Absolute Valuation Research Articles

Indonesian Digital Bank Stock Valuation: Case Study of Bank Jago in 2022

In 2019, in the midst of the early stage of the digital banking industry in Indonesia Bank Arto underwent a transition and rebranded as Bank Jago, a digital bank. As a result of Bank Jago’s transition from a traditional commercial bank into a digital bank, the company’s stock reached an all-time high share price of Rp 19,000 per share in January 2022. This was the highest share price the company had ever achieved. The public’s excitement eventually subsided, however, and this resulted in a decline in the price of the company’s shares. The price per share of Bank Jago was recorded at Rp 4,200 in November of 2022, which was 77% lower than the price recorded in the beginning of 2022. This research will analyze the financial performance of Bank Jago through the utilization of financial ratio analysis, and to determine the intrinsic value of Bank Jago through the utilization of absolute valuation using the Dividend Discount Model as well as the competitiveness and environment of the Indonesian digital banking industry using PESTEL and Porter Five Forces. From the Porter Five Forces, Indonesian digital banking industry indicates a high level of competitiveness, whilst the industry itself in Indonesia through the PESTEL analysis indicates that it will continue to grow due to the level of support from the political and government factors. According to the analysis of financial ratios, Bank Jago’s profitability has increased significantly over the past three years, as indicated by the rapid growth rate of the NIM, ROE, and ROA ratios since the time of its transformation. With a ratio of 145.86%, Bank Jago displayed a level of liquidity that was unsatisfactory. According to the projections using Dividend Discount Model, Bank Jago’s intrinsic value is currently undervalued by -23%.

The evaluation of marketing competitiveness of B2B E-commerce enterprises based on optimized deep learning networks

In the context of e-commerce trade between enterprises, there are problems such as price wars, false advertising, and unreasonable operations aimed at seizing market share. However, traditional estimation methods cannot provide a reasonable evaluation of the marketing competitiveness of e-commerce enterprises from an overall perspective. To help enterprises better clarify their own position and quantify their marketing competitiveness, a competitiveness evaluation model based on optimized deep learning networks is proposed. By combining subjective and objective evaluation methods, the indicators that affect the marketing competitiveness of enterprises are assigned to obtain the final competitiveness value. The research outcomes expressed that the max absolute error of the model constructed by the research institute was 0.0006, the max relative error was 0.0045, and the model accuracy was 99.85%. In the secondary indicator experiment of marketing competition, the model determined that the turnover rate of fixed assets had the greatest impact, with a weight value of 0.1263. Nine companies were randomly selected for market value estimation, and the average relative error of the model was 14.90%, which was lower than the mean relative error of the relative valuation, cash flow and absolute valuation methods, with numerical differences of 8.03%, 2.94%, and 0.12%, respectively. The research findings illustrated that the model constructed by the research institute had good performance and certain reference values for evaluating the marketing competitiveness of e-commerce enterprises.

The Financial Performance and Stock Valuation of Coal Mining Company in Indonesia (Case Study: Pt. Abm Investama Tbk (ABMM))

Indonesia, the world’s largest supplier of coal, may profit from the uncertainties surrounding the present geopolitical situation. According to experts, the current high price of coal could be stable through the end of 2022, before declining moderately in 2023, but remain well above its five-year average. Therefore, investing in coal companies’ stock right now is a good idea. Theoretically, investing in the stocks of any firm whose primary business is in the coal industry will result in a profit. The issue is deciding which stock to purchase to increase the portfolio’s return. Value investing, often known as finding an undervalued firm with a great potential for growth, is the main goal of the research. The first step of this study is to observe the coal mining sector, and analyze the problem that occurs. Then, a simple screening valuation method using PBV and PER is conducted to choose the appropriate company to evaluate. Next, external factor analysis using PESTEL analysis and Porter’s Five Forces analysis is conducted. Afterward, internal factor analysis using Financial Ratios and F-Score is conducted to evaluate the problem that lies within the company. Finally, to summarize, SWOT analysis is conducted to analyze the advantages and disadvantages of the company’s business environment that provide a thorough knowledge of the company’s competitive advantages. Furthermore, an absolute valuation method is carried out to produce the company’s intrinsic value. The financial performance of ABMM when viewed from its financial statement from 2017 – 2021 is strongly increased in 2021, but stagnant in 2017 – 2020. After obtaining the valuations result through three absolute valuation method, the normalized earnings valuation shows an upside of IDR 2,317 or 77%, the DCF valuation shows an upside of IDR 2,193 or 73%, and lastly, the Monte Carlo Simulation shows an upside of IDR 2,233 or 74%. Therefore, from all three method, ABMM current stock price is considered as undervalued. According on the findings, this study advises purchasing ABMM shares. The present stock price was found to be undervalued using three absolute valuation methods, which means that anyone who purchases the stock at the current price of IDR 3,000 will see a capital gain on their investment.

