Intrinsic value of Dream Global Real Estate Investment Trus - DRG-UN

Previous Close

$12.03

  Intrinsic Value

$31.30

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  Rating & Target

str. buy

+160%

Previous close

$12.03

 
Intrinsic value

$31.30

 
Up/down potential

+160%

 
Rating

str. buy

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

We calculate the intrinsic value of DRG-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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  2.00
  47.10
  42.89
  39.10
  35.69
  32.62
  29.86
  27.37
  25.14
  23.12
  21.31
  19.68
  18.21
  16.89
  15.70
  14.63
  13.67
  12.80
  12.02
  11.32
  10.69
  10.12
  9.61
  9.15
  8.73
  8.36
  8.02
  7.72
  7.45
  7.20
  6.98
Revenue, $m
  204
  300
  429
  596
  809
  1,073
  1,394
  1,775
  2,222
  2,735
  3,318
  3,971
  4,695
  5,487
  6,349
  7,278
  8,273
  9,332
  10,454
  11,637
  12,880
  14,184
  15,546
  16,968
  18,450
  19,992
  21,595
  23,263
  24,995
  26,796
  28,667
Variable operating expenses, $m
 
  53
  75
  105
  142
  189
  245
  312
  391
  481
  584
  699
  826
  966
  1,117
  1,281
  1,456
  1,642
  1,840
  2,048
  2,267
  2,496
  2,736
  2,986
  3,247
  3,519
  3,801
  4,094
  4,399
  4,716
  5,045
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
  30
  53
  75
  105
  142
  189
  245
  312
  391
  481
  584
  699
  826
  966
  1,117
  1,281
  1,456
  1,642
  1,840
  2,048
  2,267
  2,496
  2,736
  2,986
  3,247
  3,519
  3,801
  4,094
  4,399
  4,716
  5,045
Operating income, $m
  174
  247
  353
  491
  667
  884
  1,149
  1,463
  1,831
  2,254
  2,734
  3,272
  3,868
  4,522
  5,232
  5,997
  6,817
  7,689
  8,614
  9,589
  10,613
  11,687
  12,810
  13,982
  15,203
  16,473
  17,795
  19,168
  20,596
  22,080
  23,622
EBITDA, $m
  174
  247
  353
  491
  667
  884
  1,149
  1,463
  1,831
  2,254
  2,734
  3,272
  3,868
  4,522
  5,232
  5,997
  6,817
  7,689
  8,614
  9,589
  10,613
  11,687
  12,810
  13,982
  15,203
  16,473
  17,795
  19,168
  20,596
  22,080
  23,622
Interest expense (income), $m
  0
  47
  72
  104
  147
  202
  269
  351
  448
  562
  693
  842
  1,009
  1,193
  1,396
  1,615
  1,852
  2,106
  2,377
  2,663
  2,965
  3,282
  3,615
  3,963
  4,325
  4,704
  5,097
  5,506
  5,932
  6,374
  6,834
Earnings before tax, $m
  171
  200
  282
  387
  520
  683
  880
  1,112
  1,382
  1,692
  2,041
  2,430
  2,860
  3,329
  3,836
  4,382
  4,964
  5,583
  6,237
  6,926
  7,649
  8,405
  9,195
  10,019
  10,877
  11,770
  12,698
  13,662
  14,664
  15,706
  16,788
Tax expense, $m
  30
  54
  76
  104
  140
  184
  237
  300
  373
  457
  551
  656
  772
  899
  1,036
  1,183
  1,340
  1,507
  1,684
  1,870
  2,065
  2,269
  2,483
  2,705
  2,937
  3,178
  3,428
  3,689
  3,959
  4,241
  4,533
Net income, $m
  140
  146
  206
  282
  379
  498
  642
  812
  1,009
  1,235
  1,490
  1,774
  2,088
  2,430
  2,800
  3,199
  3,624
  4,076
  4,553
  5,056
  5,583
  6,136
  6,713
  7,314
  7,940
  8,592
  9,269
  9,973
  10,705
  11,465
  12,255

