Intrinsic value of OceanaGold Corporation - OGC

Previous Close

$3.68

  Intrinsic Value

$1.82

stock screener

  Rating & Target

str. sell

-51%

Previous close

$3.68

 
Intrinsic value

$1.82

 
Up/down potential

-51%

 
Rating

str. sell

We calculate the intrinsic value of OGC 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 2.2

 

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, %
  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
  866
  886
  909
  934
  963
  994
  1,027
  1,064
  1,104
  1,146
  1,191
  1,240
  1,291
  1,346
  1,404
  1,465
  1,530
  1,599
  1,672
  1,749
  1,830
  1,915
  2,006
  2,101
  2,201
  2,306
  2,417
  2,533
  2,656
  2,785
Variable operating expenses, $m
  265
  271
  278
  286
  295
  304
  314
  326
  338
  351
  365
  379
  395
  412
  430
  448
  468
  489
  512
  535
  560
  586
  614
  643
  673
  706
  739
  775
  813
  852
Fixed operating expenses, $m
  396
  404
  413
  422
  431
  441
  451
  461
  471
  481
  492
  502
  514
  525
  536
  548
  560
  573
  585
  598
  611
  625
  638
  652
  667
  681
  696
  712
  727
  743
Total operating expenses, $m
  661
  675
  691
  708
  726
  745
  765
  787
  809
  832
  857
  881
  909
  937
  966
  996
  1,028
  1,062
  1,097
  1,133
  1,171
  1,211
  1,252
  1,295
  1,340
  1,387
  1,435
  1,487
  1,540
  1,595
Operating income, $m
  205
  211
  218
  226
  237
  249
  262
  278
  295
  314
  335
  358
  382
  409
  438
  469
  502
  537
  575
  616
  659
  705
  753
  805
  860
  919
  981
  1,046
  1,116
  1,189
EBITDA, $m
  375
  384
  395
  409
  425
  443
  463
  486
  511
  538
  568
  600
  635
  673
  713
  756
  801
  850
  903
  958
  1,017
  1,080
  1,146
  1,216
  1,291
  1,370
  1,454
  1,542
  1,636
  1,734
Interest expense (income), $m
  7
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28
  30
  32
  33
  36
  38
  40
  43
  45
  48
  51
  54
  57
  60
  64
Earnings before tax, $m
  193
  198
  204
  212
  222
  233
  246
  261
  277
  295
  314
  336
  359
  384
  412
  441
  472
  506
  542
  580
  621
  665
  711
  760
  813
  868
  927
  989
  1,056
  1,126
Tax expense, $m
  52
  53
  55
  57
  60
  63
  66
  70
  75
  80
  85
  91
  97
  104
  111
  119
  127
  137
  146
  157
  168
  179
  192
  205
  219
  234
  250
  267
  285
  304
Net income, $m
  141
  145
  149
  155
  162
  170
  180
  190
  202
  215
  230
  245
  262
  281
  300
  322
  345
  369
  395
  423
  453
  485
  519
  555
  593
  634
  677
  722
  771
  822

