Intrinsic value of Chartwell Retirement Residences - CSH-UN

Previous Close

$14.53

  Intrinsic Value

$1.07

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  Rating & Target

str. sell

-93%

Previous close

$14.53

 
Intrinsic value

$1.07

 
Up/down potential

-93%

 
Rating

str. sell

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

We calculate the intrinsic value of CSH-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 2.8

 

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, %
  10.50
  2.60
  2.84
  3.06
  3.25
  3.43
  3.58
  3.72
  3.85
  3.97
  4.07
  4.16
  4.25
  4.32
  4.39
  4.45
  4.51
  4.56
  4.60
  4.64
  4.68
  4.71
  4.74
  4.76
  4.79
  4.81
  4.83
  4.84
  4.86
  4.87
  4.89
Revenue, $m
  758
  778
  800
  824
  851
  880
  912
  946
  982
  1,021
  1,063
  1,107
  1,154
  1,204
  1,257
  1,313
  1,372
  1,434
  1,500
  1,570
  1,643
  1,720
  1,802
  1,888
  1,978
  2,073
  2,173
  2,279
  2,389
  2,506
  2,628
Variable operating expenses, $m
 
  695
  715
  737
  761
  787
  815
  845
  878
  913
  950
  990
  1,032
  1,076
  1,123
  1,173
  1,226
  1,282
  1,341
  1,403
  1,469
  1,538
  1,611
  1,688
  1,768
  1,854
  1,943
  2,037
  2,136
  2,240
  2,350
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
  682
  695
  715
  737
  761
  787
  815
  845
  878
  913
  950
  990
  1,032
  1,076
  1,123
  1,173
  1,226
  1,282
  1,341
  1,403
  1,469
  1,538
  1,611
  1,688
  1,768
  1,854
  1,943
  2,037
  2,136
  2,240
  2,350
Operating income, $m
  76
  82
  85
  87
  90
  93
  97
  100
  104
  108
  113
  117
  122
  128
  133
  139
  145
  152
  159
  166
  174
  182
  191
  200
  210
  220
  230
  242
  253
  266
  279
EBITDA, $m
  223
  233
  240
  247
  255
  264
  273
  284
  295
  306
  319
  332
  346
  361
  377
  394
  411
  430
  450
  471
  493
  516
  540
  566
  593
  622
  652
  683
  717
  751
  788
Interest expense (income), $m
  73
  73
  75
  78
  80
  83
  86
  89
  93
  97
  101
  105
  110
  115
  120
  126
  131
  138
  144
  151
  158
  166
  174
  183
  192
  201
  211
  222
  233
  245
  257
Earnings before tax, $m
  -1
  9
  10
  10
  10
  10
  11
  11
  11
  12
  12
  12
  13
  13
  13
  14
  14
  14
  15
  15
  16
  16
  17
  17
  18
  18
  19
  20
  20
  21
  22
Tax expense, $m
  0
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
Net income, $m
  5
  7
  7
  7
  7
  8
  8
  8
  8
  8
  9
  9
  9
  9
  10
  10
  10
  11
  11
  11
  12
  12
  12
  13
  13
  13
  14
  14
  15
  15
  16

