Intrinsic value of Allied Properties Real Estate Investment - AP-UN

Previous Close

$37.64

  Intrinsic Value

$14.56

stock screener

  Rating & Target

str. sell

-61%

  Value-price divergence*

+11%

Previous close

$37.64

 
Intrinsic value

$14.56

 
Up/down potential

-61%

 
Rating

str. sell

 
Value-price divergence*

+11%

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

We calculate the intrinsic value of AP-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 3.2

 

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, %
  6.85
  8.50
  8.15
  7.83
  7.55
  7.30
  7.07
  6.86
  6.67
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.58
  5.53
  5.47
  5.43
  5.38
  5.34
  5.31
  5.28
  5.25
  5.23
  5.20
  5.18
  5.16
Revenue, $m
  390
  423
  458
  493
  531
  569
  610
  652
  695
  740
  787
  836
  887
  940
  996
  1,054
  1,114
  1,177
  1,242
  1,311
  1,383
  1,458
  1,536
  1,618
  1,704
  1,794
  1,889
  1,987
  2,091
  2,199
  2,313
Variable operating expenses, $m
 
  256
  277
  299
  321
  345
  369
  394
  420
  448
  476
  506
  537
  569
  602
  637
  674
  712
  752
  793
  837
  882
  930
  979
  1,031
  1,086
  1,143
  1,202
  1,265
  1,330
  1,399
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
  249
  256
  277
  299
  321
  345
  369
  394
  420
  448
  476
  506
  537
  569
  602
  637
  674
  712
  752
  793
  837
  882
  930
  979
  1,031
  1,086
  1,143
  1,202
  1,265
  1,330
  1,399
Operating income, $m
  140
  167
  181
  195
  210
  225
  241
  257
  275
  292
  311
  330
  350
  371
  393
  416
  440
  465
  491
  518
  546
  576
  607
  639
  673
  709
  746
  785
  826
  869
  914
EBITDA, $m
  142
  167
  181
  195
  210
  225
  241
  257
  275
  292
  311
  330
  350
  371
  393
  416
  440
  465
  491
  518
  546
  576
  607
  639
  673
  709
  746
  785
  826
  869
  914
Interest expense (income), $m
  76
  82
  89
  97
  105
  113
  122
  131
  140
  150
  160
  171
  182
  193
  205
  217
  230
  244
  258
  272
  288
  304
  321
  338
  356
  376
  396
  417
  439
  462
  486
Earnings before tax, $m
  324
  85
  91
  98
  105
  112
  119
  126
  134
  142
  151
  160
  169
  178
  188
  199
  210
  221
  233
  245
  258
  272
  286
  301
  317
  333
  350
  368
  387
  407
  427
Tax expense, $m
  0
  23
  25
  26
  28
  30
  32
  34
  36
  38
  41
  43
  46
  48
  51
  54
  57
  60
  63
  66
  70
  73
  77
  81
  86
  90
  95
  99
  104
  110
  115
Net income, $m
  324
  62
  67
  71
  76
  81
  87
  92
  98
  104
  110
  117
  123
  130
  138
  145
  153
  161
  170
  179
  189
  199
  209
  220
  231
  243
  256
  269
  283
  297
  312

