Intrinsic value of Pure Industrial Real Estate Trust - AAR-UN

Previous Close

$8.08

  Intrinsic Value

$5.40

stock screener

  Rating & Target

sell

-33%

Previous close

$8.08

 
Intrinsic value

$5.40

 
Up/down potential

-33%

 
Rating

sell

We calculate the intrinsic value of AAR-UN stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 2.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  19.60
  18.14
  16.83
  15.64
  14.58
  13.62
  12.76
  11.98
  11.28
  10.66
  10.09
  9.58
  9.12
  8.71
  8.34
  8.01
  7.71
  7.43
  7.19
  6.97
  6.78
  6.60
  6.44
  6.29
  6.16
  6.05
  5.94
  5.85
  5.76
  5.69
Revenue, $m
  224
  264
  309
  357
  409
  465
  524
  587
  653
  723
  796
  872
  951
  1,034
  1,120
  1,210
  1,303
  1,400
  1,501
  1,606
  1,714
  1,828
  1,945
  2,068
  2,195
  2,328
  2,466
  2,610
  2,761
  2,918
Variable operating expenses, $m
  56
  66
  77
  90
  103
  117
  132
  147
  164
  181
  200
  219
  239
  260
  281
  304
  327
  351
  377
  403
  430
  459
  488
  519
  551
  584
  619
  655
  693
  732
Fixed operating expenses, $m
  15
  16
  16
  16
  17
  17
  17
  18
  18
  19
  19
  19
  20
  20
  21
  21
  22
  22
  23
  23
  24
  24
  25
  25
  26
  26
  27
  28
  28
  29
Total operating expenses, $m
  71
  82
  93
  106
  120
  134
  149
  165
  182
  200
  219
  238
  259
  280
  302
  325
  349
  373
  400
  426
  454
  483
  513
  544
  577
  610
  646
  683
  721
  761
Operating income, $m
  152
  182
  215
  251
  290
  331
  375
  422
  471
  523
  577
  633
  693
  754
  818
  885
  955
  1,027
  1,102
  1,179
  1,260
  1,345
  1,432
  1,523
  1,618
  1,717
  1,820
  1,928
  2,040
  2,157
EBITDA, $m
  152
  182
  215
  251
  290
  331
  375
  422
  471
  523
  577
  633
  693
  754
  818
  885
  955
  1,027
  1,102
  1,179
  1,260
  1,345
  1,432
  1,523
  1,618
  1,717
  1,820
  1,928
  2,040
  2,157
Interest expense (income), $m
  38
  36
  45
  53
  63
  74
  85
  97
  110
  124
  139
  154
  170
  187
  204
  222
  241
  261
  281
  302
  324
  347
  371
  396
  422
  449
  476
  506
  536
  567
  600
Earnings before tax, $m
  116
  138
  162
  188
  216
  246
  278
  311
  347
  384
  423
  464
  506
  550
  596
  644
  694
  746
  799
  855
  913
  973
  1,036
  1,102
  1,170
  1,241
  1,315
  1,392
  1,472
  1,556
Tax expense, $m
  31
  37
  44
  51
  58
  66
  75
  84
  94
  104
  114
  125
  137
  149
  161
  174
  187
  201
  216
  231
  247
  263
  280
  297
  316
  335
  355
  376
  398
  420
Net income, $m
  84
  101
  118
  137
  158
  179
  203
  227
  253
  280
  309
  338
  369
  402
  435
  470
  506
  544
  583
  624
  667
  711
  756
  804
  854
  906
  960
  1,016
  1,075
  1,136

