Pulp and Paper Companies And Their Fair Value: Evidence From Indonesia Stock Exchange
Muhammad Iqbal Miala, Farida Titik Kristanti
Magister Management, Telkom University
Abstract
The purpose of this study is to conduct a fair price valuation of shares in pulp and paper sub-sector companies that are already listed on the Indonesia Stock Exchange. Valuation was carried out comprehensively using the DCF Free Cash Flow to Firm (FCFF) approach and the relative valuation method of Price to Earning Ratio (PER) and Price to Book Value (PBV) approaches. Each uses three scenarios; optimistic scenario, moderate scenario and pessimistic scenario. The companys historical data for the 2014-2017 period is used as a basis for projections 2018-2021. The results of this study indicate that the stock market price of January 1, 2018 when compared with the fair value of the stock valuation of the DCF-FCFF scenario is optimistic, INKP and TKIM are undervalued, FASW is overvalued. In moderate scenarios, INKP and TKIM are undervalued, FASW is overvalued. In the INKP, TKIM and FASW pessimistic scenarios, it is overvalued. While for relative valuation approaches PER all scenarios produce INKP, TKIM and FASW are overvalued. Finally for the relative valuation of the PBV approach all scenarios produce overvalued INKP, TKIM and FASW.
Keywords: Free Cash Flow to Firm; Relative Valuation; Pulp and Paper Industry; Fair Value
Topic: Financial Technology