Hi ONTHEMONEY
Yes, my estimates are conservative generally. This is way any upside to my expectations would be an added bonus
In terms of
EXPO, yes you are correct, PE of 8 times is severely understated compared to the mother company purchases which was around 20-25x PER. But we cannot expect similar levels of PE multiples in the current scenario since the company is more matured & generally negative outlook in the global scale.
However, from my in depth analysis, it is clear that
EXPO is currently benefiting from high freight rates while effectively maintaining same GP % - meaning that this is a direct addition to bottom line (since overheads are fairly fixed).
Also note that this company is hedged against the dollar. With LKR expected to hit around 220+, this will add a further 15%-20% to top line revenues. This too will add further to the bottom line and to future EPS.
Moreover, this company is positively correlated to C19. With a possible vaccination 6 months away, and considering at may take a minimum of 18-24 months to completely eradicate C19 after vaccine, the medium term outlook is very strong.
If I am not being conservative, I would have applied at least 15x PE. Meaning that this share is worth Rs. 60/- to 70/-.
Adding more to the story, due to high demand for the share with low supply in free float, the above valuation is not entirely out of the realms of short term possibility/realisation.
This is not a buy or sell recommendation - just an analysis from an independent investor.