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  12
  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
  5,214
  5,642
  6,102
  6,580
  7,077
  7,593
  8,130
  8,687
  9,267
  9,870
  10,498
  11,151
  11,831
  12,539
  13,278
  14,048
  14,851
  15,690
  16,566
  17,482
  18,438
  19,439
  20,485
  21,580
  22,726
  23,926
  25,182
  26,498
  27,877
  29,322
  30,836
Adjusted assets (=assets-cash), $m
  5,202
  5,642
  6,102
  6,580
  7,077
  7,593
  8,130
  8,687
  9,267
  9,870
  10,498
  11,151
  11,831
  12,539
  13,278
  14,048
  14,851
  15,690
  16,566
  17,482
  18,438
  19,439
  20,485
  21,580
  22,726
  23,926
  25,182
  26,498
  27,877
  29,322
  30,836
Revenue / Adjusted assets
  0.075
  0.075
  0.075
  0.075
  0.075
  0.075
  0.075
  0.075
  0.075
  0.075
  0.075
  0.075
  0.075
  0.075
  0.075
  0.075
  0.075
  0.075
  0.075
  0.075
  0.075
  0.075
  0.075
  0.075
  0.075
  0.075
  0.075
  0.075
  0.075
  0.075
  0.075
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
  -233
  -99
  -107
  -115
  -124
  -133
  -142
  -152
  -162
  -172
  -183
  -195
  -207
  -219
  -232
  -245
  -260
  -274
  -289
  -305
  -322
  -340
  -358
  -377
  -397
  -418
  -440
  -463
  -487
  -512
  -539
Total debt, $m
  2,061
  2,233
  2,426
  2,626
  2,834
  3,051
  3,275
  3,509
  3,752
  4,005
  4,267
  4,541
  4,826
  5,123
  5,432
  5,755
  6,092
  6,443
  6,810
  7,194
  7,595
  8,014
  8,452
  8,911
  9,391
  9,894
  10,420
  10,972
  11,549
  12,155
  12,789
Total liabilities, $m
  2,192
  2,364
  2,557
  2,757
  2,965
  3,182
  3,406
  3,640
  3,883
  4,136
  4,398
  4,672
  4,957
  5,254
  5,563
  5,886
  6,223
  6,574
  6,941
  7,325
  7,726
  8,145
  8,583
  9,042
  9,522
  10,025
  10,551
  11,103
  11,680
  12,286
  12,920
Total equity, $m
  3,022
  3,278
  3,545
  3,823
  4,112
  4,412
  4,723
  5,047
  5,384
  5,735
  6,099
  6,478
  6,874
  7,285
  7,714
  8,162
  8,629
  9,116
  9,625
  10,157
  10,713
  11,294
  11,902
  12,538
  13,204
  13,901
  14,631
  15,395
  16,197
  17,036
  17,916
Total liabilities and equity, $m
  5,214
  5,642
  6,102
  6,580
  7,077
  7,594
  8,129
  8,687
  9,267
  9,871
  10,497
  11,150
  11,831
  12,539
  13,277
  14,048
  14,852
  15,690
  16,566
  17,482
  18,439
  19,439
  20,485
  21,580
  22,726
  23,926
  25,182
  26,498
  27,877
  29,322
  30,836
Debt-to-equity ratio
  0.682
  0.680
  0.680
  0.690
  0.690
  0.690
  0.690
  0.700
  0.700
  0.700
  0.700
  0.700
  0.700
  0.700
  0.700
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
Adjusted equity ratio
  0.579
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581
  0.581

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  324
  62
  67
  71
  76
  81
  87
  92
  98
  104
  110
  117
  123
  130
  138
  145
  153
  161
  170
  179
  189
  199
  209
  220
  231
  243
  256
  269
  283
  297
  312
Depreciation, amort., depletion, $m
  2
  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
  156
  62
  67
  71
  76
  81
  87
  92
  98
  104
  110
  117
  123
  130
  138
  145
  153
  161
  170
  179
  189
  199
  209
  220
  231
  243
  256
  269
  283
  297
  312
Change in working capital, $m
  -5
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
Cash from operations, $m
  161
  70
  75
  80
  85
  90
  96
  102
  108
  114
  121
  128
  135
  143
  150
  159
  167
  176
  185
  195
  205
  216
  227
  239
  251
  264
  278
  292
  307
  322
  338
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
  -504
  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
  -529
  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
  -368
  70
  75
  80
  85
  90
  96
  102
  108
  114
  121
  128
  135
  143
  150
  159
  167
  176
  185
  195
  205
  216
  227
  239
  251
  264
  278
  292
  307
  322
  338
Issuance/(repayment) of debt, $m
  119
  184
  193
  200
  208
  216
  225
  234
  243
  253
  263
  274
  285
  297
  309
  323
  337
  351
  367
  384
  401
  419
  438
  459
  480
  503
  526
  551
  578
  605
  635
Issuance/(repurchase) of shares, $m
  224
  194
  200
  206
  212
  219
  225
  232
  239
  246
  254
  263
  272
  281
  292
  302
  314
  326
  339
  353
  367
  383
  399
  416
  435
  454
  474
  496
  519
  543
  568
Cash from financing (excl. dividends), $m  
  491
  378
  393
  406
  420
  435
  450
  466
  482
  499
  517
  537
  557
  578
  601
  625
  651
  677
  706
  737
  768
  802
  837
  875
  915
  957
  1,000
  1,047
  1,097
  1,148
  1,203
Total cash flow (excl. dividends), $m
  123
  448
  468
  486
  506
  525
  546
  567
  590
  614
  638
  664
  692
  721
  751
  784
  818
  854
  891
  931
  973
  1,018
  1,065
  1,114
  1,166
  1,221
  1,278
  1,339
  1,403
  1,470
  1,541
Retained Cash Flow (-), $m
  -430
  -256
  -267
  -278
  -289
  -300
  -312
  -324
  -337
  -350
  -364
  -379
  -395
  -412
  -429
  -447
  -467
  -487
  -509
  -532
  -556
  -581
  -608
  -636
  -666
  -697
  -730
  -765
  -801
  -839
  -880
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
 