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
  2,547
  2,606
  2,673
  2,748
  2,831
  2,922
  3,022
  3,130
  3,246
  3,370
  3,504
  3,646
  3,797
  3,958
  4,129
  4,310
  4,501
  4,704
  4,918
  5,144
  5,382
  5,634
  5,899
  6,178
  6,472
  6,782
  7,108
  7,451
  7,812
  8,191
Adjusted assets (=assets-cash), $m
  2,547
  2,606
  2,673
  2,748
  2,831
  2,922
  3,022
  3,130
  3,246
  3,370
  3,504
  3,646
  3,797
  3,958
  4,129
  4,310
  4,501
  4,704
  4,918
  5,144
  5,382
  5,634
  5,899
  6,178
  6,472
  6,782
  7,108
  7,451
  7,812
  8,191
Revenue / Adjusted assets
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
Average production assets, $m
  1,627
  1,665
  1,707
  1,755
  1,809
  1,867
  1,931
  1,999
  2,074
  2,153
  2,238
  2,329
  2,426
  2,529
  2,638
  2,753
  2,876
  3,005
  3,142
  3,286
  3,438
  3,599
  3,768
  3,947
  4,135
  4,333
  4,541
  4,760
  4,990
  5,233
Working capital, $m
  -48
  -49
  -50
  -51
  -53
  -55
  -57
  -59
  -61
  -63
  -66
  -68
  -71
  -74
  -77
  -81
  -84
  -88
  -92
  -96
  -101
  -105
  -110
  -116
  -121
  -127
  -133
  -139
  -146
  -153
Total debt, $m
  360
  376
  394
  415
  438
  464
  491
  521
  553
  588
  624
  664
  706
  750
  798
  848
  901
  957
  1,016
  1,079
  1,145
  1,215
  1,288
  1,365
  1,447
  1,533
  1,623
  1,718
  1,818
  1,923
Total liabilities, $m
  706
  722
  740
  761
  784
  810
  837
  867
  899
  934
  970
  1,010
  1,052
  1,096
  1,144
  1,194
  1,247
  1,303
  1,362
  1,425
  1,491
  1,561
  1,634
  1,711
  1,793
  1,879
  1,969
  2,064
  2,164
  2,269
Total equity, $m
  1,841
  1,884
  1,932
  1,987
  2,047
  2,113
  2,185
  2,263
  2,347
  2,437
  2,533
  2,636
  2,745
  2,862
  2,985
  3,116
  3,254
  3,401
  3,556
  3,719
  3,891
  4,073
  4,265
  4,467
  4,679
  4,903
  5,139
  5,387
  5,648
  5,922
Total liabilities and equity, $m
  2,547
  2,606
  2,672
  2,748
  2,831
  2,923
  3,022
  3,130
  3,246
  3,371
  3,503
  3,646
  3,797
  3,958
  4,129
  4,310
  4,501
  4,704
  4,918
  5,144
  5,382
  5,634
  5,899
  6,178
  6,472
  6,782
  7,108
  7,451
  7,812
  8,191
Debt-to-equity ratio
  0.200
  0.200
  0.200
  0.210
  0.210
  0.220
  0.220
  0.230
  0.240
  0.240
  0.250
  0.250
  0.260
  0.260
  0.270
  0.270
  0.280
  0.280
  0.290
  0.290
  0.290
  0.300
  0.300
  0.310
  0.310
  0.310
  0.320
  0.320
  0.320
  0.320
Adjusted equity ratio
  0.723
  0.723
  0.723
  0.723
  0.723
  0.723
  0.723
  0.723
  0.723
  0.723
  0.723
  0.723
  0.723
  0.723
  0.723
  0.723
  0.723
  0.723
  0.723
  0.723
  0.723
  0.723
  0.723
  0.723
  0.723
  0.723
  0.723
  0.723
  0.723
  0.723

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  141
  145
  149
  155
  162
  170
  180
  190
  202
  215
  230
  245
  262
  281
  300
  322
  345
  369
  395
  423
  453
  485
  519
  555
  593
  634
  677
  722
  771
  822
Depreciation, amort., depletion, $m
  169
  173
  178
  183
  188
  194
  201
  208
  216
  224
  233
  243
  253
  263
  275
  287
  300
  313
  327
  342
  358
  375
  393
  411
  431
  451
  473
  496
  520
  545
Funds from operations, $m
  311
  318
  327
  338
  350
  365
  381
  399
  418
  440
  463
  488
  515
  544
  575
  609
  644
  682
  723
  766
  812
  860
  912
  966
  1,024
  1,085
  1,150
  1,218
  1,290
  1,367
Change in working capital, $m
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
Cash from operations, $m
  312
  319
  328
  339
  352
  366
  383
  401
  420
  442
  465
  490
  518
  547
  578
  612
  648
  686
  727
  770
  816
  865
  917
  971
  1,029
  1,091
  1,156
  1,225
  1,297
  1,374
Maintenance CAPEX, $m
  -166
  -169
  -173
  -178
  -183
  -188
  -194
  -201
  -208
  -216
  -224
  -233
  -243
  -253
  -263
  -275
  -287
  -300
  -313
  -327
  -342
  -358
  -375
  -393
  -411
  -431
  -451
  -473
  -496
  -520
New CAPEX, $m
  -32
  -37
  -43
  -48
  -53
  -58
  -64
  -69
  -74
  -80
  -85
  -91
  -97
  -103
  -109
  -116
  -122
  -129
  -137
  -144
  -152
  -161
  -169
  -178
  -188
  -198
  -208
  -219
  -231
  -242
Cash from investing activities, $m
  -198
  -206
  -216
  -226
  -236
  -246
  -258
  -270
  -282
  -296
  -309
  -324
  -340
  -356
  -372
  -391
  -409
  -429
  -450
  -471
  -494
  -519
  -544
  -571
  -599
  -629
  -659
  -692
  -727
  -762
Free cash flow, $m
  113
  112
  112
  113
  116
  120
  125
  131
  138
  146
  156
  166
  178
  192
  206
  222
  239
  257
  277
  298
  321
  346
  372
  400
  430
  462
  496
  532
  571
  612
Issuance/(repayment) of debt, $m
  16
  16
  19
  21
  23
  25
  28
  30
  32
  35
  37
  39
  42
  45
  47
  50
  53
  56
  59
  63
  66
  70
  73
  77
  81
  86
  90
  95
  100
  105
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  16
  16
  19
  21
  23
  25
  28
  30
  32
  35
  37
  39
  42
  45
  47
  50
  53
  56
  59
  63
  66
  70
  73
  77
  81
  86
  90
  95
  100
  105
Total cash flow (excl. dividends), $m
  129
  128
  131
  134
  139
  145
  152
  161
  170
  181
  193
  206
  220
  236
  253
  272
  292
  313
  336
  361
  387
  416
  446
  478
  512
  548
  587
  627
  671
  717
Retained Cash Flow (-), $m
  -37
  -42
  -48
  -54
  -60
  -66
  -72
  -78
  -84
  -90
  -96
  -103
  -109
  -116
  -123
  -131
  -138
  -146
  -155
  -163
  -172
  -182
  -192
  -202
  -213
  -224
  -236
  -248
  -261
  -274
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
  86
  82
  80
  79
  79
  80
  83
  86
  91
  96
  103
  111
  120
  130
  141
  153
  167
  182
  198
  215
  234
  254
  276
  299
  324
  351
  379
  410
  442
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  88
  79
  72
  66
  61
  57
  54
  52
  49
  48
  46
  44
  42
  40
  38
  36
  33
  31
  28
  25
  22
  19
  17
  14
  12
  9
  8
  6
  4
  3
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
  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
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

