Analysis file – https://lcchong.files.wordpress.com/2017/09/karex-fy17-q4.xlsx
In short, despite Karex prices dropped from 2.60 to 1.48 (taking bonus shares into consideration), in my opinion, Karex is still overvalued. DCF is not really suitable for KAREX.
- EBITDA Multiple – Referring to the following EBITDA multiple, if compare to manufacturing companies in Malaysia and US, KAREX’s EBITDA multiple is very high. This is an indication of overvalue.
- My estimation – 32x
- WSJ’s estimation – 30x
- If you can’t comprehend EBITDA Multiple, then you check out KAREX’s P/E which is 53x. If we convert this to Earning Yield, 53x is equivalent to 1.9%.
I have been toying some high growth rates, but I just couldn’t “make Karex undervalued”. Therefore, I will pass KAREX for the time being, but I will keep it in my watch list.
I want to thank my relative who shares EquitiesTracker’s study on Karex with me. This saves my time a lot.
If you ever open my analysis file, you will see quick and dirty assumptions for many items, such as:
- Segregation of debts for FY2017
- Interest rates for cash balances
- Interest rates for debts
- And others….
Anyway, all of these quick and dirty assumptions won’t impact the valuation a lot (thus won’t change my view) unless their 2017 Annual Report releases something extremely off from my assumptions.
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