Leading PIE Based on Fundamental Forecasts (2).
Hyundai Motor Company Ltd (KSE: 05380.KS) manufactures and sells cars, trucks, and commercial vehicles. As of the beginning of February 2002, you are valuing Hyundai stock (which closed at Korean won 29,300 on that day). Using a spreadsheet free cash flow to equity model in which you have forecasted FCFE individually for 2002 and 2003, and valuing the final piece using a PIE, you obtain a FCFE value for the stock of KRW31,500. For ease of communication, you want to express your valuation in terms of a leading PIE based on forecasted year 2002 EPS of KRW4,446.
1. What is Hyundai’s justified PIE based on forecasted fundamentals?
2. State whether the stock appears to be fairly valued, overvalued, or undervalued, based on your answer to Problem 1.