DISCOUNTED CASH FLOW VALUATION OF HOME PRODUCT CENTER PUBLIC COMPANY LIMITED

Abstract

This thematic paper applied the principle of discounted cash flow valuation approach to evaluate the intrinsic value of Home Product Center Public Company Limited (HMPRO)’s share price. Home Product Center Public Company Limited is a Thailand-based company engaged in retail home improvement business under the name of HomePro that is listed in the commerce sector on the stock exchange of Thailand (SET50). The Company is principally engaged in the trading of a range of goods and materials for construction, addition, refurbishment, renovation, and improvement of buildings, houses, and residences place, and provision for related services to retail business, together with space rental and provide utilities service. The Company's subsidiaries include Market Village Company Limited, Home Product Center (Malaysia) Sendirian Berhad, Mega Home Center Company Limited and DC Service Center Company Limited, and Home Product Center Vietnam Company Limited. According to the DCF analysis, the sales revenue of the company forecast to increases by 3.90 % CAGR from 2022 to 2026 based on the home sector trend and driven by GDP growth in the construction sector. After the year 2026, I assume the sales growth of the company is 3.90% per annum (perpetual growth), which is a conservative rate considering the past five years’ performance of the company. The target stock price of HMPRO is 13.22 baht per share, with a 15.82% downside compared to the latest stock price as of 18 March 2022 which is 15.70 baht per share. The current stock price is overvalued based on the DCF valuation. As the difference is in the range of “Lower than 10% or Downside”, so my recommendation for HMPRO is “SELL”.