P/E (Buy ) P/E (Sell)

P/E (Buy ) = 2 × CICC

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P/E (Sell) = 1.5 × CTAC

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Both P/E (Buy) and P/E (Sell) reside in the undervalued zone, chances of being rerated upward are higher relatively.

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By this way, you will have moderate gain with lower risk.

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CICC Factor

= Clean Invested Capital Cost Factor

= 30Y Government Bond Yield Factor × ( 1 + D/E × (1 + 2 × 30Y Government Bond Yield Ratio) ) ÷ (1 + D/E)

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CICC Ratio

= CICC Factor - 1

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CICC

= 100 × CICC Ratio

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CTAC Factor

= Clean Total Assets Cost Factor

= 30Y Government Bond Yield Factor × ( 1 + Total Liabilities/Total Equity × (1 + 2 × 30Y Government Bond Yield Ratio) ) ÷ (1 + Total Liabilities/Total Equity)

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CTAC Ratio

= CTAC Factor - 1

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CTAC

= 100 × CTAC Ratio

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Reference:

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