(You would like to check if the current price of

(You would like to check if the current price of a local hospitability stock at RM 2.05 is deemed undervalued using the dividend discount model. The total shareholders’ equity of this company is RM 135 million with an outstanding number of shares of 75 million. Its latest twelve-month net profit is RM18.9 million. Recently, the company declared to follow a 60% dividend payout policy. The regression shows that its stock has an equity beta of 1.30. Besides, you have also collected some related market information. The overall market return expectation is 9.5% and the current risk-free rate is 3.2%.)

(Based only on the dividend growth model, estimate if the stock is undervalued and if you would invest in this stock.)

(Suggest and explain any four (4) potential systematic risks that may cause the possible overestimation of your value for this stock in part (i) above.)

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