A VALUATION OF PT XYZ (PERSERO) TBK
The number of airplane user increased year by year that makes airlines industry can be considered as a profitable business. PT XYZ (Persero) Tbk (XYZ) is recognized by Skytrax as the Best Regional Airline in the World, The Best Economy Class Airlines in the World, and Airline with the Best Cabin Cre...
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| Format: | Final Project |
| Language: | Indonesia |
| Online Access: | https://digilib.itb.ac.id/gdl/view/38785 |
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| Institution: | Institut Teknologi Bandung |
| Language: | Indonesia |
| Summary: | The number of airplane user increased year by year that makes airlines industry can be considered as a profitable business. PT XYZ (Persero) Tbk (XYZ) is recognized by Skytrax as the Best Regional Airline in the World, The Best Economy Class Airlines in the World, and Airline with the Best Cabin Crew in the World. XYZ is quite strong and even being the one of the best airlines in the world, but its share price continues to decline and even in 2017 XYZ generated negative earnings.
This final project aims to estimate the intrinsic value per share of XYZ as a comparison value to the share price and to determine whether the share price is overvalued or undervalued. The data used in this final project is based on the secondary data of XYZ’s financial reports from 2013 to 2017.
The Free Cash Flow to the Firm method of valuation compares the intrinsic value of XYZ with the market share price. With this method, the intrinsic value of XYZ is IDR 257 per share and it is lower that the market share price which is IDR 404 per share. The poor current financial performance leads to the low intrinsic value per share. From this result, we can see that the firm is overvalued by the market compared to its intrinsic value per share. It means that the market is more optimistic toward the firm compared to how it is fundamentally valued.
This final project also aims to determine whether the share price of XYZ is underpriced or overpriced compared to its competitors. According to the relative valuation method using Price-to-Book (PBV) ratio, XYZ’S PBV is lower than its competitors; this means that XYZ is underpriced. Based on historical data, XYZ in 2017 has negative retained earnings ie. deficit which means the company has cumulative loss, and this reduces the company’s total equity. Because of this deficit, investors would not have the courage to set a high price for XYZ, and this causes XYZ to have a low share price in stock market. |
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