Calculate the intrinsic value of ts energy bhd

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Reference no: EM132585574

Earnings and dividends prospects of TS Energy Bhd have been analysed by two analysts which is Mr. Adam and Mr. Lee. The company is expected to pay a dividend of RMI .50 in year one.

Mr. Adam predicted that the rate of dividend will grow at 4% for the next of two years, 6% in fourth year, and will grow steadily at 7% in the fifth year onwards. Whilst, Mr. Lee predicted that TS Energy Bhd will pay a constant dividend of RM1 .50 annually.

TS Energy Bhd's beta is 2 times of the market. The risk free rate of return and the market return are 5% and 10% respectively.

i. Calculate the intrinsic value of TS Energy Bhd according to the two analysts, Mr. Adam and Mr. Lee.

ii. Based on Mr. Lee's prediction on the dividend. Advise whether we should invest in TS Energy Bhd if the stock is currently trading at RM12.

Reference no: EM132585574

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