Riphah School of Management Sciences

Companies Stock Valuation

For Abbott and GlaxoSmithKline
By Using:
 Dividend Growth Model
 Operating Free Cashflow Approach
 Free Cashflow Approach

For the kind consideration of:

Mr. Farhan Shah

Submitted by:
Ahsaan Nadeem
CMS No. 24698 (M.COM)
 Dividend Growth Model
Abbott Pakistan: (2013-17)
Abbott
2013 2014 2015 2016 2017
Dividend per share (Rs) 7 7.8 30 40 40

Abbott Expected Growth Rate Calculation

Year Dividend Growth rate
2013 7
2014 7.8 11.43%
2015 30 284.62%
2016 40 33.33%
2017 40 0.00%
Expected Growth Rate 105.98%

Cost of Equity Calculation (Ke)

Net income 3,633,226
Total equity 14,355,835
ke=netincome/t.equity 0.2531

Stock Valuation Using Formula (Abbott)

P=D°(1+g)/Ke-g 40*(1+1.0598)/0.2531-1.0598

Calculated Share Price RS. 324.472

Current Share Price RS. 464.5

GSK Pakistan: (2013-17)
GSK
2013 2014 2015 2016 2017

Cash dividend per share 3.5 5 4 6 7

GSK Expected Growth Rate Calculation

Year Dividend Growth rate
2013 3.5
2014 5 42.86%
2015 4 -20.00%
2016 6 50.00%
2017 7 16.67%
Expected Growth Rate 22.38%

Cost of Equity Calculation (Ke)

Net income 2,785,278
Total equity 13,461,857
ke=netincome/t.equity 0.2069

Stock Valuation Using Formula (GSK)

P=D°(1+g)/Ke-g 7*(1+0.2238)/0.2069-0.2238

Calculated Share Price 41.181

Current Share Price 103

 Operating Free Cashflow Approach
Abbott Pakistan Ltd: (2013-17)

Abbot Pakistan Ltd.

(OFCF) Operating Free Cashflow Approach
2013 2014 2015 2016 2017
Earning Per Share (Rs.) 2528849000 2816312000 3586736000 4021792000 4205232000
Preferred Share Dividend (Rs.) 0 0 0 0 0
Net Income 26 29 37 41 43
Number of Out -Standing Shares 97903562 97890580 97891266 97901461 97909942
EBIT (Rs.) 4087276000 4758663000 5496717000 6128490000 6459090000
Depriciation 0 0 0 0 0
Tax 1157374000 1502255000 1419741000 1565349000 1636713000
Fixed Assets 3269414000 3446467000 4108183000 4523033000 5492322000
Capital Spending 344881000 -82514000 145608000 71364000
Current Assets 7898590000 10319128000 12380092000 13122151000 13743937000
Current Liabilities 2217177000 2670042000 3319884000 2848467000 4649277000
Net Working Capital 5681413000 7649086000 9060208000 10273684000 9094660000
Change in Net Working Capital 1967673000 1411122000 1213476000 -1179024000
OCF 2929902000 943854000 2748368000 3204057000 5930037000
OFCF Per Share 29.93 9.64 28.08 32.73 60.57
OFCF Per Share Growth -0.68 1.91 0.17 0.85

Kc=Rf+β(Rm-
0.56 0.1817
Avg. Growth OFCF Per Share R f)
OFCF° 60.57 Rf is kibor 0.1225
β 1.03
Rm 0.1800

P=OFCF°(1+g)/Kc-g 520
Current share price (Rs.) 452
 GSK Pakistan Ltd: (2013-17)

GSK Pakistan Ltd.

(OFCF) Operating Free Cashflow Approach
2013 2014 2015 2016 2017
Net Income (Rs.) 1,008,659,000 1,609,095,000 2,717,444,000 2,803,758,000 2,785,278,000
Preferred Share Dividend (Rs.) 0 0 0 0 0
Earning Per Share (Rs.) 3.30 5.30 8.30 8.30 9.50
Number of Out -Standing Shares 305654242 303602830 327402892 337802169 293187158
EBIT (Rs.) 1969089000 2560386000 3568467000 4371913000 5013696000
Depriciation 0 0 0 0 0
Tax 747609000 1005105000 1003380000 1707969000 88282000
Fixed Assets 5973404000 6652251000 7154446000 8318434000 8865334000
Capital Spending 257496000 -1725000 704589000 -1619687000
Current Assets 10922720000 11378061000 10266081000 11452229000 11701900000
Current Liabilities 5726508000 6180168000 5442700000 6831225000 7581158000
Net Working Capital 5196212000 5197893000 4823381000 4621004000 4120742000
Change in Net Working Capital 1681000 -374512000 -202377000 -500262000
OCF 1221480000 1296104000 2941324000 2161732000 7045363000
OFCF Per Share 4.00 4.27 8.98 6.40 24.03
OFCF Per Share Growth 0.07 1.10 -0.29 2.76

