Intrinsic value of Amaya Inc. - AYA

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$24.00

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$24.00

 
Intrinsic value

$40.60

 
Up/down potential

+69%

 
Rating

str. buy

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

We calculate the intrinsic value of AYA 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 3.4

 

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, %
  7.80
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.43
  5.38
  5.34
  5.31
  5.28
  5.25
  5.23
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
  5.04
  5.04
Revenue, $m
  1,562
  1,653
  1,747
  1,846
  1,949
  2,057
  2,169
  2,287
  2,410
  2,539
  2,673
  2,815
  2,962
  3,117
  3,279
  3,449
  3,627
  3,814
  4,010
  4,215
  4,431
  4,656
  4,893
  5,142
  5,403
  5,676
  5,963
  6,265
  6,581
  6,913
  7,261
Variable operating expenses, $m
 
  1,318
  1,372
  1,428
  1,487
  1,548
  1,612
  1,679
  1,749
  1,822
  1,898
  1,600
  1,684
  1,772
  1,864
  1,960
  2,062
  2,168
  2,279
  2,396
  2,518
  2,647
  2,781
  2,922
  3,071
  3,226
  3,389
  3,561
  3,740
  3,929
  4,127
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
  1,164
  1,318
  1,372
  1,428
  1,487
  1,548
  1,612
  1,679
  1,749
  1,822
  1,898
  1,600
  1,684
  1,772
  1,864
  1,960
  2,062
  2,168
  2,279
  2,396
  2,518
  2,647
  2,781
  2,922
  3,071
  3,226
  3,389
  3,561
  3,740
  3,929
  4,127
Operating income, $m
  398
  334
  375
  418
  462
  509
  557
  608
  661
  717
  775
  1,215
  1,279
  1,345
  1,415
  1,489
  1,566
  1,646
  1,731
  1,819
  1,912
  2,010
  2,112
  2,219
  2,332
  2,450
  2,574
  2,704
  2,840
  2,984
  3,134
EBITDA, $m
  579
  801
  847
  895
  945
  997
  1,052
  1,109
  1,169
  1,231
  1,296
  1,365
  1,436
  1,512
  1,590
  1,673
  1,759
  1,850
  1,944
  2,044
  2,148
  2,258
  2,373
  2,493
  2,620
  2,752
  2,892
  3,038
  3,191
  3,352
  3,521
Interest expense (income), $m
  177
  170
  183
  197
  212
  227
  243
  259
  277
  295
  314
  334
  354
  376
  399
  423
  448
  474
  501
  530
  560
  592
  625
  660
  697
  735
  775
  818
  862
  908
  957
Earnings before tax, $m
  189
  164
  192
  220
  250
  282
  314
  349
  384
  422
  461
  881
  924
  969
  1,017
  1,066
  1,118
  1,172
  1,229
  1,289
  1,352
  1,418
  1,487
  1,559
  1,635
  1,715
  1,799
  1,886
  1,979
  2,075
  2,177
Tax expense, $m
  6
  44
  52
  59
  68
  76
  85
  94
  104
  114
  125
  238
  250
  262
  274
  288
  302
  317
  332
  348
  365
  383
  401
  421
  442
  463
  486
  509
  534
  560
  588
Net income, $m
  184
  120
  140
  161
  183
  206
  229
  254
  281
  308
  337
  643
  675
  708
  742
  778
  816
  856
  897
  941
  987
  1,035
  1,085
  1,138
  1,194
  1,252
  1,313
  1,377
  1,444
  1,515
  1,589

