Intrinsic value of Cineplex Inc. - CGX

Previous Close

$38.33

  Intrinsic Value

$46.88

stock screener

  Rating & Target

buy

+22%

Previous close

$38.33

 
Intrinsic value

$46.88

 
Up/down potential

+22%

 
Rating

buy

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of CGX 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 2.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   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, %
  7.80
  7.70
  7.43
  7.19
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.05
  5.94
  5.85
  5.76
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
  5.16
  5.14
  5.13
Revenue, $m
  1,478
  1,592
  1,710
  1,833
  1,961
  2,093
  2,232
  2,375
  2,525
  2,680
  2,842
  3,011
  3,187
  3,371
  3,562
  3,763
  3,972
  4,190
  4,418
  4,657
  4,907
  5,169
  5,442
  5,729
  6,029
  6,343
  6,673
  7,018
  7,380
  7,760
  8,157
Variable operating expenses, $m
 
  1,395
  1,492
  1,593
  1,699
  1,808
  1,922
  2,041
  2,164
  2,292
  2,426
  2,484
  2,629
  2,781
  2,939
  3,104
  3,277
  3,457
  3,645
  3,842
  4,048
  4,264
  4,490
  4,726
  4,974
  5,233
  5,505
  5,790
  6,089
  6,402
  6,730
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
  1,352
  1,395
  1,492
  1,593
  1,699
  1,808
  1,922
  2,041
  2,164
  2,292
  2,426
  2,484
  2,629
  2,781
  2,939
  3,104
  3,277
  3,457
  3,645
  3,842
  4,048
  4,264
  4,490
  4,726
  4,974
  5,233
  5,505
  5,790
  6,089
  6,402
  6,730
Operating income, $m
  127
  197
  218
  239
  262
  285
  309
  334
  361
  388
  416
  527
  558
  590
  623
  658
  695
  733
  773
  815
  859
  905
  952
  1,003
  1,055
  1,110
  1,168
  1,228
  1,292
  1,358
  1,428
EBITDA, $m
  233
  331
  355
  381
  407
  435
  464
  493
  524
  557
  590
  625
  662
  700
  740
  782
  825
  870
  918
  967
  1,019
  1,074
  1,130
  1,190
  1,252
  1,318
  1,386
  1,458
  1,533
  1,612
  1,694
Interest expense (income), $m
  14
  15
  18
  21
  24
  27
  30
  34
  37
  41
  45
  48
  53
  57
  61
  66
  71
  76
  81
  87
  93
  99
  105
  112
  119
  126
  134
  142
  151
  159
  169
Earnings before tax, $m
  109
  182
  200
  219
  238
  258
  279
  301
  323
  347
  372
  478
  505
  533
  562
  592
  624
  657
  692
  728
  766
  806
  847
  891
  936
  984
  1,034
  1,086
  1,141
  1,199
  1,259
Tax expense, $m
  31
  49
  54
  59
  64
  70
  75
  81
  87
  94
  100
  129
  136
  144
  152
  160
  169
  177
  187
  197
  207
  218
  229
  240
  253
  266
  279
  293
  308
  324
  340
Net income, $m
  80
  133
  146
  160
  174
  188
  204
  220
  236
  253
  271
  349
  369
  389
  410
  432
  456
  480
  505
  531
  559
  588
  618
  650
  683
  718
  755
  793
  833
  875
  919

