Intrinsic value of Canadian Apartment Properties Real Estat - CAR-UN

Previous Close

$43.49

  Intrinsic Value

$19.37

stock screener

  Rating & Target

str. sell

-55%

Previous close

$43.49

 
Intrinsic value

$19.37

 
Up/down potential

-55%

 
Rating

str. sell

We calculate the intrinsic value of CAR-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 6.0

 

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, %
  6.60
  6.44
  6.30
  6.17
  6.05
  5.94
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.18
  5.16
  5.14
  5.13
  5.11
  5.10
  5.09
  5.08
  5.08
Revenue, $m
  636
  677
  720
  764
  811
  859
  909
  962
  1,016
  1,073
  1,133
  1,195
  1,261
  1,329
  1,400
  1,475
  1,553
  1,634
  1,720
  1,810
  1,904
  2,002
  2,106
  2,214
  2,327
  2,446
  2,571
  2,702
  2,840
  2,984
Variable operating expenses, $m
  97
  103
  109
  116
  123
  131
  138
  146
  154
  163
  172
  182
  192
  202
  213
  224
  236
  248
  261
  275
  289
  304
  320
  337
  354
  372
  391
  411
  432
  454
Fixed operating expenses, $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 operating expenses, $m
  97
  103
  109
  116
  123
  131
  138
  146
  154
  163
  172
  182
  192
  202
  213
  224
  236
  248
  261
  275
  289
  304
  320
  337
  354
  372
  391
  411
  432
  454
Operating income, $m
  540
  574
  611
  648
  687
  728
  771
  815
  862
  910
  961
  1,014
  1,069
  1,127
  1,187
  1,250
  1,317
  1,386
  1,459
  1,535
  1,614
  1,698
  1,786
  1,877
  1,974
  2,075
  2,180
  2,292
  2,408
  2,530
EBITDA, $m
  542
  577
  613
  651
  691
  732
  774
  819
  866
  914
  965
  1,018
  1,074
  1,132
  1,192
  1,256
  1,323
  1,392
  1,465
  1,542
  1,622
  1,706
  1,794
  1,886
  1,982
  2,084
  2,190
  2,302
  2,419
  2,542
Interest expense (income), $m
  109
  123
  131
  140
  149
  159
  169
  180
  191
  202
  214
  226
  239
  253
  267
  282
  298
  314
  331
  349
  367
  387
  407
  429
  451
  475
  500
  526
  553
  581
  611
Earnings before tax, $m
  416
  443
  470
  499
  528
  559
  591
  625
  660
  696
  734
  774
  816
  860
  905
  953
  1,003
  1,055
  1,110
  1,167
  1,228
  1,291
  1,357
  1,426
  1,499
  1,575
  1,655
  1,739
  1,827
  1,919
Tax expense, $m
  112
  120
  127
  135
  143
  151
  160
  169
  178
  188
  198
  209
  220
  232
  244
  257
  271
  285
  300
  315
  331
  348
  366
  385
  405
  425
  447
  469
  493
  518
Net income, $m
  304
  324
  343
  364
  386
  408
  432
  456
  482
  508
  536
  565
  596
  627
  661
  696
  732
  770
  810
  852
  896
  942
  990
  1,041
  1,094
  1,150
  1,208
  1,269
  1,334
  1,401

