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

Previous Close

$13.46

  Intrinsic Value

$6.95

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  Rating & Target

sell

-48%

Previous close

$13.46

 
Intrinsic value

$6.95

 
Up/down potential

-48%

 
Rating

sell

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

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
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, %
  8.11
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  400
  408
  417
  428
  440
  453
  468
  484
  501
  520
  540
  561
  584
  608
  634
  661
  690
  721
  753
  788
  824
  862
  902
  945
  990
  1,037
  1,086
  1,139
  1,194
  1,251
  1,312
Variable operating expenses, $m
 
  228
  234
  240
  246
  254
  262
  271
  281
  291
  302
  314
  327
  341
  355
  370
  387
  404
  422
  441
  461
  483
  505
  529
  554
  581
  608
  638
  668
  701
  735
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
  173
  228
  234
  240
  246
  254
  262
  271
  281
  291
  302
  314
  327
  341
  355
  370
  387
  404
  422
  441
  461
  483
  505
  529
  554
  581
  608
  638
  668
  701
  735
Operating income, $m
  227
  180
  184
  188
  194
  200
  206
  213
  221
  229
  238
  247
  257
  268
  279
  291
  304
  317
  332
  347
  363
  379
  397
  416
  435
  456
  478
  501
  525
  551
  577
EBITDA, $m
  233
  186
  190
  195
  200
  206
  213
  220
  228
  237
  246
  255
  266
  277
  288
  301
  314
  328
  343
  358
  375
  392
  411
  430
  450
  472
  494
  518
  543
  569
  597
Interest expense (income), $m
  96
  101
  103
  105
  108
  111
  115
  119
  123
  128
  133
  138
  144
  150
  157
  164
  171
  179
  187
  196
  205
  215
  225
  236
  248
  260
  272
  286
  300
  315
  330
Earnings before tax, $m
  126
  79
  81
  83
  86
  88
  91
  94
  97
  101
  105
  109
  113
  117
  122
  127
  133
  138
  144
  151
  157
  164
  172
  180
  188
  197
  206
  215
  225
  236
  247
Tax expense, $m
  1
  21
  22
  22
  23
  24
  25
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  37
  39
  41
  42
  44
  46
  49
  51
  53
  56
  58
  61
  64
  67
Net income, $m
  125
  58
  59
  61
  62
  64
  66
  69
  71
  74
  76
  79
  82
  86
  89
  93
  97
  101
  105
  110
  115
  120
  125
  131
  137
  143
  150
  157
  164
  172
  180

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
  0
Total assets, $m
  3,963
  4,040
  4,133
  4,239
  4,358
  4,490
  4,635
  4,793
  4,964
  5,148
  5,345
  5,557
  5,782
  6,022
  6,278
  6,548
  6,835
  7,139
  7,460
  7,800
  8,158
  8,536
  8,935
  9,356
  9,798
  10,265
  10,756
  11,273
  11,817
  12,389
  12,991
Adjusted assets (=assets-cash), $m
  3,963
  4,040
  4,133
  4,239
  4,358
  4,490
  4,635
  4,793
  4,964
  5,148
  5,345
  5,557
  5,782
  6,022
  6,278
  6,548
  6,835
  7,139
  7,460
  7,800
  8,158
  8,536
  8,935
  9,356
  9,798
  10,265
  10,756
  11,273
  11,817
  12,389
  12,991
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
  0.101
Average production assets, $m
  81
  82
  84
  86
  88
  91
  94
  97
  101
  105
  109
  113
  117
  122
  127
  133
  139
  145
  151
  158
  166
  173
  181
  190
  199
  208
  218
  229
  240
  252
  264
Working capital, $m
  -137
  -38
  -39
  -40
  -41
  -42
  -44
  -45
  -47
  -48
  -50
  -52
  -54
  -57
  -59
  -62
  -64
  -67
  -70
  -73
  -77
  -80
  -84
  -88
  -92
  -96
  -101
  -106
  -111
  -116
  -122
Total debt, $m
  2,396
  2,445
  2,505
  2,574
  2,651
  2,737
  2,831
  2,934
  3,044
  3,164
  3,292
  3,429
  3,576
  3,732
  3,897
  4,073
  4,259
  4,456
  4,665
  4,885
  5,118
  5,363
  5,622
  5,895
  6,182
  6,485
  6,804
  7,139
  7,492
  7,864
  8,254
Total liabilities, $m
  2,573
  2,622
  2,682
  2,751
  2,828
  2,914
  3,008
  3,111
  3,221
  3,341
  3,469
  3,606
  3,753
  3,909
  4,074
  4,250
  4,436
  4,633
  4,842
  5,062
  5,295
  5,540
  5,799
  6,072
  6,359
  6,662
  6,981
  7,316
  7,669
  8,041
  8,431
Total equity, $m
  1,390
  1,418
  1,451
  1,488
  1,530
  1,576
  1,627
  1,682
  1,742
  1,807
  1,876
  1,950
  2,030
  2,114
  2,203
  2,298
  2,399
  2,506
  2,619
  2,738
  2,864
  2,996
  3,136
  3,284
  3,439
  3,603
  3,775
  3,957
  4,148
  4,349
  4,560
Total liabilities and equity, $m
  3,963
  4,040
  4,133
  4,239
  4,358
  4,490
  4,635
  4,793
  4,963
  5,148
  5,345
  5,556
  5,783
  6,023
  6,277
  6,548
  6,835
  7,139
  7,461
  7,800
  8,159
  8,536
  8,935
  9,356
  9,798
  10,265
  10,756
  11,273
  11,817
  12,390
  12,991
Debt-to-equity ratio
  1.724
  1.720
  1.730
  1.730
  1.730
  1.740
  1.740
  1.740
  1.750
  1.750
  1.750
  1.760
  1.760
  1.770
  1.770
  1.770
  1.780
  1.780
  1.780
  1.780
  1.790
  1.790
  1.790
  1.800
  1.800
  1.800
  1.800
  1.800
  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
  0.351

