RELATIVE VALUATION OF DUSIT THANI

Abstract

Relative valuation is a method of valuing a company by comparing its financial ratios or multiples to those of other companies in the same industry, or to its own historical valuation. In this Thematic Paper, Dusit Thani Public Company Limited (DUSIT) is evaluated by applying relative valuation methods to set an appropriate target price. With limitation on the availability of historical P/E, P/BV and EV/EBITDA forward financial data, resulting from DUSIT’s negative net income (earnings) during the Covid-19 pandemic years, the P/BV trailing multiple is selected as the most appropriate valuation multiple. According DUSIT’s P/BV historical multiple bands, with its trailing band rapidly increasing to over two standard deviations above the average, the stock is interpreted to be overvalued compare to its own historical valuation. The results indicate that DUSIT is trading at a premium compared to its book value, comparing the expected prices based on its P/BV multiple of 10.22 Baht (DUSIT’s Trailing P/BV) and 6.20 Baht (Alternative comparison from Kasikornthai Equity forecasts) to the current stock price of 11.70 baht. The Peer Group Comparison of Multiples also illustrates that DUSIT's P/BV multiple of 3.74 is higher than the Peer Median of 1.55, indicating that the market is valuing DUSIT's book value per share more than its peers, thus being overvalued when comparing to its peers. The Peer Group Comparison of Fundamentals and Outlook also emphasize that the company is trailing its peers in profitability, with high debt levels, as well as lower growth potential. Thus, it is recommended to “SELL” DUSIT, as the current price exceeded DUSIT’s calculated P/BV target price by 12.67% (comparing to DUSIT’s Trailing P/BV), so that investors are better off by taking profits. Limitations of the proposed valuation method for DUSIT’s stock price are also provided, including, comparability parameters, macroeconomic factors, market efficiency, and the lack of forward-looking analysis.