Question

Your fund manager has asked you to provide some relative valuation numbers specific to equity, book value and sales on a justified basis. You are to compute the following (10 marks) Justified P/E Justified P/S Justified P/BV

Info below:

Your fund is considering the privatisation of Oceania Limited, a public listed company on the local stock exchange. This company currently has 92 million outstanding stock available. Company stock is currently trading at $52.20 per share. Oceania's financial extract are as listed below: Income Statement ($M) 2019 2020 Revenue 372 422 Depreciation 12 15 Other Operating Expense 271 298 Income Before Taxes 89 109 Taxes 23 28 Net Income 66 81 Dividends 20 19 Eamings per share 0.72 0.88 Dividends per share 0.22 0.21 Common Shares Outstanding 92 92 2019 2020 334 398 412 577 Net and Balance Sheet ($m) Current Assets Property, Plant Equipment Total Assets Current Liabilities Long Term Debt Total Liabilities Shareholder Equity Total Liabilities and Equity Capital Expenditure 732 43 0 43 689 732 42 989 121 0 121 868 989 53 Your research team has identified that the market risk premium is 6% while the risk-free rate is 4.5%. The Industry Beta is observed to be 1.3. You have requested for industry relative ratios for reference and they have provided you with the following: Industry P/E Industry P/S Industry P/BV 18 5 4.5