Value of DANOCA using P/E Ratio Method

Earning Per Share 0.40

Average sector P/E Ratio 10.00
Share price (EPS X P/E) 4.00
Number of ordinary share 5 million
Value of Donaco using PE 20 million ($)

Current market capitalization of DANOCA

Number of ordinary shares 5 million
Ordinary share price 3.30
Value of Donaca using market capitalization 16.50 million ($)

Donaca PE ratio 8.25 times

The difference between the 2 valuation and 2 PE ratio shows that there is scope for improving
There is a possibility that the PE ratio can become XXX if it is taken over by Phobix higher
and therefore, the share price and valuation of DANOCA can become XXX after the take over higher
if Phobix has the managerial skills to do so.

Value of DANOCA using Dividend Growth Model

Earning Per Share 0.40

Proposed payout ratio 60%
Proposed dividend per share 0.24
Dividend per share 2 years ago 0.22
Average dividend growth over last 2 years (Use EAG) 4.45%

Cost of Equity (Using CAPM)

Ke= Rf + Beta (Rm - Rf)
Risk free rate 4.60%
Equity beta 1.4
Return on the market 10.6%
Cost of Equity (K) 13.0%

Value of ordinary share

Value of ordinary share using DDM 2.93 per share

Number of ordinary share 5 million
Value of Donaco using DDM 14.65 million ($)
Value of Donaco using market capitalization 16.50 million ($)

Discussion
XXXX is probably the minimum value that Danoca shareholders will accept from Phobix. 14.65 million
The current market capitalization valuation is XXXX than the valuation using DDM maybe: higher
The current market value may have reflected the news of XXXXXXXXX takeover bid is good for the Phobis Co.
Also, the XXXX and XXXXX used in DGM may be inaccurate. cost of equity and average dividend growth rate

Ke= Cost of equity = required rate of return

High risk -> high return

To measure risk we use BETA

Ke= Risk free + Beta X (Return of market - Risk free)