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  30
  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
  2,797
  2,838
  2,919
  3,008
  3,106
  3,212
  3,327
  3,451
  3,584
  3,726
  3,878
  4,040
  4,211
  4,393
  4,586
  4,790
  5,006
  5,234
  5,475
  5,729
  5,997
  6,279
  6,576
  6,890
  7,220
  7,567
  7,932
  8,316
  8,721
  9,146
  9,593
Adjusted assets (=assets-cash), $m
  2,767
  2,838
  2,919
  3,008
  3,106
  3,212
  3,327
  3,451
  3,584
  3,726
  3,878
  4,040
  4,211
  4,393
  4,586
  4,790
  5,006
  5,234
  5,475
  5,729
  5,997
  6,279
  6,576
  6,890
  7,220
  7,567
  7,932
  8,316
  8,721
  9,146
  9,593
Revenue / Adjusted assets
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
Average production assets, $m
  2,543
  2,608
  2,683
  2,764
  2,854
  2,952
  3,058
  3,172
  3,294
  3,425
  3,564
  3,712
  3,870
  4,037
  4,215
  4,402
  4,601
  4,810
  5,031
  5,265
  5,511
  5,770
  6,044
  6,332
  6,635
  6,954
  7,290
  7,643
  8,014
  8,405
  8,816
Working capital, $m
  -206
  -94
  -97
  -100
  -103
  -107
  -110
  -114
  -119
  -124
  -129
  -134
  -140
  -146
  -152
  -159
  -166
  -174
  -182
  -190
  -199
  -208
  -218
  -228
  -239
  -251
  -263
  -276
  -289
  -303
  -318
Total debt, $m
  1,814
  1,835
  1,891
  1,954
  2,022
  2,097
  2,178
  2,265
  2,358
  2,458
  2,564
  2,678
  2,798
  2,926
  3,061
  3,205
  3,356
  3,516
  3,685
  3,864
  4,052
  4,250
  4,459
  4,679
  4,910
  5,154
  5,410
  5,680
  5,964
  6,262
  6,576
Total liabilities, $m
  1,972
  1,993
  2,049
  2,112
  2,180
  2,255
  2,336
  2,423
  2,516
  2,616
  2,722
  2,836
  2,956
  3,084
  3,219
  3,363
  3,514
  3,674
  3,843
  4,022
  4,210
  4,408
  4,617
  4,837
  5,068
  5,312
  5,568
  5,838
  6,122
  6,420
  6,734
Total equity, $m
  825
  846
  870
  896
  926
  957
  992
  1,029
  1,068
  1,110
  1,156
  1,204
  1,255
  1,309
  1,367
  1,427
  1,492
  1,560
  1,631
  1,707
  1,787
  1,871
  1,960
  2,053
  2,151
  2,255
  2,364
  2,478
  2,599
  2,725
  2,859
Total liabilities and equity, $m
  2,797
  2,839
  2,919
  3,008
  3,106
  3,212
  3,328
  3,452
  3,584
  3,726
  3,878
  4,040
  4,211
  4,393
  4,586
  4,790
  5,006
  5,234
  5,474
  5,729
  5,997
  6,279
  6,577
  6,890
  7,219
  7,567
  7,932
  8,316
  8,721
  9,145
  9,593
Debt-to-equity ratio
  2.199
  2.170
  2.170
  2.180
  2.180
  2.190
  2.200
  2.200
  2.210
  2.210
  2.220
  2.220
  2.230
  2.240
  2.240
  2.250
  2.250
  2.250
  2.260
  2.260
  2.270
  2.270
  2.280
  2.280
  2.280
  2.290
  2.290
  2.290
  2.290
  2.300
  2.300
Adjusted equity ratio
  0.287
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  5
  7
  7
  7
  7
  8
  8
  8
  8
  8
  9
  9
  9
  9
  10
  10
  10
  11
  11
  11
  12
  12
  12
  13
  13
  13
  14
  14
  15
  15
  16
Depreciation, amort., depletion, $m
  147
  151
  155
  160
  165
  171
  177
  183
  190
  198
  206
  215
  224
  233
  244
  254
  266
  278
  291
  304
  319
  334
  349
  366
  384
  402
  421
  442
  463
  486
  510
Funds from operations, $m
  87
  158
  162
  167
  172
  178
  185
  191
  199
  206
  215
  223
  233
  243
  253
  264
  276
  289
  302
  315
  330
  345
  362
  379
  397
  415
  435
  456
  478
  501
  526
Change in working capital, $m
  -71
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -15
Cash from operations, $m
  158
  160
  165
  170
  176
  182
  188
  195
  203
  211
  220
  229
  239
  249
  260
  271
  283
  296
  310
  324
  339
  355
  371
  389
  407
  427
  447
  469
  492
  515
  540
Maintenance CAPEX, $m
  0
  -147
  -151
  -155
  -160
  -165
  -171
  -177
  -183
  -190
  -198
  -206
  -215
  -224
  -233
  -244
  -254
  -266
  -278
  -291
  -304
  -319
  -334
  -349
  -366
  -384
  -402
  -421
  -442
  -463
  -486
New CAPEX, $m
  -254
  -66
  -74
  -82
  -90
  -98
  -106
  -114
  -122
  -131
  -139
  -148
  -158
  -167
  -177
  -188
  -198
  -210
  -221
  -233
  -246
  -259
  -273
  -288
  -303
  -319
  -336
  -353
  -371
  -391
  -411
Cash from investing activities, $m
  -232
  -213
  -225
  -237
  -250
  -263
  -277
  -291
  -305
  -321
  -337
  -354
  -373
  -391
  -410
  -432
  -452
  -476
  -499
  -524
  -550
  -578
  -607
  -637
  -669
  -703
  -738
  -774
  -813
  -854
  -897
Free cash flow, $m
  -74
  -53
  -60
  -67
  -74
  -81
  -88
  -95
  -103
  -110
  -118
  -126
  -134
  -142
  -151
  -160
  -170
  -179
  -190
  -200
  -212
  -223
  -235
  -248
  -262
  -276
  -290
  -306
  -322
  -339
  -356
Issuance/(repayment) of debt, $m
  190
  51
  57
  63
  69
  75
  81
  87
  93
  100
  106
  113
  120
  128
  135
  143
  152
  160
  169
  178
  188
  198
  209
  220
  232
  244
  256
  270
  284
  298
  314
Issuance/(repurchase) of shares, $m
  0
  14
  17
  19
  22
  24
  27
  29
  31
  34
  37
  39
  42
  45
  48
  51
  54
  57
  61
  65
  68
  72
  76
  81
  85
  90
  95
  100
  106
  111
  117
Cash from financing (excl. dividends), $m  
  183
  65
  74
  82
  91
  99
  108
  116
  124
  134
  143
  152
  162
  173
  183
  194
  206
  217
  230
  243
  256
  270
  285
  301
  317
  334
  351
  370
  390
  409
  431
Total cash flow (excl. dividends), $m
  110
  12
  13
  15
  16
  18
  19
  21
  22
  24
  25
  27
  29
  30
  32
  34
  36
  38
  40
  42
  45
  47
  50
  52
  55
  58
  61
  64
  68
  71
  75
Retained Cash Flow (-), $m
  -95
  -21
  -24
  -27
  -29
  -32
  -34
  -37
  -40
  -42
  -45
  -48
  -51
  -54
  -57
  -61
  -64
  -68
  -72
  -76
  -80
  -84
  -89
  -93
  -98
  -103
  -109
  -115
  -120
  -127
  -133
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
 
