Intrinsic value of Artis Real Estate Investment Trust - AX-UN

Previous Close

$13.16

  Intrinsic Value

$4.35

stock screener

  Rating & Target

str. sell

-67%

  Value-price divergence*

0%

Previous close

$13.16

 
Intrinsic value

$4.35

 
Up/down potential

-67%

 
Rating

str. sell

 
Value-price divergence*

0%

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

We calculate the intrinsic value of AX-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 2.0

 

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, %
  2.43
  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
  549
  560
  573
  588
  604
  622
  643
  664
  688
  714
  741
  770
  802
  835
  870
  908
  948
  990
  1,034
  1,081
  1,131
  1,183
  1,239
  1,297
  1,358
  1,423
  1,491
  1,563
  1,638
  1,717
  1,801
Variable operating expenses, $m
 
  743
  760
  779
  801
  825
  852
  881
  912
  946
  983
  1,021
  1,063
  1,107
  1,154
  1,204
  1,256
  1,312
  1,371
  1,434
  1,500
  1,569
  1,642
  1,720
  1,801
  1,887
  1,977
  2,072
  2,172
  2,277
  2,388
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
  433
  743
  760
  779
  801
  825
  852
  881
  912
  946
  983
  1,021
  1,063
  1,107
  1,154
  1,204
  1,256
  1,312
  1,371
  1,434
  1,500
  1,569
  1,642
  1,720
  1,801
  1,887
  1,977
  2,072
  2,172
  2,277
  2,388
Operating income, $m
  117
  -183
  -187
  -192
  -197
  -203
  -209
  -217
  -224
  -233
  -242
  -251
  -261
  -272
  -284
  -296
  -309
  -323
  -337
  -352
  -369
  -386
  -404
  -423
  -443
  -464
  -486
  -509
  -534
  -560
  -587
EBITDA, $m
  118
  -182
  -186
  -191
  -196
  -202
  -209
  -216
  -223
  -232
  -241
  -250
  -260
  -271
  -283
  -295
  -308
  -321
  -336
  -351
  -367
  -384
  -402
  -421
  -441
  -462
  -484
  -508
  -532
  -558
  -585
Interest expense (income), $m
  109
  104
  107
  109
  112
  116
  119
  123
  128
  132
  137
  143
  149
  155
  162
  169
  176
  184
  193
  201
  211
  221
  231
  242
  254
  266
  279
  293
  307
  322
  338
Earnings before tax, $m
  117
  -287
  -294
  -301
  -309
  -318
  -329
  -340
  -352
  -365
  -379
  -394
  -410
  -427
  -445
  -465
  -485
  -507
  -530
  -554
  -579
  -607
  -635
  -665
  -697
  -730
  -765
  -802
  -841
  -882
  -925
Tax expense, $m
  1
  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
Net income, $m
  116
  -287
  -294
  -301
  -309
  -318
  -329
  -340
  -352
  -365
  -379
  -394
  -410
  -427
  -445
  -465
  -485
  -507
  -530
  -554
  -579
  -607
  -635
  -665
  -697
  -730
  -765
  -802
  -841
  -882
  -925

