Intrinsic value of Crombie Real Estate Investment Trust - CRR-UN

Previous Close

$12.96

  Intrinsic Value

$7.86

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  Rating & Target

sell

-39%

Previous close

$12.96

 
Intrinsic value

$7.86

 
Up/down potential

-39%

 
Rating

sell

We calculate the intrinsic value of CRR-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 1.2

 

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, %
  3.00
  3.20
  3.38
  3.54
  3.69
  3.82
  3.94
  4.04
  4.14
  4.23
  4.30
  4.37
  4.44
  4.49
  4.54
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.80
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
  4.91
Revenue, $m
  412
  425
  440
  455
  472
  490
  509
  530
  552
  575
  600
  626
  654
  683
  714
  747
  782
  818
  856
  897
  940
  985
  1,032
  1,082
  1,134
  1,189
  1,247
  1,308
  1,372
  1,439
Variable operating expenses, $m
  231
  238
  246
  255
  264
  274
  285
  297
  309
  322
  336
  351
  366
  383
  400
  418
  438
  458
  480
  502
  526
  551
  578
  606
  635
  666
  698
  732
  768
  806
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
  231
  238
  246
  255
  264
  274
  285
  297
  309
  322
  336
  351
  366
  383
  400
  418
  438
  458
  480
  502
  526
  551
  578
  606
  635
  666
  698
  732
  768
  806
Operating income, $m
  181
  187
  193
  200
  208
  216
  224
  233
  243
  253
  264
  275
  288
  301
  314
  329
  344
  360
  377
  395
  413
  433
  454
  476
  499
  523
  549
  575
  604
  633
EBITDA, $m
  187
  193
  200
  207
  215
  223
  232
  241
  251
  262
  273
  285
  297
  311
  325
  340
  356
  372
  390
  408
  428
  448
  469
  492
  516
  541
  567
  595
  624
  655
Interest expense (income), $m
  96
  101
  104
  107
  111
  115
  120
  125
  130
  136
  141
  148
  154
  162
  169
  177
  185
  194
  203
  213
  224
  235
  246
  258
  271
  284
  299
  313
  329
  346
  363
Earnings before tax, $m
  81
  83
  86
  89
  92
  96
  99
  103
  107
  112
  116
  121
  126
  132
  137
  143
  150
  156
  164
  171
  179
  187
  196
  205
  214
  225
  235
  246
  258
  270
Tax expense, $m
  22
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  51
  53
  55
  58
  61
  64
  67
  70
  73
Net income, $m
  59
  61
  63
  65
  67
  70
  72
  75
  78
  81
  85
  88
  92
  96
  100
  105
  109
  114
  119
  125
  131
  137
  143
  150
  157
  164
  172
  180
  188
  197

