Calculating The Fair Value Of Malaysian Pacific Industries Berhad (KLSE:MPI)

Simply Wall St

Fri, February 13, 2026 at 1:11 PM GMT+9 6 min read

In this article:

3867.KL

-1.23%

MPI

Key Insights

Using the 2 Stage Free Cash Flow to Equity, Malaysian Pacific Industries Berhad fair value estimate is RM26.79

With RM31.00 share price, Malaysian Pacific Industries Berhad appears to be trading close to its estimated fair value

Our fair value estimate is 23% lower than Malaysian Pacific Industries Berhad's analyst price target of RM34.67

Today we’ll do a simple run through of a valuation method used to estimate the attractiveness of Malaysian Pacific Industries Berhad (KLSE:MPI) as an investment opportunity by taking the forecast future cash flows of the company and discounting them back to today’s value. Our analysis will employ the Discounted Cash Flow (DCF) model. Models like these may appear beyond the comprehension of a lay person, but they’re fairly easy to follow.

Remember though, that there are many ways to estimate a company’s value, and a DCF is just one method. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model.

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The Method

We’re using the 2-stage growth model, which simply means we take in account two stages of company’s growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. To start off with, we need to estimate the next ten years of cash flows. Where possible we use analyst estimates, but when these aren’t available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.

A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we need to discount the sum of these future cash flows to arrive at a present value estimate:

10-year free cash flow (FCF) forecast

(“Est” = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = RM2.8b

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The second stage is also known as Terminal Value, this is the business’s cash flow after the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 3.8%. We discount the terminal cash flows to today’s value at a cost of equity of 13%.

Terminal Value (TV)$1 FCF2035 × (1 + g) ÷ (r – g) = RM774m× (1 + 3.8%) ÷ (13%– 3.8%) = RM8.7b

Present Value of Terminal Value (PVTV)$1 TV / (1 + r)10$1 RM8.7b÷ ( 1 + 13%)10$1 RM2.6b

The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is RM5.3b. In the final step we divide the equity value by the number of shares outstanding. Relative to the current share price of RM31.0, the company appears around fair value at the time of writing. The assumptions in any calculation have a big impact on the valuation, so it is better to view this as a rough estimate, not precise down to the last cent.

KLSE:MPI Discounted Cash Flow February 13th 2026

Important Assumptions

The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. Part of investing is coming up with your own evaluation of a company’s future performance, so try the calculation yourself and check your own assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company’s future capital requirements, so it does not give a full picture of a company’s potential performance. Given that we are looking at Malaysian Pacific Industries Berhad as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we’ve used 13%, which is based on a levered beta of 1.591. Beta is a measure of a stock’s volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business.

View our latest analysis for Malaysian Pacific Industries Berhad

SWOT Analysis for Malaysian Pacific Industries Berhad

Strength

Earnings growth over the past year exceeded the industry.

Debt is not viewed as a risk.

Weakness

Dividend is low compared to the top 25% of dividend payers in the Semiconductor market.

Opportunity

Annual earnings are forecast to grow faster than the Malaysian market.

Good value based on P/E ratio compared to estimated Fair P/E ratio.

Threat

Annual revenue is forecast to grow slower than the Malaysian market.

Next Steps:

Valuation is only one side of the coin in terms of building your investment thesis, and it is only one of many factors that you need to assess for a company. The DCF model is not a perfect stock valuation tool. Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued. For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. For Malaysian Pacific Industries Berhad, we’ve compiled three relevant factors you should explore:

**Financial Health**: Does MPI have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.

**Future Earnings**: How does MPI's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.

**Other Solid Businesses**: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered!

PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the KLSE every day. If you want to find the calculation for other stocks just search here.

Have feedback on this article? Concerned about the content? Get in touch** with us directly.**_ Alternatively, email editorial-team (at) simplywallst.com._

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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