RELATIVE VALUATION OF MEGA LIFESCIENCES PUBLIC COMPANY LIMITED

Abstract

The purpose of this thematic paper is to evaluate the valuation of Mega Lifesciences Public Company Limited (MEGA), through the relative valuation method by comparing to the industry’s peers in term of growth and profitability based on financial and valuation ratios, and by comparing to the historical past 5 years in relation to itself. In addition, top-down analysis is included in the paper for additional insight. As MEGA significantly operates and expands capacity in developing countries, especially in South East Asia, nominal GDP growth and disposal income of households in those countries is the factor that leads to an increase in demand for dietary supplement products. The valuation method used 5 multiple ratios, trailing and forward P/E ratio, trailing and forward EV/EBITDA ratio, and trailing P/BV ratio, comparing to its peers and itself to determine the firm’s value. Finally, the target price is estimated by using the average forward P/E of the peers, which is multiplies by estimated forward earning per share. The target price of MEGA as of 31 December 2020 approximately equals 37.25 Baht per share with a 15.5% upside from the current price of 32.25 Baht per share. For this reason, the recommendation is to BUY the stock due to the company has high potential growth in developing markets and solid financial performance. In Addition, after the COVID-19 crisis, consumers would be highly conscious of their health by frequently consuming supplementary food to building a stronger immune system. Therefore, an expected increase in demand from consumers will support MEGA's products.