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
  8,374
  8,913
  9,474
  10,058
  10,667
  11,301
  11,962
  12,652
  13,371
  14,123
  14,908
  15,728
  16,586
  17,482
  18,420
  19,402
  20,430
  21,506
  22,633
  23,813
  25,050
  26,347
  27,706
  29,130
  30,624
  32,190
  33,833
  35,556
  37,364
  39,260
Adjusted assets (=assets-cash), $m
  8,374
  8,913
  9,474
  10,058
  10,667
  11,301
  11,962
  12,652
  13,371
  14,123
  14,908
  15,728
  16,586
  17,482
  18,420
  19,402
  20,430
  21,506
  22,633
  23,813
  25,050
  26,347
  27,706
  29,130
  30,624
  32,190
  33,833
  35,556
  37,364
  39,260
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
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  22
  23
  24
  25
  27
  28
  30
  31
  33
  34
  36
  38
  40
  42
  44
  46
  49
  51
  54
  57
Working capital, $m
  -175
  -186
  -198
  -210
  -223
  -236
  -250
  -264
  -279
  -295
  -312
  -329
  -347
  -365
  -385
  -406
  -427
  -449
  -473
  -498
  -524
  -551
  -579
  -609
  -640
  -673
  -707
  -743
  -781
  -821
Total debt, $m
  3,750
  4,005
  4,270
  4,547
  4,834
  5,134
  5,447
  5,773
  6,114
  6,469
  6,840
  7,228
  7,634
  8,058
  8,502
  8,966
  9,452
  9,961
  10,494
  11,053
  11,638
  12,251
  12,894
  13,568
  14,274
  15,015
  15,792
  16,607
  17,462
  18,359
Total liabilities, $m
  3,961
  4,216
  4,481
  4,758
  5,045
  5,345
  5,658
  5,984
  6,325
  6,680
  7,051
  7,439
  7,845
  8,269
  8,713
  9,177
  9,663
  10,172
  10,705
  11,264
  11,849
  12,462
  13,105
  13,779
  14,485
  15,226
  16,003
  16,818
  17,673
  18,570
Total equity, $m
  4,413
  4,697
  4,993
  5,301
  5,621
  5,956
  6,304
  6,667
  7,047
  7,443
  7,856
  8,289
  8,741
  9,213
  9,708
  10,225
  10,767
  11,334
  11,927
  12,550
  13,202
  13,885
  14,601
  15,352
  16,139
  16,964
  17,830
  18,738
  19,691
  20,690
Total liabilities and equity, $m
  8,374
  8,913
  9,474
  10,059
  10,666
  11,301
  11,962
  12,651
  13,372
  14,123
  14,907
  15,728
  16,586
  17,482
  18,421
  19,402
  20,430
  21,506
  22,632
  23,814
  25,051
  26,347
  27,706
  29,131
  30,624
  32,190
  33,833
  35,556
  37,364
  39,260
Debt-to-equity ratio
  0.850
  0.850
  0.860
  0.860
  0.860
  0.860
  0.860
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.890
  0.890
  0.890
  0.890
  0.890
Adjusted equity ratio
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  304
  324
  343
  364
  386
  408
  432
  456
  482
  508
  536
  565
  596
  627
  661
  696
  732
  770
  810
  852
  896
  942
  990
  1,041
  1,094
  1,150
  1,208
  1,269
  1,334
  1,401
Depreciation, amort., depletion, $m
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
Funds from operations, $m
  306
  326
  346
  367
  389
  411
  435
  460
  485
  512
  540
  570
  600
  632
  666
  701
  738
  776
  817
  859
  903
  950
  998
  1,049
  1,103
  1,159
  1,218
  1,280
  1,344
  1,412
Change in working capital, $m
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -21
  -22
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -38
  -40
Cash from operations, $m
  317
  337
  358
  379
  401
  425
  449
  474
  500
  528
  557
  587
  618
  651
  686
  722
  759
  799
  840
  884
  929
  977
  1,027
  1,079
  1,134
  1,192
  1,252
  1,316
  1,382
  1,452
Maintenance CAPEX, $m
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
New CAPEX, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
Cash from investing activities, $m
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -13
  -14
Free cash flow, $m
  314
  334
  354
  376
  398
  421
  445
  470
  496
  523
  552
  581
  613
  645
  679
  715
  752
  792
  833
  876
  921
  968
  1,017
  1,069
  1,124
  1,181
  1,241
  1,303
  1,369
  1,438
Issuance/(repayment) of debt, $m
  226
  255
  265
  276
  288
  300
  313
  326
  340
  355
  371
  388
  406
  424
  444
  464
  486
  509
  533
  558
  585
  613
  643
  674
  707
  741
  777
  815
  855
  897
Issuance/(repurchase) of shares, $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 financing (excl. dividends), $m  
  226
  255
  265
  276
  288
  300
  313
  326
  340
  355
  371
  388
  406
  424
  444
  464
  486
  509
  533
  558
  585
  613
  643
  674
  707
  741
  777
  815
  855
  897
Total cash flow (excl. dividends), $m
  540
  589
  620
  652
  686
  721
  757
  796
  836
  879
  923
  969
  1,018
  1,069
  1,123
  1,179
  1,238
  1,300
  1,366
  1,434
  1,506
  1,581
  1,660
  1,743
  1,830
  1,922
  2,018
  2,118
  2,224
  2,335
Retained Cash Flow (-), $m
  -255
  -284
  -296
  -308
  -321
  -334
  -348
  -363
  -379
  -396
  -414
  -432
  -452
  -473
  -494
  -517
  -542
  -567
  -594
  -622
  -652
  -683
  -716
  -751
  -787
  -825
  -866
  -908
  -953
  -999
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
  285
  305
  324
  344
  365
  386
  409
  432
  457
  482
  509
  537
  566
  597
  629
  662
  697
  733
  772
  812
  854
  898
  944
  992
  1,043
  1,096
  1,152
  1,210
  1,272
  1,336
Discount rate, %
  8.80
  9.24
  9.70
  10.19
  10.70
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.21
  20.17
  21.18
  22.24
  23.35
  24.52
  25.74
  27.03
  28.38
  29.80
  31.29
  32.85
  34.50
  36.22
PV of cash for distribution, $m
  262
  256
  246
  233
  219
  204
  187
  170
  152
  134
  117
  100
  84
  70
  57
  45
  35
  27
  20
  15
  10
  7
  5
  3
  2
  1
  1
  0
  0
  0
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Canadian Apartment Properties Real Estate Investment Trust (CAPREIT) is a Canada-based open-ended real estate investment trust. CAPREIT's investment objectives are to provide unitholders with long-term, monthly cash distributions; grow normalized funds from operations (NFFO), distributions and Unit value through the management of its properties, acquisitions and financial management, and reinvest capital within the property portfolio. CAPREIT owns and operates a portfolio of multi-unit residential rental properties, including apartments, townhomes and manufactured home communities (MHC) located in and near urban centers in Canada. CAPREIT owns interests in approximately 46,790 residential units, consisting of over 40,501 residential suites and approximately 30 MHC's, consisting of approximately 6,290 land lease sites. CAPREIT owns leasehold interests in approximately 15 properties located in the Greater Toronto Area. The leases mature between 2033 and 2037.