Preferential corporate income tax treatment: Valuation in the market portfolio

AbstractIn the setting of the market portfolio, the impacts of preferential corporate income tax treatments through the valuational reduction for risk are opposite to and offset the impacts through the expected proceeds. This suggests that focusing on the absolute valuation of tax‐favored firms results in the undermeasurement of implicit taxes on returns on investments in tax‐favored firms and the relative valuation with reference to fully taxed (i.e., tax‐disfavored) benchmark firms be used. In addition, corporate income taxes imposed on entities and capital income taxes imposed on investors have opposite valuational effects through the endogenously derived market‐aggregate aversion to risk.

Stock Valuation of Indonesia Pharmaceutical Company with COVID-19 Vaccination Development Prospects Amidst Pandemic Situation (Case Study of PT. Kalbe Farma, Tbk.)

As one of the world’s most populous countries with a fast-growing economy, Indonesia's market for pharmaceuticals has become very promising. COVID-19 pandemic that outbroken since early 2020 has brought a huge impact on the overall country condition while at the same time stimulate the growth of the pharmaceutical market as it is forecasted to grow at a CAGR of 6.3% between 2016 and 2021 according to IQVIA. This situation creates a reaction in the stock market especially of pharmaceutical companies that experienced an average increase of 67% since last year with its key driver of news regarding the distribution of Sinovac vaccine by some state-owned pharma companies as part of the national vaccination program. PT. Kalbe Farma, Tbk as one of the largest pharma companies in Indonesia is also accounting a positive growth over the years while also presented with bright prospects as a result of its strategic initiatives to collaborate with South Korea in developing COVID-19 vaccine and medication, named Genexine which is planned to be completed in Q3 2021. The possibility of success in this project might affect the company’s stock performance since it would result in bigger profitability for the company. In order to help investors to make a decision in this situation, the intrinsic value of the company stock is required. Therefore, conducting absolute and relative valuation are believed to be important in order to find the intrinsic value. This study examined absolute valuation using FCFF model and relative valuation using P/E and EV/EBITDA for KLBF. Result of the valuation suggested that the current stock price of IDR 1,445 is overvalued. The intrinsic value calculated from FCFF model is IDR 1,397 and based on the relative valuation models are IDR 1,330 and IDR 1,233 for EV/EBITDA and P/E ratio, respectively.

A Modified Contingent Valuation Method Shrinks Gain-Loss Asymmetry

Large, unpredictably variable gaps between Willingness-to-Accept and Willingness-to-Pay (WTA-WTP gaps) are a methodological concern with the Contingent Valuation Method. The present study investigates WTA-WTP gaps as one manifestation of gain-loss asymmetry: the phenomenon that selling prices exceed buying prices. We investigate some causes of this asymmetry. Using a novel paradigm, and scaled goods, we obtain valuations of three nonmarket goods: one private (Health), and two public (Environment). We systematically explore the effects on gain-loss asymmetry of Good-type (Public vs. Private), Method (Price vs. Choice), and Payment Units (absolute valuation vs. percentage of income). Across methods, gain-loss asymmetry varies by Good-type: it is larger for public goods. We also find that gain-loss asymmetry shrinks, but does not disappear, from Price to Choice. We identify the mechanism of this shrinkage: a bidirectional, asymmetric valuation shift in Gain and in Loss. Eliciting valuations via income percentages instead of absolute values, and reversing the Price/Choice sequence, preserves these effects. Valuations show less variability when elicited as income percentages than when elicited as absolute values. Insofar as smaller and less variable gain-loss asymmetries suggest methodological validity, Choice seems preferable to Price. Further, Income Percentage seems an economically justifiable basis for anchoring contingent valuations.

Impact of Excise Tax Hike to Stock Value (A Case Study of PT. Hanjaya Mandala Sampoerna, Tbk.)