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  59
  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
  5,493
  5,544
  5,672
  5,818
  5,981
  6,163
  6,362
  6,578
  6,813
  7,065
  7,337
  7,627
  7,936
  8,266
  8,616
  8,988
  9,382
  9,798
  10,239
  10,705
  11,197
  11,716
  12,263
  12,840
  13,448
  14,089
  14,763
  15,472
  16,219
  17,004
  17,830
Adjusted assets (=assets-cash), $m
  5,434
  5,544
  5,672
  5,818
  5,981
  6,163
  6,362
  6,578
  6,813
  7,065
  7,337
  7,627
  7,936
  8,266
  8,616
  8,988
  9,382
  9,798
  10,239
  10,705
  11,197
  11,716
  12,263
  12,840
  13,448
  14,089
  14,763
  15,472
  16,219
  17,004
  17,830
Revenue / Adjusted assets
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
Average production assets, $m
  4
  3
  3
  4
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
Working capital, $m
  -815
  25
  25
  26
  27
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  52
  54
  57
  60
  63
  66
  69
  72
  76
  79
Total debt, $m
  2,737
  2,737
  2,803
  2,879
  2,963
  3,057
  3,160
  3,272
  3,393
  3,524
  3,664
  3,814
  3,974
  4,144
  4,325
  4,518
  4,721
  4,937
  5,165
  5,406
  5,660
  5,928
  6,211
  6,510
  6,824
  7,155
  7,503
  7,870
  8,256
  8,662
  9,089
Total liabilities, $m
  2,865
  2,866
  2,932
  3,008
  3,092
  3,186
  3,289
  3,401
  3,522
  3,653
  3,793
  3,943
  4,103
  4,273
  4,454
  4,647
  4,850
  5,066
  5,294
  5,535
  5,789
  6,057
  6,340
  6,639
  6,953
  7,284
  7,632
  7,999
  8,385
  8,791
  9,218
Total equity, $m
  2,627
  2,678
  2,740
  2,810
  2,889
  2,977
  3,073
  3,177
  3,291
  3,413
  3,544
  3,684
  3,833
  3,992
  4,162
  4,341
  4,531
  4,733
  4,946
  5,171
  5,408
  5,659
  5,923
  6,202
  6,496
  6,805
  7,130
  7,473
  7,834
  8,213
  8,612
Total liabilities and equity, $m
  5,492
  5,544
  5,672
  5,818
  5,981
  6,163
  6,362
  6,578
  6,813
  7,066
  7,337
  7,627
  7,936
  8,265
  8,616
  8,988
  9,381
  9,799
  10,240
  10,706
  11,197
  11,716
  12,263
  12,841
  13,449
  14,089
  14,762
  15,472
  16,219
  17,004
  17,830
Debt-to-equity ratio
  1.042
  1.020
  1.020
  1.020
  1.030
  1.030
  1.030
  1.030
  1.030
  1.030
  1.030
  1.040
  1.040
  1.040
  1.040
  1.040
  1.040
  1.040
  1.040
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.060
Adjusted equity ratio
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  116
  -287
  -294
  -301
  -309
  -318
  -329
  -340
  -352
  -365
  -379
  -394
  -410
  -427
  -445
  -465
  -485
  -507
  -530
  -554
  -579
  -607
  -635
  -665
  -697
  -730
  -765
  -802
  -841
  -882
  -925
Depreciation, amort., depletion, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
Funds from operations, $m
  271
  -286
  -293
  -300
  -308
  -318
  -328
  -339
  -351
  -364
  -378
  -393
  -409
  -426
  -444
  -464
  -484
  -506
  -528
  -553
  -578
  -605
  -634
  -663
  -695
  -728
  -763
  -800
  -839
  -880
  -923
Change in working capital, $m
  19
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
Cash from operations, $m
  252
  -287
  -293
  -301
  -309
  -319
  -329
  -340
  -352
  -365
  -379
  -394
  -410
  -428
  -446
  -465
  -486
  -507
  -530
  -555
  -580
  -607
  -636
  -666
  -698
  -731
  -766
  -803
  -842
  -883
  -926
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
New CAPEX, $m
  -82
  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
  -1
Cash from investing activities, $m
  -32
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
Free cash flow, $m
  220
  -287
  -294
  -302
  -310
  -319
  -330
  -341
  -353
  -366
  -380
  -395
  -412
  -429
  -447
  -466
  -487
  -509
  -532
  -556
  -582
  -609
  -638
  -668
  -700
  -733
  -768
  -806
  -845
  -886
  -929
Issuance/(repayment) of debt, $m
  -194
  59
  66
  75
  85
  94
  103
  112
  121
  131
  140
  150
  160
  170
  181
  192
  204
  216
  228
  241
  254
  268
  283
  298
  314
  331
  349
  367
  386
  406
  427
Issuance/(repurchase) of shares, $m
  143
  338
  355
  371
  388
  406
  425
  444
  465
  487
  510
  534
  560
  586
  614
  644
  675
  708
  743
  779
  817
  857
  899
  944
  990
  1,039
  1,091
  1,145
  1,202
  1,261
  1,324
Cash from financing (excl. dividends), $m  
  -52
  397
  421
  446
  473
  500
  528
  556
  586
  618
  650
  684
  720
  756
  795
  836
  879
  924
  971
  1,020
  1,071
  1,125
  1,182
  1,242
  1,304
  1,370
  1,440
  1,512
  1,588
  1,667
  1,751
Total cash flow (excl. dividends), $m
  162
  110
  127
  145
  163
  180
  198
  216
  233
  251
  270
  289
  308
  328
  349
  370
  392
  415
  439
  464
  489
  516
  545
  574
  605
  637
  671
  706
  743
  782
  822
Retained Cash Flow (-), $m
  -59
  -338
  -355
  -371
  -388
  -406
  -425
  -444
  -465
  -487
  -510
  -534
  -560
  -586
  -614
  -644
  -675
  -708
  -743
  -779
  -817
  -857
  -899
  -944
  -990
  -1,039
  -1,091
  -1,145
  -1,202
  -1,261
  -1,324
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
 
