Universal Scientific Industrial's (USI) reported a net profit of RM80 million for the year 2020. The...

  

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Universal Scientific Industrial's (USI) reported a net profit of RM80 million for the year 2020. The number of shares outstanding was 100 million units, and share capital is RM100 million. Its share are currently trading at RM8. It is expected that USI' net profit one year from now will be RM160 million. USI has continued to expand and has expected that in year 2040, its net profit will be RM320 million given other things being constant. Assume that USI's pricelearnings (P/E) ratio remains at its current level. USI has treasury shares of RM80 million, retained earnings of RM1,420 million as at 31 December 2020. Required: (a) Calculate Universal Scientific Industrial's stock price one year from now. (6 marks) (b) Assuming that Universal Scientific Industrial's net profit grows to RM320 million in year 2040 with other things remaining constant, calculate the company's Compound Annual Growth Rate (CAGR). (4 marks) Using the CAGR in part (b) above and PE ratio obtainable above, determine whether the stock price that you have calculated in part (a) above is undervalued or overvalued. (6 marks) (c) (d) Calculate the Price - to - Book value ratio for USI for year 2020, and based on the answer (4 marks) [Total: 20 marks] you have calculated, determine whether USI is undervalued or overvalued. Universal Scientific Industrial's (USI) reported a net profit of RM80 million for the year 2020. The number of shares outstanding was 100 million units, and share capital is RM100 million. Its share are currently trading at RM8. It is expected that USI' net profit one year from now will be RM160 million. USI has continued to expand and has expected that in year 2040, its net profit will be RM320 million given other things being constant. Assume that USI's pricelearnings (P/E) ratio remains at its current level. USI has treasury shares of RM80 million, retained earnings of RM1,420 million as at 31 December 2020. Required: (a) Calculate Universal Scientific Industrial's stock price one year from now. (6 marks) (b) Assuming that Universal Scientific Industrial's net profit grows to RM320 million in year 2040 with other things remaining constant, calculate the company's Compound Annual Growth Rate (CAGR). (4 marks) Using the CAGR in part (b) above and PE ratio obtainable above, determine whether the stock price that you have calculated in part (a) above is undervalued or overvalued. (6 marks) (c) (d) Calculate the Price - to - Book value ratio for USI for year 2020, and based on the answer (4 marks) [Total: 20 marks] you have calculated, determine whether USI is undervalued or overvalued.

Answer rating: 100% (QA)

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