Cigarette industry in Indonesia had contributed around 8% to the state revenue in 2018, and this number are expected to increase in 2020 due to higher excise tax rate for cigarette industry which believed can boost the state revenue. However, the cigarette’s excise tax hike that will be effective in January 1st, 2020 will have significant impact to all of the cigarette companies in Indonesia. The biggest cost of goods sold component of cigarette companies were the excise tax expense, thus, a significant increase on excise tax will reduce the company’s profitability. The significant decrease in company’s profitability could affect the company’s stock performance. In order to help the investors how to react to this situation, the intrinsic valuation of the company is required. Evaluating the company’s financial performance in the past five years and conducting absolute or often called intrinsic valuation of HMSP are believed to be important in order to help the investors how to act while the cigarette companies’ stock was all tumbled since the beginning of the year. This study examined absolute valuation of HMSP using the FCFE model. Absolute valuation models were calculated and had suggested that the current stock price of IDR 1,900 of HMSP is undervalued. The intrinsic value calculated from absolute valuation models was IDR 2,242.71. FCFE models show significantly high intrinsic value for HMSP, with potential return above 15%, it should attract the prospective investors to buy the company’s stock.

Relative Valuation with Machine Learning

We use a decision-tree-based machine learning approach to perform relative valuation. Stocks are valued using market-to-book, enterprise-value-to-assets and enterprise-value-to-sales multiples. Our machine learning models reduce median absolute valuation errors by between 17% and 50% relative to traditional models. The identified valuation drivers are consistent with theoretical predictions derived from a discounted cash flow approach. Accounting variables related to profitability, growth, efficiency and financial soundness are important valuation drivers. The valuations produced by machine learning models behave like fundamental values. A value-weighted strategy that buys (sells) undervalued (overvalued) stocks generates highly significant abnormal returns. When we use models trained on listed firms to value IPOs, machine learning models outperform traditional models in valuation accuracy and can identify mispriced IPOs.

Using a Z-score Approach to Combine Value and Momentum in Tactical Asset Allocation

We present several active strategies for combining value and momentum strategies in a tactical asset allocation (TAA) framework. We refine the basic yield approach to valuation by standardizing the value signal using the Z-score. Such standardization not only enables us to directly compare valuation measures across asset classes, but also offers insight about each asset class’s absolute valuation by its own standard. Under the nonlinear approach, it helps to identify market peaks and bottoms. We improve the momentum strategy by considering both relative and absolute performances. In the combined tactical asset allocation model, this modification to momentum acts as a simple mechanism to adjust the importance of value and momentum strategies under different market conditions. Our combined model takes advantage of both short-term momentum effects and long-term mean-reversion in valuation to achieve superior overall portfolio performance. Finally, we also provide alternative models for smaller tracking errors.

Absolute and Relative Valuation Models to Accommodate Pre-IPO Appraisal of an Airport Authority: A Case Study of PT. Angkasa Pura II Persero

The study had firstly scanned the PT. Angkasa Pura IIs external industry through the help of PESTEL framework and Porters Five Forces. The internal business was then assessed by using the VRIN framework and the financial ratio analysis. The study proceeded to look into the perspectives of both the absolute and relative valuations of the company. Absolute valuation models were to uncover the companys underlying, sole value as a firm of its own and had employed the FCFF and three-stage DDM models as the courses. Relative valuation models were to stage market perceptions on the firm value and had taken advantage of the forward P/E and EV/EBITDA multiples as the courses. Both absolute and relative valuation models developed for this study had fundamentally concluded that Angkasa Pura II could very well raise more capital than what had been intended to. The study significantly leaned more towards the absolute valuation models than the counterparts. The absolute valuation models had additionally prompted significantly high intrinsic value for the company, which in return should appeal to prospective investors to purchase the companys stock at a high initial price.

Application of Absolute Valuation Methods of Chinese Stock—A Case Study of the Hebei Gucheng Increase Group Co., Ltd (NEEQ: 830837)

The purpose of this paper is to explore the application of the absolute valuation methods, with the Hebei Gucheng Incense Group Co., Ltd (NEEQ: 830837, Hereinafter referred to as the company) as an example. This paper studies the intrinsic value of the company and makes a reasonable valuation for the company's stock.

