Intrinsic value of Changfeng Energy Inc. - CFY

Previous Close

$0.57

  Intrinsic Value

$69.69

stock screener

  Rating & Target

str. buy

+999%

  Value-price divergence*

0%

Previous close

$0.57

 
Intrinsic value

$69.69

 
Up/down potential

+999%

 
Rating

str. buy

 
Value-price divergence*

0%

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

We calculate the intrinsic value of CFY 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 0.0

 

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, %
  16.07
  24.40
  22.46
  20.71
  19.14
  17.73
  16.46
  15.31
  14.28
  13.35
  12.52
  11.76
  11.09
  10.48
  9.93
  9.44
  8.99
  8.59
  8.24
  7.91
  7.62
  7.36
  7.12
  6.91
  6.72
  6.55
  6.39
  6.25
  6.13
  6.02
  5.91
Revenue, $m
  354
  440
  539
  651
  776
  913
  1,063
  1,226
  1,401
  1,588
  1,787
  1,997
  2,219
  2,451
  2,695
  2,949
  3,214
  3,491
  3,778
  4,077
  4,388
  4,711
  5,046
  5,395
  5,757
  6,134
  6,527
  6,935
  7,360
  7,802
  8,264
Variable operating expenses, $m
 
  350
  428
  517
  616
  725
  844
  974
  1,113
  1,261
  1,419
  1,586
  1,762
  1,946
  2,140
  2,342
  2,552
  2,772
  3,000
  3,237
  3,484
  3,740
  4,007
  4,284
  4,571
  4,871
  5,182
  5,506
  5,844
  6,195
  6,561
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
  298
  350
  428
  517
  616
  725
  844
  974
  1,113
  1,261
  1,419
  1,586
  1,762
  1,946
  2,140
  2,342
  2,552
  2,772
  3,000
  3,237
  3,484
  3,740
  4,007
  4,284
  4,571
  4,871
  5,182
  5,506
  5,844
  6,195
  6,561
Operating income, $m
  56
  91
  111
  134
  160
  188
  219
  253
  289
  327
  368
  411
  457
  505
  555
  608
  662
  719
  778
  840
  904
  970
  1,040
  1,111
  1,186
  1,264
  1,344
  1,429
  1,516
  1,607
  1,702
EBITDA, $m
  73
  91
  112
  135
  161
  190
  221
  255
  291
  330
  371
  415
  461
  509
  559
  612
  667
  725
  784
  846
  911
  978
  1,048
  1,120
  1,195
  1,273
  1,355
  1,440
  1,528
  1,620
  1,716
Interest expense (income), $m
  9
  7
  11
  16
  22
  29
  36
  44
  53
  62
  72
  83
  94
  106
  118
  131
  144
  158
  173
  188
  204
  221
  238
  256
  274
  293
  313
  334
  356
  379
  402
Earnings before tax, $m
  45
  84
  100
  118
  137
  159
  183
  208
  236
  265
  296
  329
  363
  399
  437
  477
  518
  561
  605
  651
  700
  750
  802
  856
  912
  970
  1,031
  1,094
  1,160
  1,229
  1,300
Tax expense, $m
  24
  23
  27
  32
  37
  43
  49
  56
  64
  72
  80
  89
  98
  108
  118
  129
  140
  151
  163
  176
  189
  202
  216
  231
  246
  262
  278
  295
  313
  332
  351
Net income, $m
  20
  61
  73
  86
  100
  116
  133
  152
  172
  193
  216
  240
  265
  292
  319
  348
  378
  409
  442
  476
  511
  547
  585
  625
  666
  708
  753
  799
  847
  897
  949

