RELATIVE VALUATION OF TIPCO ASPHALT PUBLIC COMPANY LIMITED.

Abstract

This thematic paper demonstrates how to value the stock price of Tipco Asphalt Public Company Limited (TASCO); the concept of the multiple valuation models were applied to find the relative market value of the firm, valuing the indirect (or relative) price of the equity using key statistics that are assumed to relate to the value. It reflected the company’s ability to achieve its projected growth and financial position, as perceived and interpreted by the market. In this paper, Price to Earnings (P/E) Ratio, Price to Book Value (PBV) Ratio, and Enterprise Value to Earnings before Interest, Taxes, Depreciation and Amortization (EV/EBITDA) Ratio were used to find the value of TASCO by using both trailing and forward P/E, P/BV and EV/EBITDA, in comparison with domestic and regional competitors or peers such as PTT, SK Innovation and Petronas. After completing the valuations, it is shown that using P/E multiple is the most appropriate relative valuation method to find TASCO’s share value, as it is perceived by the market as a ‘growth stock’ despite the P/E ratio, which is on the high side. Although the ‘BUY’ is recommended for TASCO based on the P/E multiple method, it is recommended that investors consider a few valuation methods, rather than just one, as relative valuation comes with a few important limitations. And in the case of TASCO, since the peer’s average P/E multiple is quite high, we would recommend valuing the stock price based on the DCF method, which would be a more conservative approach.