FINANCIAL RATIOS  of  Canadian Apartment Properties Real Estat (CAR-UN)

Valuation Ratios
P/E Ratio 13.3
Price to Sales 9.8
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 16.2
Price to Free Cash Flow 16.2
Growth Rates
Sales Growth Rate 11.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 79.2%
Total Debt to Equity 84.8%
Interest Coverage 5
Management Effectiveness
Return On Assets 7.3%
Ret/ On Assets - 3 Yr. Avg. 7.1%
Return On Total Capital 6%
Ret/ On T. Cap. - 3 Yr. Avg. 5.7%
Return On Equity 11.2%
Return On Equity - 3 Yr. Avg. 10.9%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 61.5%
Gross Margin - 3 Yr. Avg. 60.8%
EBITDA Margin 93.8%
EBITDA Margin - 3 Yr. Avg. 87.7%
Operating Margin 89.8%
Oper. Margin - 3 Yr. Avg. 85.5%
Pre-Tax Margin 73.5%
Pre-Tax Margin - 3 Yr. Avg. 67.1%
Net Profit Margin 73.5%
Net Profit Margin - 3 Yr. Avg. 67.1%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 24.8%

CAR-UN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CAR-UN stock intrinsic value calculation we used $597 million for the last fiscal year's total revenue generated by Canadian Apartment Properties Real Estat. The default revenue input number comes from 2016 income statement of Canadian Apartment Properties Real Estat. 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 CAR-UN stock valuation model: a) initial revenue growth rate of 6.6% 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 8.8%, whose default value for CAR-UN is calculated based on our internal credit rating of Canadian Apartment Properties Real Estat, 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 Canadian Apartment Properties Real Estat.
    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 CAR-UN stock the variable cost ratio is equal to 15.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for CAR-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 3.5% for Canadian Apartment Properties Real Estat.

Corporate tax rate of 27% is the nominal tax rate for Canadian Apartment Properties Real Estat. 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 CAR-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 CAR-UN are equal to 1.9%.

Life of production assets of 1 years is the average useful life of capital assets used in Canadian Apartment Properties Real Estat 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 CAR-UN is equal to -27.5%. 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 - $4158 million for Canadian Apartment Properties Real Estat - 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 137.46 million for Canadian Apartment Properties Real Estat 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 Canadian Apartment Properties Real Estat at the current share price and the inputted number of shares is $6.0 billion.

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