Massy Holding Limited | Equity Analysis

To value Massy Holdings Limited, we utilized a combination of a free cash flow to equity valuation model and a Justified P/E approach. The core result from the free cash flow to equity valuation model was a price target of TT$5.07 (J$114.45), assuming an average revenue growth rate over the 6-yr forecasted period of 7.64%, cost of equity of 14.52%, and a long-term growth rate of 4.98%. The cost of equity was determined using the CAPM method and a transposed calculation of equity cost, based on the Group’s stated WACC of 9.60%.

The Justified Price to Earnings (P/E) method was used with our estimated forward earnings for the company. Our estimate for the 2023 Financial year-end eps amounted to $0.41. Using the previously stated cost of equity of 14.52%, and a long-term growth rate of 4.98%, we arrived at a justified P/E ratio of 10.47x, giving us a price target of TT$4.35 (J$98.33).

Averaging these two results gives us a target share price of TT$4.71 (J$106.39). The share price determined equates to a P/E of 8.62x relative to net profit attributable to shareholders and 10.33x relative to net profit from continuing operations attributable to shareholders. The forward P/E relative to net profit from continuing operations attributable to shareholders under these assumptions equates to 8.52x.

As of March 7th, 2023, the stock traded at a share price of J$80.00/TT$4.51 which implies an upside of 32.99% and 4.43%
respectively, relative to the price target of J$106.39/TT$4.71. In considering the expected return along with other factors stated above, we recommend investors OVERWEIGHT MASSY shares listed on the Jamaica Stock Exchange and MARKETWEIGHT the shares listed on the Trinidadian and Tobago Stock Exchange.

This represents an increase in our price target relative to our last analysis following the year ended September 30, 2022, of J$92.92/TT$4.12. The improved outlook takes into consideration the expectation of greater profitability following the previously confirmed acquisitions made in the past 12 months and the strategic focus on areas of competitive advantage.