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  2,943
  3,477
  4,062
  4,697
  5,382
  6,115
  6,895
  7,721
  8,593
  9,508
  10,468
  11,471
  12,517
  13,607
  14,742
  15,923
  17,150
  18,425
  19,750
  21,127
  22,558
  24,046
  25,594
  27,205
  28,882
  30,629
  32,449
  34,347
  36,327
  38,393
Adjusted assets (=assets-cash), $m
  2,943
  3,477
  4,062
  4,697
  5,382
  6,115
  6,895
  7,721
  8,593
  9,508
  10,468
  11,471
  12,517
  13,607
  14,742
  15,923
  17,150
  18,425
  19,750
  21,127
  22,558
  24,046
  25,594
  27,205
  28,882
  30,629
  32,449
  34,347
  36,327
  38,393
Revenue / Adjusted assets
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
  0.076
Average production assets, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Working capital, $m
  84
  99
  115
  134
  153
  174
  196
  219
  244
  270
  298
  326
  356
  387
  419
  453
  487
  524
  561
  601
  641
  683
  727
  773
  821
  871
  922
  976
  1,033
  1,091
Total debt, $m
  1,204
  1,444
  1,708
  1,994
  2,302
  2,632
  2,983
  3,355
  3,747
  4,159
  4,590
  5,042
  5,513
  6,003
  6,514
  7,045
  7,597
  8,171
  8,767
  9,387
  10,031
  10,701
  11,397
  12,122
  12,877
  13,663
  14,482
  15,336
  16,227
  17,157
Total liabilities, $m
  1,324
  1,564
  1,828
  2,114
  2,422
  2,752
  3,103
  3,475
  3,867
  4,279
  4,710
  5,162
  5,633
  6,123
  6,634
  7,165
  7,717
  8,291
  8,887
  9,507
  10,151
  10,821
  11,517
  12,242
  12,997
  13,783
  14,602
  15,456
  16,347
  17,277
Total equity, $m
  1,619
  1,912
  2,234
  2,583
  2,960
  3,363
  3,792
  4,247
  4,726
  5,229
  5,757
  6,309
  6,884
  7,484
  8,108
  8,757
  9,432
  10,134
  10,862
  11,620
  12,407
  13,225
  14,077
  14,963
  15,885
  16,846
  17,847
  18,891
  19,980
  21,116
Total liabilities and equity, $m
  2,943
  3,476
  4,062
  4,697
  5,382
  6,115
  6,895
  7,722
  8,593
  9,508
  10,467
  11,471
  12,517
  13,607
  14,742
  15,922
  17,149
  18,425
  19,749
  21,127
  22,558
  24,046
  25,594
  27,205
  28,882
  30,629
  32,449
  34,347
  36,327
  38,393
Debt-to-equity ratio
  0.740
  0.760
  0.760
  0.770
  0.780
  0.780
  0.790
  0.790
  0.790
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
Adjusted equity ratio
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  84
  101
  118
  137
  158
  179
  203
  227
  253
  280
  309
  338
  369
  402
  435
  470
  506
  544
  583
  624
  667
  711
  756
  804
  854
  906
  960
  1,016
  1,075
  1,136
Depreciation, amort., depletion, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Funds from operations, $m
  84
  101
  118
  137
  158
  179
  203
  227
  253
  280
  309
  338
  369
  402
  435
  470
  506
  544
  583
  624
  667
  711
  756
  804
  854
  906
  960
  1,016
  1,075
  1,136
Change in working capital, $m
  14
  15
  17
  18
  19
  21
  22
  23
  25
  26
  27
  29
  30
  31
  32
  34
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  52
  54
  56
  59
Cash from operations, $m
  71
  85
  101
  119
  138
  159
  181
  204
  228
  254
  281
  310
  340
  371
  403
  437
  472
  508
  546
  585
  626
  668
  712
  758
  806
  856
  908
  962
  1,018
  1,077
Maintenance CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
New CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from investing activities, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Free cash flow, $m
  71
  85
  101
  119
  138
  159
  181
  204
  228
  254
  281
  310
  340
  371
  403
  437
  472
  508
  546
  585
  626
  668
  712
  758
  806
  856
  908
  962
  1,018
  1,077
Issuance/(repayment) of debt, $m
  219
  240
  263
  286
  308
  330
  351
  372
  392
  412
  432
  451
  471
  491
  511
  531
  552
  574
  596
  620
  644
  670
  697
  725
  755
  786
  819
  854
  891
  930
Issuance/(repurchase) of shares, $m
  181
  193
  204
  212
  219
  224
  226
  227
  226
  223
  219
  213
  206
  198
  189
  179
  168
  157
  145
  133
  121
  108
  95
  82
  68
  55
  42
  28
  14
  0
Cash from financing (excl. dividends), $m  
  400
  433
  467
  498
  527
  554
  577
  599
  618
  635
  651
  664
  677
  689
  700
  710
  720
  731
  741
  753
  765
  778
  792
  807
  823
  841
  861
  882
  905
  930
Total cash flow (excl. dividends), $m
  471
  519
  568
  617
  665
  712
  758
  803
  847
  890
  932
  974
  1,017
  1,059
  1,103
  1,147
  1,192
  1,239
  1,287
  1,338
  1,391
  1,446
  1,504
  1,565
  1,629
  1,697
  1,769
  1,844
  1,924
  2,007
Retained Cash Flow (-), $m
  -266
  -294
  -322
  -349
  -377
  -403
  -429
  -454
  -479
  -504
  -528
  -552
  -576
  -600
  -624
  -649
  -675
  -701
  -729
  -757
  -787
  -819
  -851
  -886
  -922
  -961
  -1,001
  -1,044
  -1,089
  -1,136
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  206
  225
  247
  268
  289
  309
  329
  348
  367
  386
  404
  423
  441
  460
  478
  498
  517
  538
  559
  581
  603
  627
  653
  679
  707
  736
  767
  800
  835
  871
Discount rate, %
  7.80
  8.19
  8.60
  9.03
  9.48
  9.95
  10.45
  10.98
  11.52
  12.10
  12.71
  13.34
  14.01
  14.71
  15.44
  16.22
  17.03
  17.88
  18.77
  19.71
  20.70
  21.73
  22.82
  23.96
  25.16
  26.41
  27.73
  29.12
  30.58
  32.11
PV of cash for distribution, $m
  191
  192
  193
  190
  184
  175
  164
  151
  138
  123
  109
  94
  80
  67
  55
  45
  36
  28
  21
  16
  12
  8
  6
  4
  3
  2
  1
  1
  0
  0
Current shareholders' claim on cash, %
  93.2
  87.5
  82.6
  78.5
  75.1
  72.1
  69.5
  67.3
  65.4
  63.8
  62.3
  61.1
  60.0
  59.1
  58.3
  57.6
  57.0
  56.5
  56.0
  55.6
  55.3
  55.1
  54.9
  54.7
  54.5
  54.4
  54.4
  54.3
  54.3
  54.3