  -228
  -228
  -226
  -225
  -226
  -227
  -229
  -232
  -236
  -240
  -245
  -252
  -258
  -266
  -274
  -283
  -293
  -304
  -315
  -328
  -341
  -355
  -370
  -385
  -402
  -420
  -439
  -459
  -480
  -502
Discount rate, %
 
  9.00
  9.45
  9.92
  10.42
  10.94
  11.49
  12.06
  12.66
  13.30
  13.96
  14.66
  15.39
  16.16
  16.97
  17.82
  18.71
  19.65
  20.63
  21.66
  22.74
  23.88
  25.07
  26.33
  27.64
  29.03
  30.48
  32.00
  33.60
  35.28
  37.05
PV of cash for distribution, $m
 
  -209
  -191
  -170
  -152
  -134
  -118
  -103
  -89
  -77
  -65
  -55
  -45
  -37
  -30
  -23
  -18
  -14
  -10
  -8
  -5
  -4
  -3
  -2
  -1
  -1
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  85.5
  72.7
  61.7
  52.1
  44.0
  37.0
  31.1
  26.0
  21.8
  18.2
  15.1
  12.6
  10.5
  8.7
  7.2
  6.0
  5.0
  4.1
  3.4
  2.8
  2.3
  1.9
  1.6
  1.3
  1.1
  0.9
  0.7
  0.6
  0.5
  0.4

Artis Real Estate Investment Trust operates as a closed-end real estate investment trust in Canada. It engages in the acquisition and operation of commercial/retail and light-industrial properties in western Canada. The company, formerly known as Westfield Real Estate Investment Trust, was founded in 2003 and is based in Winnipeg, Manitoba.

FINANCIAL RATIOS  of  Artis Real Estate Investment Trust (AX-UN)

Valuation Ratios
P/E Ratio 17.1
Price to Sales 3.6
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow 7.9
Price to Free Cash Flow 11.6
Growth Rates
Sales Growth Rate 2.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 39%
Cap. Spend. - 3 Yr. Gr. Rate 6.1%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 70%
Total Debt to Equity 104.2%
Interest Coverage 2
Management Effectiveness
Return On Assets 4.1%
Ret/ On Assets - 3 Yr. Avg. 2.9%
Return On Total Capital 2.2%
Ret/ On T. Cap. - 3 Yr. Avg. 0.9%
Return On Equity 4.5%
Return On Equity - 3 Yr. Avg. 1.8%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 61.2%
Gross Margin - 3 Yr. Avg. 61.9%
EBITDA Margin 41.3%
EBITDA Margin - 3 Yr. Avg. 30.3%
Operating Margin 21.1%
Oper. Margin - 3 Yr. Avg. 9.3%
Pre-Tax Margin 21.3%
Pre-Tax Margin - 3 Yr. Avg. 9.3%
Net Profit Margin 21.1%
Net Profit Margin - 3 Yr. Avg. 9.3%
Effective Tax Rate 0.9%
Eff/ Tax Rate - 3 Yr. Avg. 0.3%
Payout Ratio 153.4%

AX-UN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AX-UN stock intrinsic value calculation we used $549 million for the last fiscal year's total revenue generated by Artis Real Estate Investment Trust. The default revenue input number comes from 2016 income statement of Artis Real Estate Investment Trust. 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 AX-UN 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 9%, whose default value for AX-UN is calculated based on our internal credit rating of Artis Real Estate Investment Trust, 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 Artis Real Estate Investment Trust.
    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 AX-UN stock the variable cost ratio is equal to 132.6%.

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 AX-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 3.9% for Artis Real Estate Investment Trust.

Corporate tax rate of 27% is the nominal tax rate for Artis Real Estate Investment Trust. 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 AX-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 AX-UN are equal to 0.6%.

Life of production assets of 3.5 years is the average useful life of capital assets used in Artis Real Estate Investment Trust 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 AX-UN is equal to 4.4%. 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 - $2627 million for Artis Real Estate Investment Trust - 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 150.986 million for Artis Real Estate Investment Trust 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 Artis Real Estate Investment Trust at the current share price and the inputted number of shares is $2.0 billion.

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Stock chart of AX-UN Financial statements of AX-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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