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Questionsintrinsic value for Dutch Lady
Boon Chin Ng asked 4 years ago

Hi Victor and Rusmin,
Just a follow-up question. I am trying to calculate the intrinsic value for Dutch Lady. Kindly refer to the attached image, do you think is reasonable to derive the intrinsic value by: (sum of 10yrs discounted EPS) + (total dividend expected for 10yrs)?

(https://www.dropbox.com/s/o3kzlsgp7ozlwie/Intrinsic%20Value.png?dl=0)

Or I should be using other calculation for such stock?
 
Thank you!

1 Answers
Victor Chng answered 4 years ago

Hi Boon Chin,
 
Dutch lady is a great and simple business. Hence using PE is enough to value the company. What you need to do is to find out Dutch lady average PE range and try to purchase it at or below that range.

Boon Chin Ng replied 4 years ago

Hi Victor, thanks!

By the way, any comment on the high PB for Dutch Lady? Though having extremely good ROE of 90%, but also paying rather high PB of 20, which results in the “return” to be around 4.5% (ROI = ROE/PB).

Thank you.

Victor Chng replied 4 years ago

Hi Boon Chin,

Dutch lady is a earning type of business hence PE is more applicable to value the company as compared to PB.

Boon Chin Ng replied 4 years ago

Thanks! :)