OceanaGold Corporation is a gold mining company. The Company is engaged in the exploration, development and operation of gold and other mineral mining activities. The Company's segments are New Zealand, the Philippines, the United States and All other segments. The Company's assets encompass its flagship operation, the Didipio Gold-Copper Mine located on the island of Luzon in the Philippines. On the north island of New Zealand, the Company operates the high-grade Waihi Gold Mine. On the south island of New Zealand, the Company operates the gold mine in the country at the Macraes Goldfield, which is made up of a series of open pit mines and the Frasers underground mine. In the United States, the Company is constructing the Haile Gold Mine, an asset located in South Carolina along the Carolina Slate Belt.

FINANCIAL RATIOS  of  OceanaGold Corporation (OGC)

Valuation Ratios
P/E Ratio 12.2
Price to Sales 2.6
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 7.2
Price to Free Cash Flow -7.8
Growth Rates
Sales Growth Rate 23.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 214.6%
Cap. Spend. - 3 Yr. Gr. Rate 22.8%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 17.8%
Total Debt to Equity 24.3%
Interest Coverage 31
Management Effectiveness
Return On Assets 8.1%
Ret/ On Assets - 3 Yr. Avg. 8.7%
Return On Total Capital 9.1%
Ret/ On T. Cap. - 3 Yr. Avg. 9.3%
Return On Equity 11%
Return On Equity - 3 Yr. Avg. 11.4%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 62.9%
Gross Margin - 3 Yr. Avg. 58.1%
EBITDA Margin 45.1%
EBITDA Margin - 3 Yr. Avg. 40.9%
Operating Margin 24.9%
Oper. Margin - 3 Yr. Avg. 19.5%
Pre-Tax Margin 24.7%
Pre-Tax Margin - 3 Yr. Avg. 17.4%
Net Profit Margin 21.7%
Net Profit Margin - 3 Yr. Avg. 17.3%
Effective Tax Rate 12.4%
Eff/ Tax Rate - 3 Yr. Avg. -1.8%
Payout Ratio 17.9%

OGC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the OGC stock intrinsic value calculation we used $849 million for the last fiscal year's total revenue generated by OceanaGold Corporation. The default revenue input number comes from 2016 income statement of OceanaGold Corporation. 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 OGC 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 4.3%, whose default value for OGC is calculated based on our internal credit rating of OceanaGold Corporation, 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 OceanaGold Corporation.
    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 OGC stock the variable cost ratio is equal to 30.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $387 million in the base year in the intrinsic value calculation for OGC 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 OceanaGold Corporation.

Corporate tax rate of 27% is the nominal tax rate for OceanaGold Corporation. 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 OGC 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 OGC are equal to 187.9%.

Life of production assets of 9.6 years is the average useful life of capital assets used in OceanaGold Corporation 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 OGC is equal to -5.5%. 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 - $1804 million for OceanaGold Corporation - 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 609.907 million for OceanaGold Corporation 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 OceanaGold Corporation at the current share price and the inputted number of shares is $2.2 billion.

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