Intrinsic value of Alacer Gold Corp. - ASR

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$2.25

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$2.25

 
Intrinsic value

$0.74

 
Up/down potential

-67%

 
Rating

str. sell

 
Value-price divergence* premium content

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

We calculate the intrinsic value of ASR 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 0.7

 

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, %
  -40.19
  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
  192
  196
  200
  205
  211
  218
  225
  232
  241
  250
  259
  269
  280
  292
  304
  317
  331
  346
  362
  378
  396
  414
  433
  454
  475
  498
  521
  547
  573
  601
  630
Variable operating expenses, $m
 
  44
  45
  46
  47
  49
  50
  52
  54
  56
  58
  60
  63
  65
  68
  71
  74
  78
  81
  85
  89
  93
  97
  102
  106
  111
  117
  122
  128
  135
  141
Fixed operating expenses, $m
 
  160
  164
  168
  172
  176
  181
  185
  190
  195
  200
  205
  210
  215
  220
  226
  232
  237
  243
  249
  256
  262
  269
  275
  282
  289
  296
  304
  311
  319
  327
Total operating expenses, $m
  195
  204
  209
  214
  219
  225
  231
  237
  244
  251
  258
  265
  273
  280
  288
  297
  306
  315
  324
  334
  345
  355
  366
  377
  388
  400
  413
  426
  439
  454
  468
Operating income, $m
  -4
  -8
  -8
  -9
  -8
  -8
  -7
  -5
  -3
  -1
  1
  4
  8
  12
  16
  20
  26
  31
  37
  44
  51
  59
  68
  77
  86
  97
  108
  120
  133
  147
  162
EBITDA, $m
  49
  -8
  -8
  -9
  -8
  -8
  -7
  -5
  -3
  -1
  1
  4
  8
  12
  16
  20
  26
  31
  37
  44
  51
  59
  68
  77
  86
  97
  108
  120
  133
  147
  162
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  2
  2
  3
  3
  4
  4
  5
  5
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  15
  17
  18
  19
  21
  22
Earnings before tax, $m
  -3
  -8
  -9
  -9
  -9
  -9
  -8
  -7
  -6
  -4
  -2
  1
  4
  7
  10
  14
  19
  24
  29
  35
  41
  48
  56
  64
  72
  82
  92
  102
  114
  126
  139
Tax expense, $m
  -24
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  2
  3
  4
  5
  6
  8
  9
  11
  13
  15
  17
  20
  22
  25
  28
  31
  34
  38
Net income, $m
  8
  -8
  -9
  -9
  -9
  -9
  -8
  -7
  -6
  -4
  -2
  1
  3
  5
  8
  10
  14
  17
  21
  25
  30
  35
  41
  46
  53
  60
  67
  75
  83
  92
  102

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  56
  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
  1,169
  1,132
  1,158
  1,188
  1,221
  1,258
  1,299
  1,343
  1,391
  1,443
  1,498
  1,557
  1,620
  1,688
  1,759
  1,835
  1,915
  2,001
  2,091
  2,186
  2,286
  2,392
  2,504
  2,622
  2,746
  2,877
  3,014
  3,159
  3,311
  3,472
  3,641
Adjusted assets (=assets-cash), $m
  1,113
  1,132
  1,158
  1,188
  1,221
  1,258
  1,299
  1,343
  1,391
  1,443
  1,498
  1,557
  1,620
  1,688
  1,759
  1,835
  1,915
  2,001
  2,091
  2,186
  2,286
  2,392
  2,504
  2,622
  2,746
  2,877
  3,014
  3,159
  3,311
  3,472
  3,641
Revenue / Adjusted assets
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
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
  364
  98
  100
  103
  106
  109
  112
  116
  120
  125
  130
  135
  140
  146
  152
  159
  166
  173
  181
  189
  198
  207
  217
  227
  238
  249
  261
  273
  286
  300
  315
Total debt, $m
  0
  5
  12
  20
  29
  39
  50
  62
  75
  89
  103
  119
  136
  154
  173
  194
  215
  238
  262
  288
  315
  343
  373
  405
  438
  473
  510
  549
  589
  632
  678
Total liabilities, $m
  298
  303
  310
  318
  327
  337
  348
  360
  373
  387
  401
  417
  434
  452
  471
  492
  513
  536
  560
  586
  613
  641
  671
  703
  736
  771
  808
  847
  887
  930
  976
Total equity, $m
  871
  829
  848
  869
  894
  921
  951
  983
  1,018
  1,056
  1,097
  1,140
  1,186
  1,235
  1,288
  1,343
  1,402
  1,464
  1,530
  1,600
  1,673
  1,751
  1,833
  1,919
  2,010
  2,106
  2,206
  2,312
  2,424
  2,541
  2,665
Total liabilities and equity, $m
  1,169
  1,132
  1,158
  1,187
  1,221
  1,258
  1,299
  1,343
  1,391
  1,443
  1,498
  1,557
  1,620
  1,687
  1,759
  1,835
  1,915
  2,000
  2,090
  2,186
  2,286
  2,392
  2,504
  2,622
  2,746
  2,877
  3,014
  3,159
  3,311
  3,471
  3,641
Debt-to-equity ratio
  0.000
  0.010
  0.010
  0.020
  0.030
  0.040
  0.050
  0.060
  0.070
  0.080
  0.090
  0.100
  0.110
  0.120
  0.130
  0.140
  0.150
  0.160
  0.170
  0.180
  0.190
  0.200
  0.200
  0.210
  0.220
  0.220
  0.230
  0.240
  0.240
  0.250
  0.250
Adjusted equity ratio
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732
  0.732