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  142
  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
  627
  603
  739
  892
  1,062
  1,251
  1,457
  1,680
  1,920
  2,176
  2,448
  2,736
  3,040
  3,358
  3,692
  4,040
  4,403
  4,782
  5,176
  5,585
  6,011
  6,453
  6,913
  7,390
  7,887
  8,403
  8,940
  9,499
  10,082
  10,688
  11,320
Adjusted assets (=assets-cash), $m
  485
  603
  739
  892
  1,062
  1,251
  1,457
  1,680
  1,920
  2,176
  2,448
  2,736
  3,040
  3,358
  3,692
  4,040
  4,403
  4,782
  5,176
  5,585
  6,011
  6,453
  6,913
  7,390
  7,887
  8,403
  8,940
  9,499
  10,082
  10,688
  11,320
Revenue / Adjusted assets
  0.730
  0.730
  0.729
  0.730
  0.731
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
Average production assets, $m
  3
  4
  4
  5
  6
  7
  9
  10
  11
  13
  14
  16
  18
  20
  22
  24
  26
  28
  30
  33
  35
  38
  40
  43
  46
  49
  52
  55
  59
  62
  66
Working capital, $m
  -80
  -192
  -235
  -283
  -337
  -397
  -463
  -533
  -610
  -691
  -777
  -869
  -965
  -1,066
  -1,172
  -1,283
  -1,398
  -1,518
  -1,643
  -1,774
  -1,909
  -2,049
  -2,195
  -2,347
  -2,504
  -2,668
  -2,839
  -3,017
  -3,201
  -3,394
  -3,595
Total debt, $m
  201
  225
  330
  448
  580
  726
  886
  1,059
  1,245
  1,443
  1,654
  1,878
  2,113
  2,359
  2,618
  2,888
  3,170
  3,463
  3,768
  4,085
  4,415
  4,758
  5,114
  5,484
  5,869
  6,269
  6,686
  7,119
  7,570
  8,040
  8,530
Total liabilities, $m
  444
  468
  573
  691
  823
  969
  1,129
  1,302
  1,488
  1,686
  1,897
  2,121
  2,356
  2,602
  2,861
  3,131
  3,413
  3,706
  4,011
  4,328
  4,658
  5,001
  5,357
  5,727
  6,112
  6,512
  6,929
  7,362
  7,813
  8,283
  8,773
Total equity, $m
  183
  136
  166
  201
  239
  281
  328
  378
  432
  490
  551
  616
  684
  756
  831
  909
  991
  1,076
  1,164
  1,257
  1,352
  1,452
  1,555
  1,663
  1,775
  1,891
  2,012
  2,137
  2,268
  2,405
  2,547
Total liabilities and equity, $m
  627
  604
  739
  892
  1,062
  1,250
  1,457
  1,680
  1,920
  2,176
  2,448
  2,737
  3,040
  3,358
  3,692
  4,040
  4,404
  4,782
  5,175
  5,585
  6,010
  6,453
  6,912
  7,390
  7,887
  8,403
  8,941
  9,499
  10,081
  10,688
  11,320
Debt-to-equity ratio
  1.098
  1.650
  1.980
  2.230
  2.430
  2.580
  2.700
  2.800
  2.880
  2.950
  3.000
  3.050
  3.090
  3.120
  3.150
  3.180
  3.200
  3.220
  3.240
  3.250
  3.260
  3.280
  3.290
  3.300
  3.310
  3.320
  3.320
  3.330
  3.340
  3.340
  3.350
Adjusted equity ratio
  0.167
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  20
  61
  73
  86
  100
  116
  133
  152
  172
  193
  216
  240
  265
  292
  319
  348
  378
  409
  442
  476
  511
  547
  585
  625
  666
  708
  753
  799
  847
  897
  949
Depreciation, amort., depletion, $m
  17
  1
  1
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
Funds from operations, $m
  60
  62
  74
  87
  102
  118
  135
  154
  174
  196
  219
  243
  269
  295
  323
  353
  383
  415
  448
  482
  518
  555
  593
  633
  675
  718
  763
  810
  859
  909
  962
Change in working capital, $m
  -10
  -38
  -43
  -49
  -54
  -60
  -65
  -71
  -76
  -81
  -86
  -91
  -96
  -101
  -106
  -111
  -115
  -120
  -125
  -130
  -135
  -140
  -146
  -152
  -158
  -164
  -171
  -178
  -185
  -193
  -201
Cash from operations, $m
  70
  100
  117
  136
  156
  177
  200
  225
  250
  277
  305
  335
  365
  397
  429
  463
  499
  535
  573
  612
  653
  695
  739
  785
  833
  882
  934
  987
  1,044
  1,102
  1,163
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
New CAPEX, $m
  -46
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
Cash from investing activities, $m
  -34
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -16
  -16
Free cash flow, $m
  36
  99
  115
  134
  154
  175
  198
  222
  247
  274
  301
  330
  360
  391
  423
  457
  492
  528
  565
  604
  644
  686
  729
  774
  821
  870
  921
  974
  1,029
  1,087
  1,147
Issuance/(repayment) of debt, $m
  42
  92
  105
  119
  132
  146
  160
  173
  186
  199
  211
  223
  235
  247
  258
  270
  282
  293
  305
  317
  330
  343
  356
  370
  385
  400
  416
  433
  451
  470
  490
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
  0
Cash from financing (excl. dividends), $m  
  40
  92
  105
  119
  132
  146
  160
  173
  186
  199
  211
  223
  235
  247
  258
  270
  282
  293
  305
  317
  330
  343
  356
  370
  385
  400
  416
  433
  451
  470
  490
Total cash flow (excl. dividends), $m
  76
  190
  220
  252
  286
  321
  357
  395
  433
  472
  512
  553
  595
  638
  682
  727
  773
  821
  870
  921
  974
  1,028
  1,085
  1,144
  1,206
  1,270
  1,337
  1,407
  1,480
  1,557
  1,637
Retained Cash Flow (-), $m
  -19
  -27
  -30
  -34
  -38
  -42
  -46
  -50
  -54
  -58
  -61
  -65
  -68
  -72
  -75
  -78
  -82
  -85
  -89
  -92
  -96
  -100
  -103
  -107
  -112
  -116
  -121
  -126
  -131
  -136
  -142
Prev. year cash balance distribution, $m
 