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  50
  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
  2,887
  4,168
  5,955
  8,284
  11,241
  14,908
  19,359
  24,658
  30,856
  37,991
  46,087
  55,157
  65,202
  76,215
  88,181
  101,083
  114,899
  129,608
  145,188
  161,622
  178,895
  196,996
  215,920
  235,668
  256,245
  277,662
  299,937
  323,093
  347,157
  372,164
  398,152
Adjusted assets (=assets-cash), $m
  2,837
  4,168
  5,955
  8,284
  11,241
  14,908
  19,359
  24,658
  30,856
  37,991
  46,087
  55,157
  65,202
  76,215
  88,181
  101,083
  114,899
  129,608
  145,188
  161,622
  178,895
  196,996
  215,920
  235,668
  256,245
  277,662
  299,937
  323,093
  347,157
  372,164
  398,152
Revenue / Adjusted assets
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
Average production assets, $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
Working capital, $m
  -96
  18
  25
  35
  48
  63
  82
  105
  131
  161
  196
  234
  277
  324
  375
  429
  488
  551
  617
  687
  760
  837
  917
  1,001
  1,089
  1,180
  1,274
  1,372
  1,475
  1,581
  1,691
Total debt, $m
  1,399
  2,047
  2,986
  4,208
  5,760
  7,685
  10,022
  12,805
  16,059
  19,804
  24,055
  28,816
  34,090
  39,872
  46,154
  52,928
  60,181
  67,903
  76,083
  84,710
  93,779
  103,282
  113,217
  123,585
  134,388
  145,632
  157,326
  169,483
  182,117
  195,245
  208,889
Total liabilities, $m
  1,540
  2,188
  3,127
  4,349
  5,901
  7,826
  10,163
  12,946
  16,200
  19,945
  24,196
  28,957
  34,231
  40,013
  46,295
  53,069
  60,322
  68,044
  76,224
  84,851
  93,920
  103,423
  113,358
  123,726
  134,529
  145,773
  157,467
  169,624
  182,258
  195,386
  209,030
Total equity, $m
  1,347
  1,980
  2,829
  3,935
  5,339
  7,081
  9,196
  11,713
  14,657
  18,046
  21,891
  26,200
  30,971
  36,202
  41,886
  48,015
  54,577
  61,564
  68,964
  76,770
  84,975
  93,573
  102,562
  111,942
  121,716
  131,890
  142,470
  153,469
  164,900
  176,778
  189,122
Total liabilities and equity, $m
  2,887
  4,168
  5,956
  8,284
  11,240
  14,907
  19,359
  24,659
  30,857
  37,991
  46,087
  55,157
  65,202
  76,215
  88,181
  101,084
  114,899
  129,608
  145,188
  161,621
  178,895
  196,996
  215,920
  235,668
  256,245
  277,663
  299,937
  323,093
  347,158
  372,164
  398,152
Debt-to-equity ratio
  1.039
  1.030
  1.060
  1.070
  1.080
  1.090
  1.090
  1.090
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
Adjusted equity ratio
  0.457
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  140
  146
  206
  282
  379
  498
  642
  812
  1,009
  1,235
  1,490
  1,774
  2,088
  2,430
  2,800
  3,199
  3,624
  4,076
  4,553
  5,056
  5,583
  6,136
  6,713
  7,314
  7,940
  8,592
  9,269
  9,973
  10,705
  11,465
  12,255
