Intrinsic value of First Capital Realty Inc. - FCR

Previous Close

$20.22

  Intrinsic Value

$6.13

stock screener

  Rating & Target

str. sell

-70%

Previous close

$20.22

 
Intrinsic value

$6.13

 
Up/down potential

-70%

 
Rating

str. sell

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

We calculate the intrinsic value of FCR 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 4.9

 

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, %
  3.21
  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
  4.92
Revenue, $m
  676
  698
  721
  747
  774
  804
  836
  869
  905
  944
  984
  1,027
  1,073
  1,121
  1,172
  1,226
  1,282
  1,342
  1,405
  1,472
  1,542
  1,615
  1,693
  1,775
  1,861
  1,951
  2,046
  2,146
  2,251
  2,361
  2,477
Variable operating expenses, $m
 
  421
  436
  451
  468
  486
  505
  525
  547
  570
  594
  620
  648
  677
  708
  740
  775
  811
  849
  889
  931
  976
  1,023
  1,072
  1,124
  1,178
  1,236
  1,296
  1,360
  1,426
  1,496
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
  200
  421
  436
  451
  468
  486
  505
  525
  547
  570
  594
  620
  648
  677
  708
  740
  775
  811
  849
  889
  931
  976
  1,023
  1,072
  1,124
  1,178
  1,236
  1,296
  1,360
  1,426
  1,496
Operating income, $m
  476
  276
  286
  296
  307
  318
  331
  344
  358
  374
  390
  407
  425
  444
  464
  485
  508
  531
  556
  583
  611
  640
  670
  703
  737
  773
  810
  850
  891
  935
  981
EBITDA, $m
  477
  277
  287
  297
  308
  320
  332
  346
  360
  375
  391
  408
  426
  446
  466
  487
  510
  534
  559
  585
  613
  642
  673
  705
  740
  776
  813
  853
  895
  939
  985
Interest expense (income), $m
  141
  144
  150
  157
  163
  171
  178
  187
  195
  205
  215
  225
  237
  249
  261
  275
  289
  304
  319
  336
  353
  371
  391
  411
  432
  455
  478
  503
  530
  557
  586
Earnings before tax, $m
  476
  133
  135
  139
  143
  148
  153
  158
  163
  169
  175
  181
  188
  195
  203
  211
  219
  228
  237
  247
  257
  268
  280
  292
  304
  318
  332
  346
  362
  378
  395
Tax expense, $m
  90
  36
  36
  38
  39
  40
  41
  43
  44
  46
  47
  49
  51
  53
  55
  57
  59
  62
  64
  67
  70
  72
  76
  79
  82
  86
  90
  94
  98
  102
  107
Net income, $m
  383
  97
  99
  102
  105
  108
  111
  115
  119
  123
  128
  132
  137
  143
  148
  154
  160
  166
  173
  180
  188
  196
  204
  213
  222
  232
  242
  253
  264
  276
  288