Parasitic egg rejection decisions of chalk-browed mockingbirds Mimus saturninus are independent of clutch composition.

Obligate avian brood parasites lay their eggs in nests of other host species, which assume all the costs of parental care for the foreign eggs and chicks. The most common defensive response to parasitism is the rejection of foreign eggs by hosts. Different cognitive mechanisms and decision-making rules may guide both egg recognition and rejection behaviors. Classical optimization models generally assume that decisions are based on the absolute properties of the options (i.e., absolute valuation). Increasing evidence shows instead that hosts' rejection decisions also depend on the context in which options are presented (i.e., context-dependent valuation). Here we study whether the chalk-browed mockingbird's (Mimus saturninus) rejection of parasitic shiny cowbird (Molothrus bonariensis) eggs is a fixed behavior or varies with the context of the clutch. We tested three possible context-dependent mechanisms: (1) range effect, (2) habituation to variation, and (3) sensitization to variation. We found that mockingbird rejection of parasitic eggs does not change according to the characteristics of the other eggs in the nest. Thus, rejection decisions may exclusively depend on the objective characteristics of the eggs, meaning that the threshold of acceptance or rejection of a foreign egg is context-independent in this system.

The Performance of Relative-Value Equity Strategies

This paper examines investment strategies that combine time-series and cross-sectional stock sorts based on scaled price-to-earnings ratios, which I describe as relative-value strategies. Relative-value strategies buy (short) stocks that are below (above) their long-run historical absolute or market-relative valuation. I test the performance of relative-value strategies versus a traditional value strategy. I find that a relative-value effect exists, but is dwarfed by the traditional value effect. On average, the tested relative-value strategies deliver long-short returns of 1.25% p.a. and long-only excess returns of 0.69% p.a. over 1990 to 2014. The traditional value strategy produces long-short returns of 5.50% p.a. and long-only excess returns of 4.33% p.a. Relative-value strategies offer an alternative but not necessarily superior source of returns. I evaluate returns after adjusting for common risk factors. I explore the effect on returns from alternative portfolio formation and rebalancing rules. I discuss possible explanations for the findings and implications for investors.

Consumption-based equity valuation

Using a CCAPM-based risk-adjustment model, we perform yearly valuations of a large sample of stocks listed on NYSE, AMEX, and NASDAQ over a 30-year period. The model differs from standard valuation models in the sense that it adjusts forecasted residual income for risk in the numerator rather than through a risk-adjusted cost of equity in the denominator. The risk adjustments are derived based on assumptions about the time-series properties of residual income returns and aggregate consumption rather than on historical stock returns. We compare the performance of the model with several implementations of standard valuation models, both in terms of median absolute valuation errors (MAVE) and in terms of excess returns on simple investment strategies based on the differences between model and market prices. The CCAPM-based valuation model yields a significantly lower MAVE than the best performing standard valuation model. Both types of models can identify investment strategies with subsequent excess returns. The CCAPM-based valuation model yields time-series of realized hedge returns with more and higher positive returns and fewer and less negative returns compared with the time-series of realized hedge returns based on the best performing standard valuation model for holding periods from 1 to 5 years. In a statistical test of 1-year-ahead excess return predictability based on the models’ implied pricing errors, the CCAPM-based valuation model is selected as the better model. Using the standard series of aggregate consumption and the nominal price index, a reasonable level of relative risk aversion, and calibrated growth rates in the continuing value at each valuation date, the CCAPM-based valuation model produces small risk adjustments to forecasted residual income and low continuing values. Compared with standard valuation models, it relies less on estimated parameters and speculative elements when aggregating residual earnings forecasts into a valuation.

Context-dependent foraging by seed-eating birds does not necessarily mean low ecological predictability

