STOCK VALUATION OF PT INDOFOOD CBP SUKSES MAKMUR BY USING DISCOUNTED CASH FLOW VALUATION MODEL

Abstract

The main objective of this thesis is to determine the fair value of the stock of ICBP with the discounted cash flow method. And compare the current market price with the fair value to conclude whether or not the value found is over or underestimated. ICBP has strong fundamental highlighted by its strong brand power and has consistently growing with a track record of strong performance in the past. We see the growth pattern will continue due to its fundamental and Indonesia resilient domestic market. It employs the descriptive approach and both the quantitative and qualitative research method to analyze the case company financial statement. And based on the nature of this research problem, and the information sources available, it is a secondary data research design. Through both a strategic and a financial analysis, ICBP’s firm value from the DCF model is 39,416,079 million rupiah. With a total number of shares of 5,830,954,000 the company’s share price per 31.12.2013 is calculated to be 6,760 rupiah, which is below the actual share price of 10,200 rupiah on the given date, suggesting that the stock is overvalued in the market. Since the primary inputs to the DCF model like WACC, cost of equity, cost of debt, terminal growth rate, free cash flow, etc are calculated by researcher herself, it is ensured that the discounted cash flow method is the best valuation approach to value the share price of the case company and the estimated value is more accurate. Even though DCF model is proved to be the best approach to value the company, there are still some difficult problems during the valuation process because of the high degree of uncertainty around the estimated values. Therefore, the results should be interpreted with caution. And for further studies, researchers should choose a suitable valuation method for the company depending on the company business characteristics and the purpose of the valuation before appraising a company.