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  25
  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
  9,105
  9,427
  9,746
  10,091
  10,463
  10,863
  11,291
  11,747
  12,234
  12,750
  13,299
  13,880
  14,496
  15,147
  15,835
  16,562
  17,329
  18,137
  18,990
  19,888
  20,834
  21,830
  22,878
  23,982
  25,143
  26,364
  27,648
  28,998
  30,418
  31,910
  33,478
Adjusted assets (=assets-cash), $m
  9,080
  9,427
  9,746
  10,091
  10,463
  10,863
  11,291
  11,747
  12,234
  12,750
  13,299
  13,880
  14,496
  15,147
  15,835
  16,562
  17,329
  18,137
  18,990
  19,888
  20,834
  21,830
  22,878
  23,982
  25,143
  26,364
  27,648
  28,998
  30,418
  31,910
  33,478
Revenue / Adjusted assets
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
Average production assets, $m
  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
  20
  21
  23
  24
  25
Working capital, $m
  -555
  -96
  -100
  -103
  -107
  -111
  -115
  -120
  -125
  -130
  -136
  -142
  -148
  -155
  -162
  -169
  -177
  -185
  -194
  -203
  -213
  -223
  -234
  -245
  -257
  -269
  -282
  -296
  -311
  -326
  -342
Total debt, $m
  4,018
  4,180
  4,351
  4,537
  4,737
  4,952
  5,182
  5,428
  5,690
  5,968
  6,263
  6,576
  6,907
  7,257
  7,627
  8,018
  8,431
  8,866
  9,324
  9,808
  10,317
  10,852
  11,417
  12,010
  12,635
  13,292
  13,982
  14,709
  15,473
  16,275
  17,119
Total liabilities, $m
  4,909
  5,072
  5,243
  5,429
  5,629
  5,844
  6,074
  6,320
  6,582
  6,860
  7,155
  7,468
  7,799
  8,149
  8,519
  8,910
  9,323
  9,758
  10,216
  10,700
  11,209
  11,744
  12,309
  12,902
  13,527
  14,184
  14,874
  15,601
  16,365
  17,167
  18,011
Total equity, $m
  4,195
  4,355
  4,503
  4,662
  4,834
  5,019
  5,216
  5,427
  5,652
  5,891
  6,144
  6,413
  6,697
  6,998
  7,316
  7,652
  8,006
  8,379
  8,773
  9,188
  9,625
  10,085
  10,570
  11,080
  11,616
  12,180
  12,773
  13,397
  14,053
  14,742
  15,467
Total liabilities and equity, $m
  9,104
  9,427
  9,746
  10,091
  10,463
  10,863
  11,290
  11,747
  12,234
  12,751
  13,299
  13,881
  14,496
  15,147
  15,835
  16,562
  17,329
  18,137
  18,989
  19,888
  20,834
  21,829
  22,879
  23,982
  25,143
  26,364
  27,647
  28,998
  30,418
  31,909
  33,478
Debt-to-equity ratio
  0.958
  0.960
  0.970
  0.970
  0.980
  0.990
  0.990
  1.000
  1.010
  1.010
  1.020
  1.030
  1.030
  1.040
  1.040
  1.050
  1.050
  1.060
  1.060
  1.070
  1.070
  1.080
  1.080
  1.080
  1.090
  1.090
  1.090
  1.100
  1.100
  1.100
  1.110
Adjusted equity ratio
  0.459
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  383
  97
  99
  102
  105
  108
  111
  115
  119
  123
  128
  132
  137
  143
  148
  154
  160
  166
  173
  180
  188
  196
  204
  213
  222
  232
  242
  253
  264
  276
  288
Depreciation, amort., depletion, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
Funds from operations, $m
  108
  98
  100
  103
  106
  109
  113
  116
  120
  125
  129
  134
  139
  144
  150
  156
  162
  168
  175
  183
  190
  198
  207
  216
  225
  235
  245
  256
  268
  280
  292
Change in working capital, $m
  -149
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
Cash from operations, $m
  257
  101
  103
  106
  110
  113
  117
  121
  125
  130
  135
  140
  145
  151
  157
  163
  170
  177
  184
  192
  200
  209
  218
  227
  237
  247
  258
  270
  282
  295
  308
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
New CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from investing activities, $m
  -570
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
Free cash flow, $m
  -313
  99
  102
  105
  108
  112
  115
  119
  124
  128
  133
  138
  143
  149
  155
  161
  167
  174
  181
  189
  197
  205
  214
  224
  233
  244
  254
  266
  278
  290
  303
Issuance/(repayment) of debt, $m
  235
  187
  171
  186
  200
  215
  230
  246
  262
  278
  295
  313
  331
  350
  370
  391
  412
  435
  459
  483
  509
  536
  564
  594
  625
  657
  691
  726
  764
  803
  844
Issuance/(repurchase) of shares, $m
  291
  64
  49
  58
  67
  77
  86
  96
  106
  116
  126
  136
  147
  158
  170
  182
  194
  207
  221
  235
  249
  264
  280
  297
  314
  332
  351
  371
  392
  413
  436
Cash from financing (excl. dividends), $m  
  527
  251
  220
  244
  267
  292
  316
  342
  368
  394
  421
  449
  478
  508
  540
  573
  606
  642
  680
  718
  758
  800
  844
  891
  939
  989
  1,042
  1,097
  1,156
  1,216
  1,280
Total cash flow (excl. dividends), $m
  213
  350
  322
  349
  376
  403
  432
  461
  491
  522
  554
  587
  622
  657
  695
  734
  774
  816
  861
  907
  955
  1,006
  1,059
  1,114
  1,172
  1,233
  1,296
  1,363
  1,433
  1,507
  1,583
Retained Cash Flow (-), $m
  -555
  -160
  -147
  -159
  -172
  -185
  -198
  -211
  -225
  -239
  -253
  -269
  -284
  -301
  -318
  -336
  -354
  -374
  -394
  -415
  -437
  -460
  -484
  -510
  -536
  -564
  -593
  -624
  -656
  -689
  -725
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
 