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  34
  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
  1,728
  1,825
  1,961
  2,102
  2,249
  2,401
  2,559
  2,724
  2,895
  3,074
  3,259
  3,453
  3,655
  3,866
  4,085
  4,315
  4,555
  4,805
  5,067
  5,341
  5,627
  5,927
  6,241
  6,570
  6,914
  7,275
  7,652
  8,048
  8,463
  8,899
  9,355
Adjusted assets (=assets-cash), $m
  1,694
  1,825
  1,961
  2,102
  2,249
  2,401
  2,559
  2,724
  2,895
  3,074
  3,259
  3,453
  3,655
  3,866
  4,085
  4,315
  4,555
  4,805
  5,067
  5,341
  5,627
  5,927
  6,241
  6,570
  6,914
  7,275
  7,652
  8,048
  8,463
  8,899
  9,355
Revenue / Adjusted assets
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
Average production assets, $m
  678
  729
  783
  840
  898
  959
  1,022
  1,088
  1,156
  1,227
  1,302
  1,379
  1,460
  1,544
  1,632
  1,723
  1,819
  1,919
  2,024
  2,133
  2,247
  2,367
  2,493
  2,624
  2,761
  2,905
  3,056
  3,214
  3,380
  3,554
  3,736
Working capital, $m
  -220
  -271
  -291
  -312
  -333
  -356
  -379
  -404
  -429
  -456
  -483
  -512
  -542
  -573
  -606
  -640
  -675
  -712
  -751
  -792
  -834
  -879
  -925
  -974
  -1,025
  -1,078
  -1,134
  -1,193
  -1,255
  -1,319
  -1,387
Total debt, $m
  412
  484
  563
  644
  728
  816
  907
  1,002
  1,101
  1,203
  1,310
  1,422
  1,538
  1,660
  1,786
  1,918
  2,056
  2,201
  2,352
  2,509
  2,674
  2,847
  3,028
  3,217
  3,415
  3,623
  3,841
  4,069
  4,308
  4,559
  4,821
Total liabilities, $m
  979
  1,051
  1,130
  1,211
  1,295
  1,383
  1,474
  1,569
  1,668
  1,770
  1,877
  1,989
  2,105
  2,227
  2,353
  2,485
  2,623
  2,768
  2,919
  3,076
  3,241
  3,414
  3,595
  3,784
  3,982
  4,190
  4,408
  4,636
  4,875
  5,126
  5,388
Total equity, $m
  749
  774
  832
  891
  953
  1,018
  1,085
  1,155
  1,228
  1,303
  1,382
  1,464
  1,550
  1,639
  1,732
  1,829
  1,931
  2,037
  2,148
  2,265
  2,386
  2,513
  2,646
  2,786
  2,932
  3,084
  3,245
  3,412
  3,588
  3,773
  3,966
Total liabilities and equity, $m
  1,728
  1,825
  1,962
  2,102
  2,248
  2,401
  2,559
  2,724
  2,896
  3,073
  3,259
  3,453
  3,655
  3,866
  4,085
  4,314
  4,554
  4,805
  5,067
  5,341
  5,627
  5,927
  6,241
  6,570
  6,914
  7,274
  7,653
  8,048
  8,463
  8,899
  9,354
Debt-to-equity ratio
  0.550
  0.630
  0.680
  0.720
  0.760
  0.800
  0.840
  0.870
  0.900
  0.920
  0.950
  0.970
  0.990
  1.010
  1.030
  1.050
  1.060
  1.080
  1.090
  1.110
  1.120
  1.130
  1.140
  1.150
  1.170
  1.170
  1.180
  1.190
  1.200
  1.210
  1.220
Adjusted equity ratio
  0.422
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  80
  133
  146
  160
  174
  188
  204
  220
  236
  253
  271
  349
  369
  389
  410
  432
  456
  480
  505
  531
  559
  588
  618
  650
  683
  718
  755
  793
  833
  875
  919
Depreciation, amort., depletion, $m
  106
  133
  137
  141
  145
  150
  154
  159
  164
  169
  174
  99
  104
  110
  117
  123
  130
  137
  145
  152
  161
  169
  178
  187
  197
  208
  218
  230
  241
  254
  267
Funds from operations, $m
  148
  266
  283
  301
  319
  338
  358
  379
  400
  422
  446
  448
  473
  499
  527
  556
  586
  617
  650
  684
  720
  757
  796
  838
  881
  926
  973
  1,022
  1,074
  1,129
  1,186
Change in working capital, $m
  -18
  -19
  -20
  -21
  -22
  -23
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -42
  -44
  -47
  -49
  -51
  -53
  -56
  -59
  -62
  -65
  -68
Cash from operations, $m
  166
  286
  303
  322
  341
  361
  381
  403
  425
  449
  473
  476
  503
  531
  559
  590
  621
  654
  688
  724
  762
  802
  843
  886
  932
  979
  1,029
  1,081
  1,136
  1,193
  1,254
Maintenance CAPEX, $m
  0
  -48
  -52
  -56
  -60
  -64
  -68
  -73
  -78
  -83
  -88
  -93
  -99
  -104
  -110
  -117
  -123
  -130
  -137
  -145
  -152
  -161
  -169
  -178
  -187
  -197
  -208
  -218
  -230
  -241
  -254
New CAPEX, $m
  -106
  -52
  -54
  -56
  -58
  -61
  -63
  -66
  -68
  -71
  -74
  -77
  -81
  -84
  -88
  -92
  -96
  -100
  -105
  -109
  -114
  -120
  -125
  -131
  -137
  -144
  -151
  -158
  -166
  -174
  -182
Cash from investing activities, $m
  -135
  -100
  -106
  -112
  -118
  -125
  -131
  -139
  -146
  -154
  -162
  -170
  -180
  -188
  -198
  -209
  -219
  -230
  -242
  -254
  -266
  -281
  -294
  -309
  -324
  -341
  -359
  -376
  -396
  -415
  -436
Free cash flow, $m
  31
  186
  197
  210
  222
  236
  250
  264
  279
  295
  311
  306
  324
  342
  361
  381
  402
  424
  447
  470
  495
  521
  549
  577
  607
  638
  671
  705
  741
  778
  817
Issuance/(repayment) of debt, $m
  70
  75
  78
  81
  84
  88
  91
  95
  99
  103
  107
  112
  116
  121
  127
  132
  138
  144
  151
  158
  165
  173
  181
  189
  198
  208
  218
  228
  239
  251
  263
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
  0
Cash from financing (excl. dividends), $m  
  68
  75
  78
  81
  84
  88
  91
  95
  99
  103
  107
  112
  116
  121
  127
  132
  138
  144
  151
  158
  165
  173
  181
  189
  198
  208
  218
  228
  239
  251
  263
Total cash flow (excl. dividends), $m
  99
  261
  275
  291
  307
  324
  341
  359
  378
  398
  418
  418
  440
  464
  488
  514
  540
  568
  598
  628
  660
  694
  729
  766
  805
  846
  888
  933
  980
  1,029
  1,080
Retained Cash Flow (-), $m
  18
  -56
  -58
  -60
  -62
  -65
  -67
  -70
  -73
  -76
  -79
  -82
  -86
  -89
  -93
  -97
  -102
  -106
  -111
  -116
  -121
  -127
  -133
  -139
  -146
  -153
  -160
  -168
  -176
  -184
  -193
Prev. year cash balance distribution, $m
 
