DOES RAPIDLY GROWING REVENUES ALWAYS PRODUCE AN EXCELLENT COMPANY'S VALUE? DCF & P/E VALUATION ASSESSMENT ON HOSPITAL INDUSTRY

Satria Zemba, Riko Hendrawan

Abstract

The investment opportunities of the health sub-sector business in Indonesia are still wide open, because capacity of all hospitals in Indonesia is only able to serve 3.25% of the total potential patients, there is still 96.75% potential market that equivalent to 9,501,350 customers. Because of this enormous chance to gain more revenue, absolutely attract investor to make an investment. Not much choice to investing in healthcare business in Indonesia, there is MIKA, SAME, SILO and SRAJ, all of them will be evaluating using DCF and Relative Valuation, to know their fair value. This fair value becomes essential when investors want to make investment decisions, which they will not want to buy stocks if their prices is too high, and not trusting to buy stocks whose prices are falling. This research are meant to be done searching fair value of those company.

This research begin with collecting financial statement for 5 years between 2013 and 2017, using it as the historical aspect to generate forecast for next 5 years 2018-2022. Every income and cost are carefully calculated to create ratio using geometric or arithmetic average. The purpose of forecast is to estimate potential free cash flow that can be produce in the future. This valuation is reveal how good each company to produce more money in the future, no matter how much they growth revenue it self, because in this research we can see company with less revenue growth can make more money than the big one.

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