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  751
  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
  7,380
  7,003
  7,403
  7,821
  8,258
  8,714
  9,191
  9,690
  10,211
  10,757
  11,328
  11,926
  12,552
  13,208
  13,896
  14,616
  15,371
  16,162
  16,992
  17,862
  18,774
  19,731
  20,735
  21,788
  22,893
  24,052
  25,268
  26,545
  27,884
  29,290
  30,766
Adjusted assets (=assets-cash), $m
  6,629
  7,003
  7,403
  7,821
  8,258
  8,714
  9,191
  9,690
  10,211
  10,757
  11,328
  11,926
  12,552
  13,208
  13,896
  14,616
  15,371
  16,162
  16,992
  17,862
  18,774
  19,731
  20,735
  21,788
  22,893
  24,052
  25,268
  26,545
  27,884
  29,290
  30,766
Revenue / Adjusted assets
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
Average production assets, $m
  2,497
  2,641
  2,792
  2,950
  3,114
  3,286
  3,466
  3,654
  3,851
  4,057
  4,272
  4,498
  4,734
  4,981
  5,240
  5,512
  5,797
  6,095
  6,408
  6,736
  7,080
  7,441
  7,820
  8,217
  8,633
  9,071
  9,529
  10,011
  10,516
  11,046
  11,603
Working capital, $m
  -213
  -952
  -1,006
  -1,063
  -1,123
  -1,185
  -1,249
  -1,317
  -1,388
  -1,462
  -1,540
  -1,621
  -1,706
  -1,795
  -1,889
  -1,987
  -2,089
  -2,197
  -2,310
  -2,428
  -2,552
  -2,682
  -2,819
  -2,962
  -3,112
  -3,270
  -3,435
  -3,608
  -3,790
  -3,982
  -4,182
Total debt, $m
  3,281
  3,462
  3,724
  3,998
  4,284
  4,583
  4,895
  5,222
  5,563
  5,921
  6,295
  6,687
  7,097
  7,526
  7,977
  8,448
  8,943
  9,461
  10,005
  10,574
  11,172
  11,799
  12,456
  13,146
  13,870
  14,629
  15,426
  16,262
  17,139
  18,060
  19,027
Total liabilities, $m
  4,407
  4,587
  4,849
  5,123
  5,409
  5,708
  6,020
  6,347
  6,688
  7,046
  7,420
  7,812
  8,222
  8,651
  9,102
  9,573
  10,068
  10,586
  11,130
  11,699
  12,297
  12,924
  13,581
  14,271
  14,995
  15,754
  16,551
  17,387
  18,264
  19,185
  20,152
Total equity, $m
  2,974
  2,416
  2,554
  2,698
  2,849
  3,006
  3,171
  3,343
  3,523
  3,711
  3,908
  4,114
  4,331
  4,557
  4,794
  5,042
  5,303
  5,576
  5,862
  6,162
  6,477
  6,807
  7,153
  7,517
  7,898
  8,298
  8,718
  9,158
  9,620
  10,105
  10,614
Total liabilities and equity, $m
  7,381
  7,003
  7,403
  7,821
  8,258
  8,714
  9,191
  9,690
  10,211
  10,757
  11,328
  11,926
  12,553
  13,208
  13,896
  14,615
  15,371
  16,162
  16,992
  17,861
  18,774
  19,731
  20,734
  21,788
  22,893
  24,052
  25,269
  26,545
  27,884
  29,290
  30,766
Debt-to-equity ratio
  1.103
  1.430
  1.460
  1.480
  1.500
  1.520
  1.540
  1.560
  1.580
  1.600
  1.610
  1.630
  1.640
  1.650
  1.660
  1.680
  1.690
  1.700
  1.710
  1.720
  1.720
  1.730
  1.740
  1.750
  1.760
  1.760
  1.770
  1.780
  1.780
  1.790
  1.790
Adjusted equity ratio
  0.335
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  184
  120
  140
  161
  183
  206
  229
  254
  281
  308
  337
  643
  675
  708
  742
  778
  816
  856
  897
  941
  987
  1,035
  1,085
  1,138
  1,194
  1,252
  1,313
  1,377
  1,444
  1,515
  1,589
Depreciation, amort., depletion, $m
  181
  467
  472
  477
  483
  489
  495
  501
  507
  514
  521
  150
  158
  166
  175
  184
  193
  203
  214
  225
  236
  248
  261
  274
  288
  302
  318
  334
  351
  368
  387
Funds from operations, $m
  332
  587
  612
  638
  666
  694
  724
  755
  788
  822
  858
  793
  833
  874
  917
  962
  1,009
  1,059
  1,111
  1,166
  1,223
  1,283
  1,346
  1,412
  1,482
  1,554
  1,631
  1,711
  1,795
  1,883
  1,976
Change in working capital, $m
  -141
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -71
  -74
  -78
  -81
  -85
  -89
  -93
  -98
  -103
  -108
  -113
  -118
  -124
  -130
  -136
  -143
  -150
  -158
  -165
  -174
  -182
  -191
  -201
Cash from operations, $m
  473
  554
  666
  695
  725
  756
  789
  823
  859
  896
  936
  875
  918
  963
  1,010
  1,060
  1,112
  1,167
  1,224
  1,284
  1,347
  1,413
  1,483
  1,555
  1,632
  1,712
  1,796
  1,884
  1,977
  2,074
  2,176
Maintenance CAPEX, $m
  0
  -83
  -88
  -93
  -98
  -104
  -110
  -116
  -122
  -128
  -135
  -142
  -150
  -158
  -166
  -175
  -184
  -193
  -203
  -214
  -225
  -236
  -248
  -261
  -274
  -288
  -302
  -318
  -334
  -351
  -368
New CAPEX, $m
  -20
  -144
  -151
  -158
  -165
  -172
  -180
  -188
  -197
  -206
  -215
  -226
  -236
  -247
  -259
  -272
  -285
  -298
  -313
  -328
  -344
  -361
  -379
  -397
  -417
  -437
  -459
  -481
  -505
  -530
  -556
Cash from investing activities, $m
  39
  -227
  -239
  -251
  -263
  -276
  -290
  -304
  -319
  -334
  -350
  -368
  -386
  -405
  -425
  -447
  -469
  -491
  -516
  -542
  -569
  -597
  -627
  -658
  -691
  -725
  -761
  -799
  -839
  -881
  -924
Free cash flow, $m
  512
  327
  427
  444
  462
  480
  499
  519
  540
  562
  585
  507
  532
  558
  585
  614
  644
  675
  708
  742
  778
  816
  856
  898
  941
  987
  1,035
  1,085
  1,138
  1,194
  1,252
Issuance/(repayment) of debt, $m
  -333
  246
  262
  274
  286
  299
  312
  327
  342
  357
  374
  392
  410
  430
  450
  472
  494
  518
  543
  570
  598
  627
  658
  690
  724
  759
  797
  836
  877
  921
  966
Issuance/(repurchase) of shares, $m
  3
  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  
  -507
  246
  262
  274
  286
  299
  312
  327
  342
  357
  374
  392
  410
  430
  450
  472
  494
  518
  543
  570
  598
  627
  658
  690
  724
  759
  797
  836
  877
  921
  966
Total cash flow (excl. dividends), $m
  -9
  572
  690
  718
  748
  779
  812
  846
  882
  920
  959
  898
  942
  987
  1,035
  1,085
  1,138
  1,193
  1,251
  1,312
  1,376
  1,443
  1,513
  1,587
  1,665
  1,746
  1,832
  1,921
  2,016
  2,114
  2,218
Retained Cash Flow (-), $m
  -247
  -128
  -138
  -144
  -151
  -157
  -165
  -172
  -180
  -188
  -197
  -206
  -216
  -226
  -237
  -248
  -260
  -273
  -286
  -300
  -315
  -330
  -346
  -363
  -381
  -400
  -420
  -440
  -462
  -485
  -509
Prev. year cash balance distribution, $m
 
