Do Free Cash Flow to Firm and Relative Valuation Method Work in Valuing Building and Construction Companies? : A Test in IDX in 2018

Abstract

: This research aimed to take a fair valuation in estimating the stock price at the building construction companies listed in IDX 2018 using DCF method within the FCFF approach and relative valuation methods including PER and PBV. Three scenarios involved; pessimistic scenario (average industry condition), moderate scenario (the most potential condition) and optimistic scenario (the condition above industry growth). The research data were derived from historical data 2013 - 2017 which considered as the reference for the projection years; 2018-2022. Results of this research presented that using DCF method, in the optimistic, moderate, and pessimistic scenario, the intrinsic value of ADHI is overvalued; WSKT is overvalued; WIKA is undervalued, and PTPP is undervalued. Furthermore, in Relative Valuation method within PER approach, the PER value of ADHI in the optimistic, moderate and pessimistic scenario is 4.19, 3.73, and 3.32; WSKT 3.51, 3.13, and 2.38; WIKA 33.8, 33.4, and 26; PTPP 13.7, 13.7, and 13.6. In PBV approach, the PBV value of ADHI in optimistic, moderate and pessimistic scenario is 0.76, 0.64, and 0.54; WSKT 0.64, 0.56, and 0.42; WIKA 4.03, 3.95, and 3.04; PTPP 2.49, 2.49, and 2.47. The conclusion of this research recommends buying ADHI, WSKT, WIKA and PTPP shares.