Relative Valuation of Carabao Group Public Company Limited

Abstract

This thematic paper evaluates the Carabao Group Public Company Limited (CBG)’s stock, a beverage company mainly energy drink, whether it is undervalued, overvalued or fairly traded with the price at THB 149.50 as of July 7th, 2021. In this paper, CBG’s stock was evaluated by using the relative valuation model, comparing CBG’s trailing and forward P/E, P/BV, EV/EBITDA multiples as of July 7th, 2021 with its own historical averages and with its peer group’s multiples. The forward EV/EBITDA multiple was chosen over other multiples to evaluate the CBG’s stock price and calculate its target prices at the end of 2021 and 2022 because, it reflects the future insights and focuses on the company’s capability to generate free cash flow. By comparing the forward EV/EBITDA multiple with its own historical average, shows that CBG’s stock is fairly traded with the price of THB 149.50 as of July 7th, 2021. By comparing CBG’s the forward EV/EBITDA multiple with its peer group’s EV/EBITDA multiples results in the costliness of CBG’s stock over its peers. The estimated CBG’s target prices at the end of 2021 and 2022 are THB 85.62 and THB 92.37, respectively. However, CBG’s stock was valued more by investors due to the superior ROCE and sales growth in 2020. The misleading target prices are caused by comparing CBG with the imperfect peer group. In conclusion, CBG’s stock as of July 7th, 2021 with the price of THB 149.50 is fairly traded.