Depreciation, amort., depletion, $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
Funds from operations, $m
  52
  146
  206
  282
  379
  498
  642
  812
  1,009
  1,235
  1,490
  1,774
  2,088
  2,430
  2,800
  3,199
  3,624
  4,076
  4,553
  5,056
  5,583
  6,136
  6,713
  7,314
  7,940
  8,592
  9,269
  9,973
  10,705
  11,465
  12,255
Change in working capital, $m
  -8
  6
  8
  10
  13
  16
  19
  23
  26
  30
  34
  39
  43
  47
  51
  55
  59
  62
  66
  70
  73
  77
  80
  84
  87
  91
  95
  98
  102
  106
  110
Cash from operations, $m
  60
  140
  198
  273
  367
  483
  623
  789
  983
  1,205
  1,456
  1,736
  2,045
  2,383
  2,750
  3,144
  3,565
  4,013
  4,487
  4,986
  5,510
  6,059
  6,632
  7,230
  7,853
  8,501
  9,175
  9,875
  10,603
  11,359
  12,145
Maintenance CAPEX, $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
New CAPEX, $m
  -24
  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 investing activities, $m
  -128
  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
Free cash flow, $m
  -68
  140
  198
  273
  367
  483
  623
  789
  983
  1,205
  1,456
  1,736
  2,045
  2,383
  2,750
  3,144
  3,565
  4,013
  4,487
  4,986
  5,510
  6,059
  6,632
  7,230
  7,853
  8,501
  9,175
  9,875
  10,603
  11,359
  12,145
Issuance/(repayment) of debt, $m
  88
  698
  938
  1,223
  1,552
  1,925
  2,337
  2,782
  3,254
  3,746
  4,250
  4,762
  5,274
  5,782
  6,282
  6,774
  7,253
  7,722
  8,180
  8,628
  9,068
  9,503
  9,935
  10,368
  10,803
  11,244
  11,694
  12,157
  12,634
  13,129
  13,644
Issuance/(repurchase) of shares, $m
  98
  487
  643
  824
  1,025
  1,243
  1,472
  1,705
  1,935
  2,154
  2,356
  2,534
  2,684
  2,801
  2,884
  2,930
  2,939
  2,911
  2,848
  2,750
  2,621
  2,462
  2,277
  2,066
  1,834
  1,581
  1,311
  1,026
  726
  413
  89
Cash from financing (excl. dividends), $m  
  174
  1,185
  1,581
  2,047
  2,577
  3,168
  3,809
  4,487
  5,189
  5,900
  6,606
  7,296
  7,958
  8,583
  9,166
  9,704
  10,192
  10,633
  11,028
  11,378
  11,689
  11,965
  12,212
  12,434
  12,637
  12,825
  13,005
  13,183
  13,360
  13,542
  13,733
Total cash flow (excl. dividends), $m
  104
  1,325
  1,780
  2,319
  2,944
  3,651
  4,432
  5,277
  6,172
  7,105
  8,062
  9,031
  10,002
  10,966
  11,916
  12,847
  13,757
  14,646
  15,514
  16,364
  17,199
  18,024
  18,844
  19,664
  20,489
  21,326
  22,180
  23,057
  23,962
  24,901
  25,878
Retained Cash Flow (-), $m
  -67
  -633
  -849
  -1,106
  -1,404
  -1,742
  -2,114
  -2,517
  -2,944
  -3,389
  -3,846
  -4,308
  -4,771
  -5,231
  -5,684
  -6,128
  -6,563
  -6,987
  -7,401
  -7,806
  -8,205
  -8,598
  -8,989
  -9,380
  -9,774
  -10,173
  -10,581
  -10,999
  -11,431
  -11,878
  -12,344
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
 
