To value Massy Holdings Limited, we utilized a combination of a free cash flow to equity valuation method and a Justified P/E approach. The core result from the free cash flow to equity valuation method was a price target of TT$4.35 (J$98.00), assuming an average revenue growth rate over the 6-yr forecasted period of 7.46%, cost of equity of 17.30%, and a long-term growth rate of 5.71%. The 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 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 $0.45. Using the previously stated cost of equity of 17.30%, and a long-term growth rate of 5.71%, we attained a result of the company having a justified P/E ratio of 8.62x, giving us a price target of TT$3.90 (J$87.84);
Averaging these two results gives us a target share price of TT$4.12 (J$92.92). The share price determined equates to a P/E of 8.48x relative to net profit attributable to shareholders and 10.16x 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 7.71x.
As of January 16th, 2022, the stock traded at a share price of J$78.55/TT$4.50 which implies an upside of 18.3%/-2.64%, relative to the core price target of J$92.92/TT$4.12. With consideration to the expected return along with other factors stated above, we recommend investors OVERWEIGHT MASSY shares listed on the Jamaica Stock Exchange at current levels and UNDERWEIGHT MASSY shares listed on the Trinidadian Stock Exchange.
|Current Price (TTD/JMD):||TT$4.50 / J$78.55|
|Fair Value (TTD/JMD):||TT$4.12/ J$92.92|
|Potential Upside/Downside (%):||
-5.18% (TT Shares)
18.30% (JM Shares)
|Trailing P/E (TTD/JMD):||13.12x/10.16x|
|Trailing P/B (TTD/JMD):||1.23x/0.95x|
UNDERWEIGHT (TT Shares)
OVERWEIGHT (JM Share
as at January 16, 2023
Massy Holdings Limited | Equity Analysis