RELATIVE VALUATION OF ANANDA DEVELOPMENT PUBLIC COMPANY LIMITED

Abstract

Relative valuation is a commonly used tool to value stocks, generally by implementing the average multiple from the peer group in the same industry. The multiple of the five years historical data will tell whether Ananda’s current price is overpriced or underpriced. Base on the trailing P/E bands, Ananda's current stock price looks cheap due to the P/E multiple was above the five years average. In comparison with its peers (AP, LH, LPN, SIRI, SPALI, and ORI), Ananda’s P/E ratio is the highest and just happened during 2020 due to the significant dropped in the company’s earnings. Similarly, if the company’s earnings increase up to their normal state, then their P/E ratio would be relatively close to their past performance. Nevertheless, it is quite challenging for Ananda to reach the target price at 2.11 baht at the end of the year 2021. As of now, the current stock price seems to be unattractive for a value investor due to Ananda's earnings per share are decreased from 0.09 in 2019 to a negative 0.19 in 2020. However, if the company handle the current situation and their management strategy better then there is a possibility that there can reach the target price and looks more attractive from the investor's point of view. The current stock price is overvalued based on the relative valuation approach. There was a negative 65% upside between the current market price and fair price. The recommendation is to “SELL”.