  192
  201
  209
  217
  225
  234
  243
  253
  263
  274
  285
  297
  309
  322
  336
  351
  366
  382
  400
  418
  437
  457
  478
  500
  524
  548
  574
  602
  631
  661
Discount rate, %
 
  8.20
  8.61
  9.04
  9.49
  9.97
  10.47
  10.99
  11.54
  12.12
  12.72
  13.36
  14.02
  14.73
  15.46
  16.24
  17.05
  17.90
  18.79
  19.73
  20.72
  21.76
  22.84
  23.99
  25.19
  26.45
  27.77
  29.16
  30.61
  32.15
  33.75
PV of cash for distribution, $m
 
  177
  170
  161
  151
  140
  129
  117
  106
  94
  83
  72
  61
  52
  43
  35
  28
  22
  17
  13
  10
  7
  5
  3
  2
  1
  1
  1
  0
  0
  0
Current shareholders' claim on cash, %
  100
  94.3
  89.1
  84.5
  80.3
  76.4
  72.9
  69.7
  66.7
  63.9
  61.3
  58.9
  56.7
  54.6
  52.6
  50.7
  48.9
  47.2
  45.6
  44.1
  42.7
  41.3
  39.9
  38.6
  37.4
  36.2
  35.1
  34.0
  33.0
  32.0
  31.0

Allied Properties Real Estate Investment Trust operates as an unincorporated closed-end real estate investment trust in Canada. The company, through its subsidiaries, provides Class I office space in the urban areas of Toronto, Montreal, Winnipeg, Quebec City, and Kitchener. It also provides property management and related services. The company serves various business tenants, including a range of service and professional firms, telecommunications and information technology providers, media and film groups, and storefront retailers. As of December 31, 2007, it owned and operated 50 properties located in Toronto, 7 properties in Winnipeg, 8 properties in Montreal, 5 properties in Quebec City, and 1 property in Kitchener. Allied Properties Real Estate Investment Trust was founded in 2002 and is headquartered in Toronto, Canada.

FINANCIAL RATIOS  of  Allied Properties Real Estate Investment (AP-UN)

Valuation Ratios
P/E Ratio 9.8
Price to Sales 8.2
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 19.8
Price to Free Cash Flow -9.3
Growth Rates
Sales Growth Rate 6.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 46.1%
Cap. Spend. - 3 Yr. Gr. Rate 9.7%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 63.1%
Total Debt to Equity 68.2%
Interest Coverage 5
Management Effectiveness
Return On Assets 8.3%
Ret/ On Assets - 3 Yr. Avg. 7.2%
Return On Total Capital 6.9%
Ret/ On T. Cap. - 3 Yr. Avg. 5.8%
Return On Equity 11.5%
Return On Equity - 3 Yr. Avg. 9.6%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 56.7%
Gross Margin - 3 Yr. Avg. 58.3%
EBITDA Margin 103.1%
EBITDA Margin - 3 Yr. Avg. 84.8%
Operating Margin 36.2%
Oper. Margin - 3 Yr. Avg. 38.1%
Pre-Tax Margin 83.1%
Pre-Tax Margin - 3 Yr. Avg. 65.9%
Net Profit Margin 83.1%
Net Profit Margin - 3 Yr. Avg. 65.9%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 35.5%

AP-UN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AP-UN stock intrinsic value calculation we used $390 million for the last fiscal year's total revenue generated by Allied Properties Real Estate Investment. The default revenue input number comes from 2016 income statement of Allied Properties Real Estate Investment. 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 AP-UN stock valuation model: a) initial revenue growth rate of 8.5% 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 8.2%, whose default value for AP-UN is calculated based on our internal credit rating of Allied Properties Real Estate Investment, 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 Allied Properties Real Estate Investment.
    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 AP-UN stock the variable cost ratio is equal to 60.5%.

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 AP-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% for Allied Properties Real Estate Investment.

Corporate tax rate of 27% is the nominal tax rate for Allied Properties Real Estate Investment. 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 AP-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 AP-UN are equal to 0%.

Life of production assets of 0 years is the average useful life of capital assets used in Allied Properties Real Estate Investment 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 AP-UN is equal to -23.3%. 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 - $3022 million for Allied Properties Real Estate Investment - 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 84.898 million for Allied Properties Real Estate Investment 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 Allied Properties Real Estate Investment at the current share price and the inputted number of shares is $3.2 billion.

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Stock chart of AP-UN Financial statements of AP-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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