  692
  931
  1,213
  1,540
  1,910
  2,318
  2,760
  3,228
  3,715
  4,216
  4,723
  5,231
  5,735
  6,232
  6,719
  7,195
  7,659
  8,113
  8,558
  8,995
  9,426
  9,855
  10,284
  10,715
  11,153
  11,600
  12,058
  12,532
  13,022
  13,533
Discount rate, %
 
  9.20
  9.66
  10.14
  10.65
  11.18
  11.74
  12.33
  12.95
  13.59
  14.27
  14.99
  15.74
  16.52
  17.35
  18.22
  19.13
  20.08
  21.09
  22.14
  23.25
  24.41
  25.63
  26.91
  28.26
  29.67
  31.15
  32.71
  34.35
  36.07
  37.87
PV of cash for distribution, $m
 
  634
  774
  908
  1,027
  1,124
  1,191
  1,223
  1,219
  1,180
  1,110
  1,017
  906
  786
  664
  546
  437
  341
  259
  191
  138
  96
  65
  43
  27
  17
  10
  6
  3
  2
  1
Current shareholders' claim on cash, %
  100
  81.3
  67.4
  56.8
  48.8
  42.5
  37.5
  33.5
  30.4
  27.8
  25.6
  23.9
  22.4
  21.2
  20.2
  19.3
  18.6
  18.0
  17.5
  17.0
  16.7
  16.4
  16.1
  15.9
  15.7
  15.6
  15.5
  15.4
  15.4
  15.4
  15.4

Dream Global REIT is an open-ended real estate investment trust (REIT). The Trust is an owner and operator of approximately 10 million square feet of office and mixed-use space in Germany and Austria. The Company allows investors to invest in commercial real estate outside of Canada. The Company's portfolio consists of approximately 170 properties, including properties located in Germany and Austria. The Company comprises approximately 13 million square feet of gross leasable area. The Company has a 50% interest in nine properties. The Trust's asset manager is Dream Asset Management Corporation.

FINANCIAL RATIOS  of  Dream Global Real Estate Investment Trus (DRG-UN)

Valuation Ratios
P/E Ratio 9.7
Price to Sales 6.7
Price to Book 1
Price to Tangible Book
Price to Cash Flow 22.7
Price to Free Cash Flow 37.8
Growth Rates
Sales Growth Rate 2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 71.4%
Cap. Spend. - 3 Yr. Gr. Rate 32%
Financial Strength
Quick Ratio 0
Current Ratio 0.2
LT Debt to Equity 92.1%
Total Debt to Equity 103.9%
Interest Coverage 0
Management Effectiveness
Return On Assets 5%
Ret/ On Assets - 3 Yr. Avg. 6.3%
Return On Total Capital 5.2%
Ret/ On T. Cap. - 3 Yr. Avg. 6.6%
Return On Equity 10.7%
Return On Equity - 3 Yr. Avg. 14.1%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 65.7%
Gross Margin - 3 Yr. Avg. 67.4%
EBITDA Margin 83.8%
EBITDA Margin - 3 Yr. Avg. 84.4%
Operating Margin 85.3%
Oper. Margin - 3 Yr. Avg. 85.6%
Pre-Tax Margin 83.8%
Pre-Tax Margin - 3 Yr. Avg. 84.4%
Net Profit Margin 68.6%
Net Profit Margin - 3 Yr. Avg. 74.4%
Effective Tax Rate 17.5%
Eff/ Tax Rate - 3 Yr. Avg. 11.6%
Payout Ratio 58.6%

DRG-UN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DRG-UN stock intrinsic value calculation we used $204 million for the last fiscal year's total revenue generated by Dream Global Real Estate Investment Trus. The default revenue input number comes from 2016 income statement of Dream Global Real Estate Investment Trus. 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 DRG-UN stock valuation model: a) initial revenue growth rate of 47.1% 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 9.2%, whose default value for DRG-UN is calculated based on our internal credit rating of Dream Global Real Estate Investment Trus, 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 Dream Global Real Estate Investment Trus.
    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 DRG-UN stock the variable cost ratio is equal to 17.6%.

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 DRG-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 Dream Global Real Estate Investment Trus.

Corporate tax rate of 27% is the nominal tax rate for Dream Global Real Estate Investment Trus. 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 DRG-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 DRG-UN are equal to 0%.

Life of production assets of 10 years is the average useful life of capital assets used in Dream Global Real Estate Investment Trus 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 DRG-UN is equal to 5.9%. 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 - $1347 million for Dream Global Real Estate Investment Trus - 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 175.941 million for Dream Global Real Estate Investment Trus 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 Dream Global Real Estate Investment Trus at the current share price and the inputted number of shares is $2.1 billion.

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