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  125
  58
  59
  61
  62
  64
  66
  69
  71
  74
  76
  79
  82
  86
  89
  93
  97
  101
  105
  110
  115
  120
  125
  131
  137
  143
  150
  157
  164
  172
  180
Depreciation, amort., depletion, $m
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
Funds from operations, $m
  65
  64
  65
  67
  69
  71
  73
  76
  79
  81
  85
  88
  91
  95
  99
  103
  107
  112
  117
  122
  127
  133
  139
  145
  152
  159
  166
  174
  182
  191
  200
Change in working capital, $m
  -2
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
Cash from operations, $m
  67
  64
  66
  68
  70
  72
  75
  77
  80
  83
  86
  90
  93
  97
  101
  105
  110
  115
  120
  125
  131
  137
  143
  149
  156
  163
  171
  179
  187
  196
  206
Maintenance CAPEX, $m
  0
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
New CAPEX, $m
  -75
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -12
  -12
Cash from investing activities, $m
  -463
  -8
  -8
  -8
  -8
  -10
  -10
  -10
  -10
  -12
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -18
  -18
  -19
  -20
  -21
  -23
  -23
  -24
  -26
  -26
  -28
  -30
  -31
Free cash flow, $m
  -396
  57
  58
  60
  61
  63
  65
  67
  69
  72
  75
  77
  80
  83
  87
  90
  94
  98
  102
  107
  112
  116
  122
  127
  133
  139
  145
  152
  159
  167
  175
Issuance/(repayment) of debt, $m
  404
  49
  60
  69
  77
  86
  94
  102
  111
  119
  128
  137
  146
  156
  166
  176
  186
  197
  208
  220
  233
  245
  259
  273
  287
  303
  319
  336
  353
  371
  391
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  2
  4
  6
  7
  9
  11
  13
  15
  16
  18
  20
  22
  24
  26
  29
  31
Cash from financing (excl. dividends), $m  
  395
  49
  60
  69
  77
  86
  94
  102
  111
  119
  128
  137
  146
  156
  166
  178
  190
  203
  215
  229
  244
  258
  274
  289
  305
  323
  341
  360
  379
  400
  422
Total cash flow (excl. dividends), $m
  -1
  106
  119
  129
  139
  149
  159
  170
  180
  191
  203
  215
  227
  239
  253
  268
  284
  301
  318
  336
  355
  375
  395
  416
  439
  462
  487
  512
  539
  567
  596
Retained Cash Flow (-), $m
  -243
  -28
  -33
  -37
  -42
  -46
  -51
  -55
  -60
  -65
  -69
  -74
  -79
  -84
  -90
  -95
  -101
  -107
  -113
  -119
  -126
  -133
  -140
  -148
  -155
  -164
  -172
  -181
  -191
  -201
  -211
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
 
  78
  86
  91
  97
  103
  108
  114
  120
  127
  133
  140
  148
  155
  163
  173
  184
  194
  205
  217
  229
  242
  255
  269
  283
  298
  314
  331
  348
  366
  385
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
 
  70
  69
  65
  60
  55
  50
  44
  38
  33
  28
  23
  19
  15
  12
  9
  7
  5
  4
  3
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
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
  99.9
  99.7
  99.4
  99.1
  98.7
  98.2
  97.7
  97.1
  96.6
  95.9
  95.3
  94.6
  93.9
  93.2
  92.4
  91.7

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 16
Price to Sales 5
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 29.8
Price to Free Cash Flow -249.7
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 2% 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 20.1%.

Life of production assets of 13.4 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 88.41 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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Financial statements of CRR-UN
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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