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  8
  -8
  -9
  -9
  -9
  -9
  -8
  -7
  -6
  -4
  -2
  1
  3
  5
  8
  10
  14
  17
  21
  25
  30
  35
  41
  46
  53
  60
  67
  75
  83
  92
  102
Depreciation, amort., depletion, $m
  53
  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
  54
  -8
  -9
  -9
  -9
  -9
  -8
  -7
  -6
  -4
  -2
  1
  3
  5
  8
  10
  14
  17
  21
  25
  30
  35
  41
  46
  53
  60
  67
  75
  83
  92
  102
Change in working capital, $m
  4
  2
  2
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
Cash from operations, $m
  50
  -10
  -11
  -12
  -12
  -12
  -11
  -11
  -10
  -8
  -6
  -5
  -3
  -1
  1
  4
  7
  10
  13
  17
  21
  26
  31
  36
  42
  48
  55
  62
  70
  78
  87
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
  -199
  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
  -260
  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
  -210
  -10
  -11
  -12
  -12
  -12
  -11
  -11
  -10
  -8
  -6
  -5
  -3
  -1
  1
  4
  7
  10
  13
  17
  21
  26
  31
  36
  42
  48
  55
  62
  70
  78
  87
Issuance/(repayment) of debt, $m
  0
  5
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  25
  27
  28
  30
  32
  33
  35
  37
  39
  41
  43
  45
Issuance/(repurchase) of shares, $m
  0
  0
  23
  25
  27
  29
  30
  31
  32
  32
  32
  32
  32
  32
  32
  31
  31
  30
  28
  27
  25
  23
  21
  18
  16
  12
  9
  5
  1
  0
  0
Cash from financing (excl. dividends), $m  
  17
  5
  30
  33
  36
  39
  41
  43
  45
  46
  47
  48
  49
  50
  51
  51
  53
  53
  52
  52
  52
  51
  51
  50
  49
  47
  46
  44
  42
  43
  45
Total cash flow (excl. dividends), $m
  -198
  -4
  -4
  -4
  -3
  -2
  -1
  1
  3
  6
  8
  11
  14
  17
  21
  24
  28
  33
  38
  43
  48
  54
  61
  68
  75
  83
  92
  101
  111
  121
  132
Retained Cash Flow (-), $m
  -11
  -14
  -19
  -22
  -24
  -27
  -30
  -32
  -35
  -38
  -41
  -43
  -46
  -49
  -52
  -56
  -59
  -62
  -66
  -70
  -74
  -78
  -82
  -86
  -91
  -96
  -101
  -106
  -112
  -117
  -123
Prev. year cash balance distribution, $m
 
  56
  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
 
  38
  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
  4
  9
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
 
  36
  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
Current shareholders' claim on cash, %
  100
  100.0
  96.5
  92.8
  89.1
  85.4
  81.9
  78.5
  75.2
  72.2
  69.4
  66.8
  64.4
  62.2
  60.2
  58.3
  56.6
  55.1
  53.7
  52.5
  51.4
  50.5
  49.7
  49.0
  48.5
  48.1
  47.8
  47.7
  47.7
  47.7
  47.7

Alacer Gold Corp., an intermediate gold mining company, engages in the mining, development, and exploration of mineral deposits in Turkey. It primarily holds 80% interest in the Çöpler gold mine located to the southwest of the city of Erzincan, Turkey. The company is based in Englewood, Colorado.

FINANCIAL RATIOS  of  Alacer Gold Corp. (ASR)

Valuation Ratios
P/E Ratio 82.2
Price to Sales 3.4
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow 13.1
Price to Free Cash Flow -4.4
Growth Rates
Sales Growth Rate -40.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 126.1%
Cap. Spend. - 3 Yr. Gr. Rate 18.5%
Financial Strength
Quick Ratio NaN
Current Ratio 5.2
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0.7%
Ret/ On Assets - 3 Yr. Avg. 5.2%
Return On Total Capital 0.9%
Ret/ On T. Cap. - 3 Yr. Avg. 6.8%
Return On Equity 0.9%
Return On Equity - 3 Yr. Avg. 6.8%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 13%
Gross Margin - 3 Yr. Avg. 30.3%
EBITDA Margin 26%
EBITDA Margin - 3 Yr. Avg. 41.4%
Operating Margin -1.6%
Oper. Margin - 3 Yr. Avg. 20%
Pre-Tax Margin -1.6%
Pre-Tax Margin - 3 Yr. Avg. 18.9%
Net Profit Margin 4.2%
Net Profit Margin - 3 Yr. Avg. 15.5%
Effective Tax Rate 800%
Eff/ Tax Rate - 3 Yr. Avg. 266.7%
Payout Ratio 0%

ASR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ASR stock intrinsic value calculation we used $192 million for the last fiscal year's total revenue generated by Alacer Gold Corp.. The default revenue input number comes from 2016 income statement of Alacer Gold Corp.. 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 ASR 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 ASR is calculated based on our internal credit rating of Alacer Gold Corp., 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 Alacer Gold Corp..
    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 ASR stock the variable cost ratio is equal to 22.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $156 million in the base year in the intrinsic value calculation for ASR 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 Alacer Gold Corp..

Corporate tax rate of 27% is the nominal tax rate for Alacer Gold Corp.. 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 ASR 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 ASR are equal to 0%.

Life of production assets of 0 years is the average useful life of capital assets used in Alacer Gold Corp. 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 ASR is equal to 50%. 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 - $871 million for Alacer Gold Corp. - 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 292.798 million for Alacer Gold Corp. 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 Alacer Gold Corp. at the current share price and the inputted number of shares is $0.7 billion.


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Stock chart of ASR Financial statements of ASR
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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