  31
  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
 
  236
  218
  231
  245
  259
  274
  289
  305
  322
  339
  336
  355
  374
  395
  416
  439
  462
  487
  512
  539
  567
  596
  627
  659
  693
  728
  765
  804
  844
  887
Discount rate, %
 
  5.10
  5.36
  5.62
  5.90
  6.20
  6.51
  6.83
  7.18
  7.54
  7.91
  8.31
  8.72
  9.16
  9.62
  10.10
  10.60
  11.13
  11.69
  12.27
  12.89
  13.53
  14.21
  14.92
  15.66
  16.45
  17.27
  18.13
  19.04
  19.99
  20.99
PV of cash for distribution, $m
 
  225
  196
  196
  195
  192
  188
  182
  175
  167
  159
  140
  130
  120
  109
  98
  87
  77
  67
  57
  48
  39
  32
  26
  20
  15
  12
  9
  6
  4
  3
Current shareholders' claim on cash, %
  100
  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

Cineplex Inc. (Cineplex) is a Canada-based film exhibition company. The Company's segments include Exhibition and Media. The Exhibition segment includes all direct and ancillary revenues from theatre attendance, including box office and food service revenues. The Exhibition segment also includes amusement gaming and leisure, theatre rentals and digital commerce rental and sales. The Media segment consists of two operating segments: Cineplex Media and Cineplex Digital Media. Cineplex Media consists of all in-theatre advertising revenues and costs, including pre-show, show time, magazine and lobby advertising. Cineplex Digital Media is engaged in the design, installation and operations of digital signage networks, along with advertising on certain networks. The Company has theatres in approximately 10 provinces. Its subsidiaries include Famous Players Limited Partnership, Galaxy Entertainment Inc., Cineplex Digital Media Inc., Cineplex Digital Networks Inc. and Cineplex Starburst Inc.

FINANCIAL RATIOS  of  Cineplex Inc. (CGX)

Valuation Ratios
P/E Ratio 30.4
Price to Sales 1.6
Price to Book 3.3
Price to Tangible Book
Price to Cash Flow 14.7
Price to Free Cash Flow 40.6
Growth Rates
Sales Growth Rate 7.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 9.3%
Cap. Spend. - 3 Yr. Gr. Rate 11.3%
Financial Strength
Quick Ratio 11
Current Ratio 0
LT Debt to Equity 54.6%
Total Debt to Equity 55%
Interest Coverage 9
Management Effectiveness
Return On Assets 5.2%
Ret/ On Assets - 3 Yr. Avg. 6.5%
Return On Total Capital 7%
Ret/ On T. Cap. - 3 Yr. Avg. 8.8%
Return On Equity 10.6%
Return On Equity - 3 Yr. Avg. 12.9%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 67.2%
Gross Margin - 3 Yr. Avg. 66%
EBITDA Margin 15.5%
EBITDA Margin - 3 Yr. Avg. 17%
Operating Margin 8.5%
Oper. Margin - 3 Yr. Avg. 10.1%
Pre-Tax Margin 7.4%
Pre-Tax Margin - 3 Yr. Avg. 9.2%
Net Profit Margin 5.4%
Net Profit Margin - 3 Yr. Avg. 7.1%
Effective Tax Rate 28.4%
Eff/ Tax Rate - 3 Yr. Avg. 23.9%
Payout Ratio 126.3%

CGX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CGX stock intrinsic value calculation we used $1478 million for the last fiscal year's total revenue generated by Cineplex Inc.. The default revenue input number comes from 2016 income statement of Cineplex Inc.. 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 CGX stock valuation model: a) initial revenue growth rate of 7.7% 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 5.1%, whose default value for CGX is calculated based on our internal credit rating of Cineplex Inc., 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 Cineplex Inc..
    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 CGX stock the variable cost ratio is equal to 88%.

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 CGX 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 Cineplex Inc..

Corporate tax rate of 27% is the nominal tax rate for Cineplex Inc.. 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 CGX 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 CGX are equal to 45.8%.

Life of production assets of 14 years is the average useful life of capital assets used in Cineplex Inc. 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 CGX is equal to -17%. 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 - $749 million for Cineplex Inc. - 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 63.51 million for Cineplex Inc. 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 Cineplex Inc. at the current share price and the inputted number of shares is $2.4 billion.

RELATED COMPANIES Price Int.Val. Rating
Financial statements of CGX
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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