Value (J$)||$47.07|
|Year To Date Return||8.62%|
As at July 5, 2021
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