Valuation & Recommendation
WISYNCO was valued using a mixture of a justified Price-to-Book (P/B) model as well as a relative price-to-earnings (P/E) multiple.
For the P/E-based valuation approach, we forecasted forward earnings per share (EPS) of $1.37 for FY 2023. We then applied the average P/E multiple of a group of Wisynco’s peers to the forward EPS. The average P/E multiple of the Wisynco Group’s peers stood at 14.99x. When this multiple was applied to our forward EPS estimate, this resulted in an estimated fair value of $20.47. We also utilized WISYNCO’s 4-year average P/E multiple (excluding an outlier year) of 16.97x. When this multiple was applied to our forward EPS estimate, this resulted in a fair value estimate of $23.17.
For the Justified P/B model, To arrive at a discount rate, we utilized the capital asset pricing model (CAPM), which resulted in an outturn of 15.74%. We calculated the company’s sustainable growth rate based on factors including the company’s net profit margin, equity multiplier, total asset turnover and retention ratio, arriving at an outturn of 13.07%. While this might seem quitehigh, it is a reflection of the fairly high ROAE and the degree to which the company retains earnings that can be used to support the ongoing growth agenda.
Using these inputs, a justified P/B ratio of 3.36x was derived, resulting in a price target of $18.99.Finally, in computing an average of these estimates of fair value, the result is a final estimated price target of $20.88. Compared to the closing price as at July 19, 2023, of $17.85, this represents a potential upside of 16.96%. The company currently trades at a trailing P/E multiple of 14.08x. Based on its current trading price and our target EPS, the company produces a forward P/E of
| Stock: | Wysinco |
|---|---|
| Last Closing Price | J$17.85 |
| 52 Week High | J$20.20 |
| 52 Week Low | $16.10 |
| YTD Return | 1.02% |
| Target Price | J$20.88 |
| Potential Return | 16.96% |
| Trailing P/E | 14.08x |
| Trailing P/B | 3.24x |
| Forward P/E | 13.07x |
| Dividend Yield (TTM) | 19.31% |
| Recommendation | OVERWEIGHT |
Wysinco Group Limited | Equity Analysis