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
  4,079
  4,210
  4,352
  4,506
  4,672
  4,851
  5,042
  5,246
  5,463
  5,694
  5,939
  6,198
  6,473
  6,764
  7,071
  7,396
  7,738
  8,099
  8,480
  8,881
  9,303
  9,748
  10,216
  10,709
  11,227
  11,772
  12,346
  12,949
  13,583
  14,249
Adjusted assets (=assets-cash), $m
  4,079
  4,210
  4,352
  4,506
  4,672
  4,851
  5,042
  5,246
  5,463
  5,694
  5,939
  6,198
  6,473
  6,764
  7,071
  7,396
  7,738
  8,099
  8,480
  8,881
  9,303
  9,748
  10,216
  10,709
  11,227
  11,772
  12,346
  12,949
  13,583
  14,249
Revenue / Adjusted assets
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
Average production assets, $m
  53
  55
  57
  59
  61
  63
  66
  68
  71
  74
  77
  81
  84
  88
  92
  96
  101
  106
  110
  116
  121
  127
  133
  140
  146
  153
  161
  169
  177
  186
Working capital, $m
  -38
  -40
  -41
  -42
  -44
  -46
  -47
  -49
  -51
  -53
  -56
  -58
  -61
  -64
  -66
  -69
  -73
  -76
  -80
  -83
  -87
  -92
  -96
  -101
  -105
  -111
  -116
  -122
  -128
  -134
Total debt, $m
  2,470
  2,555
  2,647
  2,748
  2,855
  2,971
  3,095
  3,227
  3,368
  3,518
  3,677
  3,846
  4,024
  4,213
  4,412
  4,623
  4,845
  5,079
  5,326
  5,587
  5,861
  6,149
  6,453
  6,773
  7,109
  7,463
  7,835
  8,227
  8,638
  9,071
Total liabilities, $m
  2,647
  2,732
  2,824
  2,925
  3,032
  3,148
  3,272
  3,404
  3,545
  3,695
  3,854
  4,023
  4,201
  4,390
  4,589
  4,800
  5,022
  5,256
  5,503
  5,764
  6,038
  6,326
  6,630
  6,950
  7,286
  7,640
  8,012
  8,404
  8,815
  9,248
Total equity, $m
  1,432
  1,478
  1,528
  1,582
  1,640
  1,703
  1,770
  1,841
  1,917
  1,998
  2,084
  2,176
  2,272
  2,374
  2,482
  2,596
  2,716
  2,843
  2,976
  3,117
  3,265
  3,422
  3,586
  3,759
  3,941
  4,132
  4,333
  4,545
  4,768
  5,001
Total liabilities and equity, $m
  4,079
  4,210
  4,352
  4,507
  4,672
  4,851
  5,042
  5,245
  5,462
  5,693
  5,938
  6,199
  6,473
  6,764
  7,071
  7,396
  7,738
  8,099
  8,479
  8,881
  9,303
  9,748
  10,216
  10,709
  11,227
  11,772
  12,345
  12,949
  13,583
  14,249
Debt-to-equity ratio
  1.730
  1.730
  1.730
  1.740
  1.740
  1.750
  1.750
  1.750
  1.760
  1.760
  1.760
  1.770
  1.770
  1.770
  1.780
  1.780
  1.780
  1.790
  1.790
  1.790
  1.790
  1.800
  1.800
  1.800
  1.800
  1.810
  1.810
  1.810
  1.810
  1.810
Adjusted equity ratio
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  59
  61
  63
  65
  67
  70
  72
  75
  78
  81
  85
  88
  92
  96
  100
  105
  109
  114
  119
  125
  131
  137
  143
  150
  157
  164
  172
  180
  188
  197
Depreciation, amort., depletion, $m
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
Funds from operations, $m
  65
  67
  69
  72
  74
  77
  80
  83
  87
  90
  94
  98
  102
  106
  111
  116
  121
  126
  132
  138
  145
  151
  158
  166
  174
  182
  190
  199
  209
  219
Change in working capital, $m
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
Cash from operations, $m
  66
  68
  71
  73
  76
  79
  82
  85
  89
  92
  96
  100
  104
  109
  114
  119
  124
  130
  136
  142
  149
  155
  163
  170
  178
  187
  196
  205
  215
  225
Maintenance CAPEX, $m
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
New CAPEX, $m
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
Cash from investing activities, $m
  -8
  -8
  -8
  -9
  -9
  -9
  -9
  -11
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -15
  -17
  -17
  -18
  -19
  -20
  -21
  -21
  -23
  -24
  -25
  -27
  -28
  -30
Free cash flow, $m
  59
  61
  63
  65
  67
  69
  72
  75
  78
  81
  84
  88
  92
  95
  100
  104
  109
  113
  119
  124
  130
  136
  142
  149
  155
  163
  170
  179
  187
  196
Issuance/(repayment) of debt, $m
  74
  85
  92
  100
  108
  116
  124
  132
  141
  150
  159
  169
  178
  189
  199
  211
  222
  234
  247
  260
  274
  289
  304
  320
  336
  354
  372
  391
  411
  432
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  3
  4
  6
  8
  9
  11
  13
  14
  16
  18
  20
  21
  23
  25
  27
  30
  32
  34
  36
Cash from financing (excl. dividends), $m  
  74
  85
  92
  100
  108
  116
  124
  132
  141
  150
  160
  172
  182
  195
  207
  220
  233
  247
  261
  276
  292
  309
  325
  343
  361
  381
  402
  423
  445
  468
Total cash flow (excl. dividends), $m
  133
  145
  155
  165
  175
  185
  196
  207
  219
  231
  244
  259
  274
  290
  307
  324
  342
  360
  380
  400
  422
  444
  467
  492
  517
  544
  572
  602
  633
  665
Retained Cash Flow (-), $m
  -42
  -46
  -50
  -54
  -58
  -63
  -67
  -72
  -76
  -81
  -86
  -91
  -96
  -102
  -108
  -114
  -120
  -127
  -134
  -141
  -148
  -156
  -164
  -173
  -182
  -191
  -201
  -212
  -222
  -234
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
  91
  99
  105
  111
  117
  123
  129
  136
  143
  150
  158
  168
  178
  188
  199
  210
  221
  234
  246
  259
  273
  288
  303
  319
  335
  353
  371
  390
  410
  431
Discount rate, %
  10.90
  11.45
  12.02
  12.62
  13.25
  13.91
  14.61
  15.34
  16.10
  16.91
  17.75
  18.64
  19.57
  20.55
  21.58
  22.66
  23.79
  24.98
  26.23
  27.54
  28.92
  30.37
  31.89
  33.48
  35.15
  36.91
  38.76
  40.69
  42.73
  44.87
PV of cash for distribution, $m
  82
  80
  75
  69
  63
  56
  50
  43
  37
  31
  26
  22
  17
  14
  11
  8
  6
  4
  3
  2
  1
  1
  1
  0
  0
  0
  0
  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
  99.9
  99.8
  99.5
  99.2
  98.8
  98.4
  97.9
  97.4
  96.8
  96.1
  95.5
  94.8
  94.1
  93.4
  92.6
  91.8
  91.1
  90.3
  89.5
  88.6