  -9
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -19
  -20
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -53
  -56
  -58
Discount rate, %
 
  10.30
  10.82
  11.36
  11.92
  12.52
  13.15
  13.80
  14.49
  15.22
  15.98
  16.78
  17.62
  18.50
  19.42
  20.39
  21.41
  22.48
  23.61
  24.79
  26.03
  27.33
  28.70
  30.13
  31.64
  33.22
  34.88
  36.62
  38.45
  40.38
  42.40
PV of cash for distribution, $m
 
  -8
  -9
  -8
  -8
  -8
  -7
  -7
  -6
  -5
  -5
  -4
  -3
  -3
  -2
  -2
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  99.5
  98.9
  98.3
  97.6
  96.8
  96.0
  95.2
  94.4
  93.5
  92.6
  91.7
  90.8
  89.8
  88.9
  87.9
  86.9
  85.9
  85.0
  84.0
  83.0
  82.0
  81.1
  80.1
  79.1
  78.1
  77.2
  76.2
  75.3
  74.4
  73.4

Chartwell Retirement Residences is an unincorporated, open-ended trust. The Company indirectly owns, manages and operates a range of seniors housing communities from independent living through assisted living to long term care. Its segments include Canadian Retirement Operations and Canadian Long Term Care Operations. It owns and operates senior residences in Canada. Its portfolio of residences includes independent living residences for seniors that include retirement units/townhouses/bungalows providing meals and general services; independent supported living residences for seniors that include retirement units/townhouses/bungalows with household general services; assisted living residences for seniors requiring personal care services; memory care units for seniors having Alzheimer's or other form of dementia and requiring personal care services, and Long term care residences for people requiring professional nursing care on a daily basis and over 24-hour supervision.

FINANCIAL RATIOS  of  Chartwell Retirement Residences (CSH-UN)

Valuation Ratios
P/E Ratio 557.1
Price to Sales 3.7
Price to Book 3.4
Price to Tangible Book
Price to Cash Flow 17.6
Price to Free Cash Flow -29
Growth Rates
Sales Growth Rate 10.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -48.9%
Cap. Spend. - 3 Yr. Gr. Rate 10.8%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 202.4%
Total Debt to Equity 219.9%
Interest Coverage 1
Management Effectiveness
Return On Assets 2.9%
Ret/ On Assets - 3 Yr. Avg. 9.4%
Return On Total Capital 0.2%
Ret/ On T. Cap. - 3 Yr. Avg. 4.8%
Return On Equity 0.6%
Return On Equity - 3 Yr. Avg. 20.4%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 34.7%
Gross Margin - 3 Yr. Avg. 32.8%
EBITDA Margin 28.9%
EBITDA Margin - 3 Yr. Avg. 33.5%
Operating Margin 10%
Oper. Margin - 3 Yr. Avg. 9.4%
Pre-Tax Margin -0.1%
Pre-Tax Margin - 3 Yr. Avg. -1.2%
Net Profit Margin 0.7%
Net Profit Margin - 3 Yr. Avg. 17.4%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. -44.3%
Payout Ratio 1660%

CSH-UN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CSH-UN stock intrinsic value calculation we used $758 million for the last fiscal year's total revenue generated by Chartwell Retirement Residences. The default revenue input number comes from 2016 income statement of Chartwell Retirement Residences. 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 CSH-UN stock valuation model: a) initial revenue growth rate of 2.6% 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 10.3%, whose default value for CSH-UN is calculated based on our internal credit rating of Chartwell Retirement Residences, 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 Chartwell Retirement Residences.
    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 CSH-UN stock the variable cost ratio is equal to 89.4%.

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 CSH-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 4.1% for Chartwell Retirement Residences.

Corporate tax rate of 27% is the nominal tax rate for Chartwell Retirement Residences. 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 CSH-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 CSH-UN are equal to 335.4%.

Life of production assets of 17.3 years is the average useful life of capital assets used in Chartwell Retirement Residences 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 CSH-UN is equal to -12.1%. 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 - $825 million for Chartwell Retirement Residences - 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 192.705 million for Chartwell Retirement Residences 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 Chartwell Retirement Residences at the current share price and the inputted number of shares is $2.8 billion.

RELATED COMPANIES Price Int.Val. Rating
Financial statements of CSH-UN
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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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