Discounted cash flow valuation of MEGA lifesciences public company limited

Abstract

This thematic paper aims to estimate the intrinsic value of Mega Lifesciences Public Company Limited (MEGA) by using discounted cash flow valuation method (FCFF). The estimated share value should reflect the company’s fundamentals, expected future performance and the risk. MEGA is operating in developing countries or emerging markets, and the nominal GDP growth of these countries are relatively high. Moreover, the awareness of health concern due to covid-19 and aging population trends are another factor that will lead to high demand for dietary supplement products as the company’s sales is directly related to disposable income and health concerns based on historical information. The target price of MEGA based on a five-year forecast was estimated to be 81.23 baht per share with an upside of 121.04% when compared to the market price 36.75 baht per share on July 11th, 2024. Accordingly, we recommend to BUY the shares of MEGA. As a limitation, the DCF approach still has several drawbacks even if the valuation result shows the company's high underlying value, because it depends on several assumptions about unknown future growth and risks. As a result, the valuation estimate needs to be assessed carefully and critically.