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Sido Muncul Dividend Discount Model Valuation

Posted on March 27, 2021July 20, 2023 by Admin

Brief Introduction of Sido Muncul

Sido Muncul is a public Indonesian company with its Head Quarter located in Semarang, Central Java. Sido Muncul focused on traditional and herbal pharmaceuticals production in the Indonesian FMCG sector. Founded in 1940, Sido Muncul has grown rapidly with its signature product such as Tolak Angin, Kuku Bima, and many more. Currently Sido Muncul operates using a PT Industri Jamu dan Farmasi Sido Muncul Tbk as legal entity name.

 

Financial Model & Input Assumption

Corporate Finance Institute’s Financial Model Color Theme of Blue and Orange is used in this model. The input assumptions are based on historical performance and some complex inputs are held constant to keep the simplicity of the model. Information regarding the input is as follows:

  • Risk-free rates to calculate the Cost of Equity is taken from 10 Year Government Bond.
  • Beta used to calculate Cost of Equity is based on 2-year betas using Excel SLOPE Function to the excess return of market and stock.
  • IHSG Historical and SIDO Stock monthly closing prices are taken from Yahoo Finance.
  • As stated in the report, the Valuation technique used was: three years of explicit dividend forecast and constant-growth assumptions from year 4 on.
  • Other Firm’s target prices are taken from Indopremier Online Trading System (IPOT)

 

Click the report to zoom in

Normal Case Scenario Input Assumptions

Input assumptions for the 3-statement model are based on the recent year’s historical performances. In this model, there are 3 different scenarios namely Bear Case, Normal Case, and Bull Case. Bear Case implies an assumption in which the growth of some company’s performance decreases over time. On the other hand, Bull Case implies an increase in some of the company’s performance. Those three scenarios, in the end, led to the differences in the company’s final valuation which are IDR 533, IDR 810, and IDR 1126 of the stock price for every Case Scenario respectively. The Normal Case Scenario input value are as follows:

Valuation Model of Normal Case Scenario

Using three years of explicit dividend forecasts and a constant-growth assumption from year 4 on, the final implied share price of 810 is concluded. Cost of Equity is calculated using CAPM methods. Stock Variance and Market Variance are calculated using Excel =VAR function. Covariance is calculated using Excel =COVAR function. Two-Year Beta is calculated using Excel =SLOPE function. DDM Valuation is as follows:

I kept the rest of the full coverage Excel valuation model for myself. Any feedback and criticism are appreciated!

 

DISCLAIMER: Investing and or trading in Stock Market involves a certain degree of risk. This Report and Valuation are for educational and portfolio purposes only. I hereby disclaim that I won’t be held responsible for any future risk and inaccuracies that occurred regarding your investment decision-making involving this Report & Valuation.

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