  686
  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
 
  1,131
  552
  574
  597
  622
  647
  674
  702
  731
  762
  692
  726
  761
  798
  837
  878
  920
  965
  1,012
  1,061
  1,113
  1,167
  1,224
  1,284
  1,346
  1,412
  1,481
  1,553
  1,629
  1,709
Discount rate, %
 
  6.90
  7.25
  7.61
  7.99
  8.39
  8.81
  9.25
  9.71
  10.19
  10.70
  11.24
  11.80
  12.39
  13.01
  13.66
  14.34
  15.06
  15.81
  16.61
  17.44
  18.31
  19.22
  20.18
  21.19
  22.25
  23.37
  24.53
  25.76
  27.05
  28.40
PV of cash for distribution, $m
 
  1,058
  480
  461
  439
  416
  390
  363
  335
  305
  276
  214
  190
  167
  144
  123
  103
  85
  69
  55
  43
  33
  24
  18
  13
  9
  6
  4
  3
  2
  1
Current shareholders' claim on cash, %
  100
  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

Amaya Inc. provides technology-based products and services to the global gaming and interactive entertainment industries. The company operates through two segments, Real-Money Online Poker, and Real-Money Online Casino and Sportsbook. It owns and operates gaming and related interactive entertainment businesses under the PokerStars, Full Tilt, BetStars, StarsDraft, European Poker Tour, PokerStars Caribbean Adventure, LatinAmerican Poker Tour, and Asia Pacific Poker Tour brand names. The company was formerly known as Amaya Gaming Group Inc. and changed its name to Amaya, Inc. in December 2014. Amaya, Inc. was founded in 2004 and is headquartered in Montréal, Canada.

FINANCIAL RATIOS  of  Amaya Inc. (AYA)

Valuation Ratios
P/E Ratio 18.9
Price to Sales 2.2
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 7.4
Price to Free Cash Flow 7.7
Growth Rates
Sales Growth Rate 7.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -28.6%
Cap. Spend. - 3 Yr. Gr. Rate -11.6%
Financial Strength
Quick Ratio 12
Current Ratio 0
LT Debt to Equity 108.1%
Total Debt to Equity 110.3%
Interest Coverage 2
Management Effectiveness
Return On Assets 4.7%
Ret/ On Assets - 3 Yr. Avg. 7.4%
Return On Total Capital 3%
Ret/ On T. Cap. - 3 Yr. Avg. 2.5%
Return On Equity 6.5%
Return On Equity - 3 Yr. Avg. 5.8%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 35%
EBITDA Margin - 3 Yr. Avg. 37.3%
Operating Margin 25.5%
Oper. Margin - 3 Yr. Avg. 23.3%
Pre-Tax Margin 12.1%
Pre-Tax Margin - 3 Yr. Avg. 9.3%
Net Profit Margin 11.8%
Net Profit Margin - 3 Yr. Avg. 10%
Effective Tax Rate 3.2%
Eff/ Tax Rate - 3 Yr. Avg. -81%
Payout Ratio 0%

AYA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AYA stock intrinsic value calculation we used $1562 million for the last fiscal year's total revenue generated by Amaya Inc.. The default revenue input number comes from 2016 income statement of Amaya 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 AYA stock valuation model: a) initial revenue growth rate of 5.8% 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 6.9%, whose default value for AYA is calculated based on our internal credit rating of Amaya 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 Amaya 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 AYA stock the variable cost ratio is equal to 81.1%.

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 AYA 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 5.3% for Amaya Inc..

Corporate tax rate of 27% is the nominal tax rate for Amaya 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 AYA 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 AYA are equal to 159.8%.

Life of production assets of 34.8 years is the average useful life of capital assets used in Amaya 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 AYA is equal to -57.6%. 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 - $2974 million for Amaya 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 143.492 million for Amaya 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 Amaya Inc. at the current share price and the inputted number of shares is $3.4 billion.


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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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