  190
  174
  189
  204
  219
  234
  250
  266
  283
  300
  318
  337
  357
  377
  398
  420
  443
  467
  492
  518
  545
  574
  604
  636
  669
  703
  739
  777
  817
  859
Discount rate, %
 
  8.70
  9.14
  9.59
  10.07
  10.57
  11.10
  11.66
  12.24
  12.85
  13.50
  14.17
  14.88
  15.62
  16.41
  17.23
  18.09
  18.99
  19.94
  20.94
  21.98
  23.08
  24.24
  25.45
  26.72
  28.06
  29.46
  30.93
  32.48
  34.11
  35.81
PV of cash for distribution, $m
 
  174
  146
  144
  139
  132
  125
  116
  106
  95
  85
  74
  64
  54
  45
  37
  29
  23
  18
  13
  10
  7
  5
  3
  2
  1
  1
  1
  0
  0
  0
Current shareholders' claim on cash, %
  100
  98.7
  97.8
  96.7
  95.6
  94.3
  92.9
  91.5
  90.0
  88.5
  86.9
  85.3
  83.7
  82.0
  80.3
  78.7
  77.0
  75.4
  73.7
  72.1
  70.4
  68.8
  67.2
  65.7
  64.1
  62.6
  61.1
  59.6
  58.2
  56.8
  55.4

First Capital Realty Inc. (FCR) is engaged in the business of acquiring, developing, redeveloping, owning and managing urban retail-centered properties. The Company owns, develops and manages grocery anchored, urban properties where people live and shop. The Company operates through three segments: Eastern Region, which includes operations primarily in Quebec and Ottawa; Central Region, which includes the Company's Ontario operations excluding Ottawa; and Western Region, which includes operations in Alberta and British Columbia. The Company holds interest in approximately 160 properties, totaling approximately 25.3 million square feet of gross leasable area. The Company holds interest in properties, which include Peninsula Village, 225 Peel St. (Griffintown), Cliffcrest Plaza, 338 Wellington Rd. (Wellington Corners), 2415-2595 Rue de Salaberry (Galeries Normandie) and Avenue Rd. & Lawrence Ave. assembly. The Company's subsidiary is First Capital Holdings Trust.

FINANCIAL RATIOS  of  First Capital Realty Inc. (FCR)

Valuation Ratios
P/E Ratio 12.9
Price to Sales 7.3
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 19.2
Price to Free Cash Flow 19.2
Growth Rates
Sales Growth Rate 3.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 84.2%
Total Debt to Equity 95.8%
Interest Coverage 4
Management Effectiveness
Return On Assets 5.7%
Ret/ On Assets - 3 Yr. Avg. 4.5%
Return On Total Capital 4.9%
Ret/ On T. Cap. - 3 Yr. Avg. 3.5%
Return On Equity 9.8%
Return On Equity - 3 Yr. Avg. 7.1%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 62.4%
Gross Margin - 3 Yr. Avg. 62.6%
EBITDA Margin 91.4%
EBITDA Margin - 3 Yr. Avg. 71.3%
Operating Margin 70.4%
Oper. Margin - 3 Yr. Avg. 49.3%
Pre-Tax Margin 70.4%
Pre-Tax Margin - 3 Yr. Avg. 49.4%
Net Profit Margin 56.7%
Net Profit Margin - 3 Yr. Avg. 39.4%
Effective Tax Rate 18.9%
Eff/ Tax Rate - 3 Yr. Avg. 20%
Payout Ratio 52.2%

FCR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FCR stock intrinsic value calculation we used $676 million for the last fiscal year's total revenue generated by First Capital Realty Inc.. The default revenue input number comes from 2016 income statement of First Capital Realty 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 FCR stock valuation model: a) initial revenue growth rate of 3.2% 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 8.7%, whose default value for FCR is calculated based on our internal credit rating of First Capital Realty 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 First Capital Realty 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 FCR stock the variable cost ratio is equal to 60.4%.

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 FCR 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 3.6% for First Capital Realty Inc..

Corporate tax rate of 27% is the nominal tax rate for First Capital Realty 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 FCR 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 FCR are equal to 1%.

Life of production assets of 6.5 years is the average useful life of capital assets used in First Capital Realty 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 FCR is equal to -13.8%. 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 - $4195 million for First Capital Realty 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 243.878 million for First Capital Realty 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 First Capital Realty Inc. at the current share price and the inputted number of shares is $4.9 billion.

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Financial statements of FCR
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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