DB : Fighting the flow: could buying opportunity emerge for HMSP and UNVR post the Friday massive sell-off?
IDX plan to change the weighting formula of its LQ45 and IDX 30 indices to “free-float market cap driven” has triggered massive decline in HMSP (-10%) and UNVR (-4%) share price on Friday, given their relatively low-free float.
Further sell-off on those name are expected. Yet, investors might wonder, at what point buying opportunity for both names could emerge?
To answer this question, we estimate the fair valuation of HMSP and UNVR post the indices adjustment. Note that some part of premium in HMSP and UNVR’s valuation multiple have been driven by scarcity value of their share, whom have been looking after as they represent large portion of the index.
We believe the fair valuation multiple for HMSP is the company’s valuation multiple pre share re-floating in 2016 - at the range of 27.0-28.0x one-year forward PE. Note that the company’s valuation multiple has re-rated materially to 35.0-40.0x one-year forward PE after share re-floating, which led to inclusions into several indices. This implied target price range of Rp3,100-3,250 per share.
On the other side, from technical point of view, we think UNVR’s fair valuation multiple is the average valuation of foreign operations of FMCG MNCs in emerging Asia – or around 41x 2019E PE. This is as UNVR will have similar market cap weighting with its peers in emerging Asia after the adjustment by IDX. This implied target price range of Rp41,400 per share. Hence, we see tactical buying opportunities on UNVR.
(12/11/2018)
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