Sappe. As a result, the intrinsic value of Sappe is 19.31 Baht. Comparing intrinsic value 19.31 Baht and the
current market price 14.30 baht as of 23 March 2020, the current market price is undervalued. Since its
intrinsic value is in the range of more or less than 50% of market value, our recommendation is to buy on
Sappe. (Figure138)
Dividend Discount Model
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sum of all of s
WRck¶V fXWXUe diYideQd Sa\meQWV aQd diVcRXQWed back WR WheiU SUeVeQW YalXe. IW caQ Well WhaW Whe
price of current stock is overvalued or undervalued. If the intrinsic value is lower than the market price, it
means that the price is overvalued and the investors should not buy the stock as it is traded at a premium.
On the other hand, the investors should buy the stock when it is undervalued, it means that the intrinsic value
is higher than the market price. There are variables in this model include the discount rate, the required rate
of return or cost of equity(Kcs), the expected dividend growth(g), longterm inflation, and dividends per
share(DPS).
To get the intrinsic value of the stock, the equation is calculated as follow:
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࠵?࠵?࠵?
௧
ሺ1 ࠵?ሻ
௧
௧ୀ1
௧ୀ1
࠵?࠵?࠵?
2026
ሺ1 ࠵?ሻ
7
To begin with computing the expected rate of dividend growth (Figure139) that is calculated by multiplying
the return on equity (ROE) with the retention ratio (1Dividend Payout Ratio), which resulted in the 4year
average historical growth rate of 10.12% from 20162019. Then, use this growth rate to find the future
dividends by using the dividends of the latest year (D0) multiplied by 1+growth rate to get future dividends
for each year. For the growth rate during transitional phase, beginning with 2025 at 6.02%, and decelerating
further to 3.96% in 2026. With the stable growth period starting in the year 2027, the dividends are expected
to grow at a constant rate or at the same rate of longterm inflation which is 1.91%.
Figure 139 : Dividend Growth Rate
Growth Rate
Year
DPS
EPS
Payout Ratio
b (RR)
ROE
Growth Rate
2016
0.42
1.36
30.88%
69.12%
22.11%
15.28%
2017
0.54
1.33
40.60%
59.40%
18.82%
11.18%
2018
0.69
1.16
59.48%
40.52%
15.01%
6.08%
2019
0.66
1.32
50.00%
50.00%
15.88%
7.94%
20202024F
10.12%
2025F
Transition Period
Incremental
6.02%
2026F
4.11%
3.96%
2027F
Stable Growth
1.91%
SRXUce : Team¶V AQal\ViV
P a g e

42
Figure 140 : DDM Projection
Dividend Discount Model
Year
DPS
Terminal Value
(1+r)^t
PV
Intrinsic Value
2019
0.659805
12.11869836
2020
0.726583
1.1003
0.6603500362
2021
0.800120
1.21066009
0.6608955227
2022
0.881099
1.332089297
0.6614414598
2023
0.970274
1.465697854
0.6619878478
2024
1.068475
1.612707348
0.6625346872
2025
1.132748
1.774461895
0.6383614471
2026
1.177636
14.77990851
1.952440423
8.173127356
2027
1.200129
SRXUce : Team¶V AQal\ViV
After we get the expected dividends per share for each year then divide them by (1+r)^t, with cost of equity
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rate and longterm inflation as the stable growth rate. After that we sum this terminal value (14.7799 THB)
with the expected dividends per share in the year 2026 (1.1776 THB) and divide it by (1+ cost of equity) ^7
to discount it back to 2019.
To end with summation of all present value of future cash flows including