Relatives valuation of MK restaurant group public company limited.

Abstract

The aim of this study is to examine the precision of relative valuation methods in the stock price. Theoretically, the definition of the relative valuation method is a business valuation method that compares a firm’s value to its competitors in order to determine the firm’s financial worth. Relative valuation models are an alternative way to evaluate a company’s intrinsic value. Relative valuation methods do not provide a direct estimate of a company’s fundamental value: They do not indicate whether a company is fairly priced; they indicate only whether it is fairly priced relative to some benchmark or peer group. Price to Earnings per share, Price to Book Value, Enterprise value to Sale and Enterprise value to EBITDA methods are implemented in this paper to forecast value of the MK Restaurant Group Public Company Limited. The competitors that have the most likely the same business structure as MK Restaurant are CENTEL, MINT and OISHI. The results of the calculation for each method which consists of Price/Earnings Ratio, Price/Book Value Enterprise/Sale ratio, Enterprise/EBITDA ratio are 70.82, 57.27, 57.30, 66.19 baht respectively for trailing method and 73.56, 58.26, 55.61 and 66.05 Baht respectively for forward method As a result, there is a huge discrepancy between market price of MK Restaurant as of December 4th, 2014 at 60 baht and the relatives valuation method. Hold position for MK’s stock price is recommended. KEY WORDS: Valuation, Relative, Price/Earnings Ratio, Chain Restaurant Business