Kc=Rf+β(Rm-
0.91 0.1967
Avg. Growth OFCF Per Share R f)
OFCF° 24.03 Rf is kibor 0.1225
β 1.29
Rm 0.1800

P=OFCF°(1+g)/Kc-g 232
Current share price (Rs.) 102.8
 Free Cashflow Approach
Abbott Pakistan Ltd: (2013-17)
Abbot Pakistan Ltd.
(FCF) Free Cashflow Approach
2013 2014 2015 2016 2017
Net Income (Rs.) 2528849000 2816312000 3586736000 4021792000 4205232000
Preferred Share Dividend (Rs.) 0 0 0 0 0
Earning Per Share (Rs.) 25.83 28.77 36.64 41.08 42.95
Number of Out -Standing Shares 97903562 97890580 97891266 97901461 97909942
OCF (Rs.) 2929902000 943854000 2748368000 3204057000 5930037000
EBIT (Rs.) 4087276000 4758663000 5496717000 6128490000 6459090000
Interest Cover Ratio 581.71 827.62 851.86 905.60 1,248.03
Interest Expense 7026312 5749816 6452606 6767326 5175428
Long Term Debt 231,147,000 203,477,000 219,144,000 223,953,000 203,562,000
Debt Paid 27,670,000 -15,667,000 -4,809,000 20,391,000
Prefered Dividend 0 0 0 0 0
Owner's Equity 14,355,835,000 14,593,240,000 12,949,247,000 10,871,600,000 8,747,265,000
-
237,405,000 -1,643,993,000 -2,077,647,000
Change In Equity 2,124,335,000
FCF 2922875688 673029184 4401575394 5279745674 8028805572
FCF/Share 29.85 6.88 44.96 53.93 82.00
FCF/Share Growth -0.769706787 5.539901478 0.199387819 0.520548638

Kc=Rf+β(Rm-
1.37 0.1817
Avg. Growth OFCF Per Share R f)
OFCF° 60.57 Rf is kibor 0.1225
β 1.03
Rm 0.1800

P=FCF°(1+g)/Kc-g 1069
Current share price (Rs.) 452
 GSK Pakistan Ltd: (2013-17)
GSK Pakistan Ltd.
(FCF) Free Cashflow Approach
2013 2014 2015 2016 2017
Net Income (Rs.) 1008659000 1609095000 2717444000 2803758000 2785278000
Preferred Share Dividend (Rs.) 0 0 0 0 0
Earning Per Share (Rs.) 3.30 5.30 8.30 8.30 9.50
Number of Out -Standing Shares 305654242 303602830 327402892 337802169 293187158
OCF (Rs.) 1221480000 1296104000 2941324000 2161732000 7045363000
EBIT (Rs.) 1969089000 2560386000 3568467000 4371913000 5013696000
Interest Cover Ratio 11.40 139.90 70.80 228.70 55.80
Interest Expense 172727105 18301544 50402076 19116366 89851183
Long Term Debt 862,989,000 975,607,000 646,542,000 723,185,000 830,917,000
Debt Paid -112,618,000 329,065,000 -76,643,000 -107,732,000
Prefered Dividend 0 0 0 0 0
Owner's Equity 11,349,313,000 11,945,103,000 13,070,211,000 13,542,785,000 13,461,857,000
Change In Equity 595,790,000 1,125,108,000 472,574,000 -80,928,000
FCF 1048752895 794630456 1436748924 1746684634 7144171817
FCF/Share 3.43 2.62 4.39 5.17 24.37
FCF/Share Growth -0.24 0.68 0.18 3.71

Kc=Rf+β(Rm-
1.08 0.1967
Avg. Growth OFCF Per Share R f)
OFCF° 60.57 Rf is kibor 0.1225
β 1.29
Rm 0.1800

P=FCF°(1+g)/Kc-g 257
Current share price
102.8
(Rs.)