Pure Industrial Real Estate Trust (PIRET) is a Canada-based unincorporated, open-ended investment trust that owns and operates a portfolio of income-producing industrial properties. The Trust's primary objectives are to generate stable and growing cash distributions from investments in income producing industrial properties in markets across Canada and distribution and logistics markets in the United States; to maximize the long-term value of the properties through active management, and to expand its asset base and increase its distributable income through an accretive acquisition program. The Trust operates through five segments, which include British Columbia (BC), Alberta (AB), Ontario (ON), the United States of America (USA) and Other. PIRET is a real estate investment trust (REIT) that focuses on investing in industrial properties. Its subsidiaries include PIRET Holdings (Canada) Ltd., PIRET USA Inc., PIRET Management Corporation and PIRET Management LP.

FINANCIAL RATIOS  of  Pure Industrial Real Estate Trust (AAR-UN)

Valuation Ratios
P/E Ratio 13.4
Price to Sales 10.6
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 20.5
Price to Free Cash Flow -8
Growth Rates
Sales Growth Rate 9.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 65.4%
Cap. Spend. - 3 Yr. Gr. Rate -10.7%
Financial Strength
Quick Ratio 1
Current Ratio 0.7
LT Debt to Equity 70.8%
Total Debt to Equity 77.2%
Interest Coverage 5
Management Effectiveness
Return On Assets 8%
Ret/ On Assets - 3 Yr. Avg. 8.8%
Return On Total Capital 6.7%
Ret/ On T. Cap. - 3 Yr. Avg. 7.1%
Return On Equity 12.6%
Return On Equity - 3 Yr. Avg. 14.2%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 91.4%
Gross Margin - 3 Yr. Avg. 91.7%
EBITDA Margin 104.8%
EBITDA Margin - 3 Yr. Avg. 107.2%
Operating Margin 66.8%
Oper. Margin - 3 Yr. Avg. 66.7%
Pre-Tax Margin 84.5%
Pre-Tax Margin - 3 Yr. Avg. 84.9%
Net Profit Margin 79.1%
Net Profit Margin - 3 Yr. Avg. 79.8%
Effective Tax Rate 3.2%
Eff/ Tax Rate - 3 Yr. Avg. 4%
Payout Ratio 45.3%

AAR-UN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AAR-UN stock intrinsic value calculation we used $187 million for the last fiscal year's total revenue generated by Pure Industrial Real Estate Trust. The default revenue input number comes from 2016 income statement of Pure Industrial Real Estate Trust. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our AAR-UN stock valuation model: a) initial revenue growth rate of 19.6% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 7.8%, whose default value for AAR-UN is calculated based on our internal credit rating of Pure Industrial Real Estate Trust, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Pure Industrial Real Estate Trust.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of AAR-UN stock the variable cost ratio is equal to 25.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $15 million in the base year in the intrinsic value calculation for AAR-UN stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.7% for Pure Industrial Real Estate Trust.

Corporate tax rate of 27% is the nominal tax rate for Pure Industrial Real Estate Trust. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the AAR-UN stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for AAR-UN are equal to 0%.

Life of production assets of 10 years is the average useful life of capital assets used in Pure Industrial Real Estate Trust operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for AAR-UN is equal to 37.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $1353 million for Pure Industrial Real Estate Trust - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 305.761 million for Pure Industrial Real Estate Trust is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Pure Industrial Real Estate Trust at the current share price and the inputted number of shares is $2.5 billion.

RELATED COMPANIES Price Int.Val. Rating
HBC Hudson's B 12.00 21.36  str.buy
Follow us on:   twitter   twitter   twitter   twitter

ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2018. All rigths reserved.