Crombie Real Estate Investment Trust is a Canada-based unincorporated open-ended real estate investment trust (REIT). The Trust invests in income-producing retail, office and mixed use properties in Canada. It owns and operates primarily retail and office real estate assets located in Canada. It owns a portfolio of over 280 investment properties in 10 provinces, comprising approximately 19.1 million square feet of gross leasable area (GLA). It focuses on owning, operating and developing a portfolio of high quality grocery and drug store anchored shopping centers, freestanding stores and mixed use developments primarily in Canada's urban and suburban markets. Its property portfolio includes Aberdeen Business Centre, Barrington Place, Brunswick Place, Kenmount Business Centre, Barrington Tower, CIBC Building, Amherst Centre, Avalon Mall, County Fair Mall, 1 Avenue NW Safeway, 2 Avenue West Safeway, 13 Avenue, Kildonan Green, Yellowhead Highway Safeway, among others.

FINANCIAL RATIOS  of  Crombie Real Estate Investment Trust (CRR-UN)

Valuation Ratios
P/E Ratio 15.4
Price to Sales 4.8
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 28.7
Price to Free Cash Flow -240.4
Growth Rates
Sales Growth Rate 8.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 476.9%
Cap. Spend. - 3 Yr. Gr. Rate 31.6%
Financial Strength
Quick Ratio 0
Current Ratio 0.2
LT Debt to Equity 165.2%
Total Debt to Equity 172.4%
Interest Coverage 2
Management Effectiveness
Return On Assets 5.9%
Ret/ On Assets - 3 Yr. Avg. 5.2%
Return On Total Capital 3.5%
Ret/ On T. Cap. - 3 Yr. Avg. 2.6%
Return On Equity 9.9%
Return On Equity - 3 Yr. Avg. 7.2%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 71.3%
Gross Margin - 3 Yr. Avg. 70.1%
EBITDA Margin 57%
EBITDA Margin - 3 Yr. Avg. 49.4%
Operating Margin 56.8%
Oper. Margin - 3 Yr. Avg. 49.2%
Pre-Tax Margin 31.5%
Pre-Tax Margin - 3 Yr. Avg. 22.7%
Net Profit Margin 31.3%
Net Profit Margin - 3 Yr. Avg. 23%
Effective Tax Rate 0.8%
Eff/ Tax Rate - 3 Yr. Avg. -1.7%
Payout Ratio 0%

CRR-UN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CRR-UN stock intrinsic value calculation we used $400 million for the last fiscal year's total revenue generated by Crombie Real Estate Investment Trust. The default revenue input number comes from 2016 income statement of Crombie Real Estate Investment 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 CRR-UN stock valuation model: a) initial revenue growth rate of 3% 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 10.9%, whose default value for CRR-UN is calculated based on our internal credit rating of Crombie Real Estate Investment 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 Crombie Real Estate Investment 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 CRR-UN stock the variable cost ratio is equal to 56%.

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 CRR-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 4.2% for Crombie Real Estate Investment Trust.

Corporate tax rate of 27% is the nominal tax rate for Crombie Real Estate Investment 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 CRR-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 CRR-UN are equal to 12.9%.

Life of production assets of 8.6 years is the average useful life of capital assets used in Crombie Real Estate Investment 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 CRR-UN is equal to -9.3%. 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 - $1390 million for Crombie Real Estate Investment 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 89.13 million for Crombie Real Estate Investment 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 Crombie Real Estate Investment Trust at the current share price and the inputted number of shares is $1.2 billion.

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