STOCK VALUATION

V = PV OF DIVIDENDS

Data (Case 1)
Present dividend 250 V = P0 = D1 / (r - g)
Growth g 0.10 r = CAPM
E(r) 0.20

Problem
(a) What is today's intrinsic value?
Solution 1.a
Po = D1/(r - g)
D1 = 250 * (1+0,1)
r = 0,20
g=0,10
Po = 275/(0,20-0,1) = 2750

Data (Case 2)
Do= 300
r= 0.2
g1 0.12 from now to year 5
g2 0.09 after year 5
What is intrinsic value?

Solution, (case 2)
t Dividend Price CF PVIF CF x PVIF
1 336.00 336.00 0.833 280.00
2 376.32 376.32 0.694 261.33
3 421.48 421.48 0.579 243.91
4 472.06 472.06 0.482 227.65
5 528.70 5,238.96 5,767.66 0.402 2,317.89
6 576.29
Theoretical (intrinsic) value = P0 3,330.79

Data (Case 3)
D0 300
E(r) 0.2
g1 0.15 from now to year 3
g2 0.12 from year 4 to year 6
g3 0.09 after year 6
What is intrinsic value?

Jawab, kasus 3
t Dividend Price CF PVF CF x PVF
1 345.000 345.000 0.833 287.500
2 396.750 396.750 0.694 275.521
3 456.263 456.263 0.579 264.041
4 511.014 511.014 0.482 246.438
5 572.336 572.336 0.402 230.009
6 641.016 6,351.885 6,351.885 0.335 2,127.234
7 698.707
Jumlah (harga teoretik saat ini) 3,430.742
 STOCK VALUATION
CASH FLOW APPROACH

A. Stock ABC (constant growth)

D0 350
D1 400 0.14286
g 0.14
Rf 0.06
Rm 0.09
β 3
capm 0.15 r
Po 56,000

B. Stock ABC (assumed 0% growth)

Dividend 350
Po 2,333.33

C. PT KLM Multiple Growth

In the next 5 years dividend grow for 15% (supernormal growth)
The present dividend is Rp400.
After the supernormal growth period, dividend growth will decline to be 12%
per year.
When the expected rate of return of investor is 18%, what is fair value of this sto

CIF PVCIF
D1 460 389.8
D2 529 379.9
D3 608.35 370.3
D4 699.6025 360.8
D5 804.542875 15018 P5 6916
D6 901.08802
8417 Intrinsic Value
Fair Value
Theoretical Value
D. PER Approach
PER= Po/E1= [D1/(r-g)]/E1
D1=E1.(1 - retention rate)
when b = retention rate, then
PER= [E1(1 - b)/(r - g)]/E1
PER= (1 - b)/(r - g)
Example:
When PER = 10; DPR = 30% and b = 70%; r = 24%; what is growth
rate of this stock?
10 = (1 - 0,70)/(0,24 - g)

E. PER calculation by using cross sectional regression

Elton & Gruber →
PER = 4 + 2,3 (phi growth) Bearish
PER = 4 + 1,8 (phi growth) Bullish
Whitbeck-Kisor → PER = 8,2 + 1,5 (g of phi) + 0,067 (DPR) - 0,2σg
ecline to be 12%

fair value of this stock?

s growth