Flexibility of foraging behaviour affects our capacity to predict ecological outputs such as population responses to habitat change. Some birds forage following rules of absolute value of the food item (i.e., absolute valuation). Their realized diet is strongly correlated with the profitability of the food item and it is predictable. Consumers, however, do not always follow absolute rules. Opportunistic foragers adjust food consumption based on the availability of the food item. Their diet is still predictable but more elusive. Relativistic or context-dependent foragers change the ranks of food preferences depending on the presence of alternative food options in the choice set. Predicting their contingent diet is particularly difficult. We tested if the context of seed availability affects foraging decisions of three seed-eating bird species (the Rufous-collared Sparrow (Zonotrichia capensis (Statius Muller, 1776)), the Many-colored Chaco Finch (Saltatricula multicolor (Burmeister, 1860)), and the Common Diuca Finch (Diuca diuca (Molina, 1782))) using choice experiments aimed at detecting if seed preferences for two types of target seeds changed according to context. Birds showed very similar rankings of preferences for target seeds; however, preferences for attractive food items were not fixed but often increased in less valuable contexts. Although results imply some degree of context-dependent behaviour, predictability of bird diet was preserved because the ranking of preferences remained mostly unchanged between contexts (and among bird species), and the higher consumption of target grass seeds in a less attractive context was widely expected from the intrinsic properties of the seeds.

Eurozone equities expected to outperform in 2015

We expect Eurozone equities to somewhat outperform US equities in 2015, so long as downside risks (such as a Greek exit from the Eurozone) do not materialise. Absolute valuation measures suggest that Eurozone stocks are fair‐to‐slightly cheap, limiting their upward potential. But relative to US stocks, they appear more attractive. This suggests potential for favourable portfolio reallocations and a possible lift to equity prices in the region. That said, earnings growth is likely to provide the main support to Eurozone equity performance in 2015, against a backdrop of converging earnings cycles between the US and the Eurozone.

Poly Real Estate Value Evaluation Research

This paper made valuation research on poly real estate by combining the actual situation of poly real estate and special factors affecting real estate industry assessment, using relative valuation method p/e ratio method and price-to-book ratio method, and discount cash flow method in absolute valuation method respectively. Three methods valuation results have little difference from the actual price, and are in line with the actual situation. By contrast, two methods valuation results are slightly lower than the actual price, which means that poly still has a certain rise space. From overall analysis, discount cash flow method is more rational comparing with valuation method.

Comparazione delle definizioni di bosco efficaci sul territorio nazionale attraverso l’analisi di dominanza

Abstract: Comparison of forest definitions at the national level using dominance analysis. Despite Italian forests are subject of protection since long time, the first forest definition legally binding has been enacted only in 2001. However, thanks to the action of international, national and regional institutions, 25 forest definitions are effective today on the Italian territory. All definitions of forest are fully described and their qualification analyzed using four definition types: legislation, policies, technical and allocative. Only those that are included in the first three types were subjected to dominance analysis. Macro-criteria, criteria and sub-criteria have been defined to build an absolute valuation matrix. Concordance, discordance and dominance analysis have been cattied out after normaliztion. Forest definitions have been subdivided into two groups: dominant and dominated. The first group includes all regional definitions due to the details of their content, while the second group includes definition adopted by international and national institutions. Three aspects have been emphasized in the conclusion: (a) all definitions, except that adopted by the Lombardy Region, are based on the “forest land” and not on the “forest”; (b) most definitions do not include the multifunctional nature of the forest thus neglecting one of the most relevant forest profiles; (c) the first part of all definition is devoted to technical details as if the main motivation for their elaboration were the quantification of the forest area.

Using a Z-score Approach to Combine Value andMomentum in Tactical Asset Allocation

This article presents several active strategies for combining value and momentum strategies in a tactical asset allocation (TAA) framework. It refines the basic yield approach to valuation by standardizing the value signal using the Z-score. Such standardization not only enables the authors to directly compare valuation measures across asset classes but also offers insight about each asset class’s absolute valuation by its own standard. Under the nonlinear approach, it helps to identify market peaks and bottoms. It improves the momentum strategy by considering both relative and absolute performances. In the combined TAA model, this modification to momentum acts as a simple mechanism to adjust the importance of value and momentum strategies under different market conditions. The combined model takes advantage of both short-term momentum effects and long-term mean-reversion in valuation to achieve superior overall portfolio performance. Finally, it also provides alternative models for smaller tracking errors.

Relative valuation and analyst target price forecasts

We document that within industry relative valuations implicit in analyst target prices do provide investors with valuable information although the implied absolute valuations themselves are much less informative. Importantly, our findings are not merely a small stock phenomenon but apply to the sample of S&P 500 stocks and do not rely on trading at the exact time of announcement. Using a large database of target price announcements from 1997 to 2004, we construct a simple strategy based on target price implied relative valuations and show that the resulting abnormal return is both economically and statistically significant and not easily explained by transaction costs alone.