DISCOUNTED CASH FLOW VALUATION OF MK RESTAURANT GROUP

Abstract

The objective of this thematic paper is to evaluate whether the price of MK Restaurant Group Public Company Limited’s stock (M) on 13 March 2023 at 53.25 baht is undervalued or overvalued. This thematic paper applied the principle of discounted cash flow (DCF) valuation approach, which represents the concept that a company's stock price should reflect its intrinsic value in terms of cash flow, growth, and risk of M’s share price. According to the DCF analysis, the company's sales revenue grows at a 5.9% CAGR from 2023 to 2027, driven by GDP growth in the Restaurants and Hotels sector as a result of COVID-19 vaccine efficiency and economic recovery. After 2027, I assume the sales growth of the company is 3.82% per annum (perpetual growth), which is a conservative rate considering the past five years’ performance of the company. The target stock price of M is 64.36 baht per share as of 31 December 2023, representing a 21% upside compared to the latest stock price as of 13 March 2023 which was 53.25 baht per share. The current stock price is undervalued based on our DCF valuation. As the difference is in the range of “20% or Greater upside”, my recommendation for M is “BUY”.