  74
  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
 
  237
  190
  218
  248
  279
  311
  344
  379
  415
  451
  488
  527
  566
  607
  649
  692
  736
  782
  829
  878
  929
  982
  1,037
  1,094
  1,154
  1,216
  1,281
  1,349
  1,420
  1,495
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
 
  228
  174
  190
  204
  216
  226
  233
  237
  238
  236
  232
  225
  215
  204
  190
  176
  160
  144
  128
  112
  96
  81
  68
  56
  45
  35
  27
  21
  16
  11
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

Changfeng Energy Inc. (Changfeng) is a natural gas distribution company in the People's Republic of China. The Company has approximately three projects in operation, which include approximately two city piped natural gas distribution projects and a compressed natural gas (CNG) vehicle refueling station. The Company has two segments: Natural Gas Distribution Utility and CNG Refueling Retail Station. The Natural Gas Distribution segment consists of gas pipeline installation and connection, and piped gas sales. Changfeng operates a CNG refueling retail station in Changsha City. The Company sells natural gas to approximately 10 industrial customers in the Park. It is engaged in installing and connecting services, and distribution of natural gas through its pipeline networks in Sanya City, Hainan Province, China. It serves over 169,270 residential and approximately 830 commercial and industrial customers, including hotels and restaurants in Sanya City, Hainan Province, China.

FINANCIAL RATIOS  of  Changfeng Energy Inc. (CFY)

Valuation Ratios
P/E Ratio 1.8
Price to Sales 0.1
Price to Book 0.2
Price to Tangible Book
Price to Cash Flow 0.5
Price to Free Cash Flow 1.5
Growth Rates
Sales Growth Rate 16.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -1.3%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 72.7%
Total Debt to Equity 109.8%
Interest Coverage 6
Management Effectiveness
Return On Assets 4.1%
Ret/ On Assets - 3 Yr. Avg. 5.8%
Return On Total Capital 5.7%
Ret/ On T. Cap. - 3 Yr. Avg. 8.1%
Return On Equity 11.5%
Return On Equity - 3 Yr. Avg. 17.3%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 20.1%
EBITDA Margin - 3 Yr. Avg. 24.6%
Operating Margin 15.8%
Oper. Margin - 3 Yr. Avg. 18.1%
Pre-Tax Margin 12.7%
Pre-Tax Margin - 3 Yr. Avg. 15.4%
Net Profit Margin 5.6%
Net Profit Margin - 3 Yr. Avg. 8%
Effective Tax Rate 53.3%
Eff/ Tax Rate - 3 Yr. Avg. 46.7%
Payout Ratio 0%

CFY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CFY stock intrinsic value calculation we used $354 million for the last fiscal year's total revenue generated by Changfeng Energy Inc.. The default revenue input number comes from 2016 income statement of Changfeng Energy 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 CFY stock valuation model: a) initial revenue growth rate of 24.4% 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 CFY is calculated based on our internal credit rating of Changfeng Energy 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 Changfeng Energy 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 CFY stock the variable cost ratio is equal to 79.4%.

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 CFY 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% for Changfeng Energy Inc..

Corporate tax rate of 27% is the nominal tax rate for Changfeng Energy 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 CFY 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 CFY are equal to 0.8%.

Life of production assets of 0.2 years is the average useful life of capital assets used in Changfeng Energy 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 CFY is equal to -43.5%. 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 - $183 million for Changfeng Energy 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 63.8 million for Changfeng Energy 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 Changfeng Energy Inc. at the current share price and the inputted number of shares is $0.0 billion.

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Financial statements of CFY
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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