Intrinsic value of Cineplex Inc. - CGX

Previous Close

$50.09

  Intrinsic Value

$39.90

stock screener

  Rating & Target

sell

-20%

  Value-price divergence*

+218%

Previous close

$50.09

 
Intrinsic value

$39.90

 
Up/down potential

-20%

 
Rating

sell

 
Value-price divergence*

+218%

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

We calculate the intrinsic value of CGX 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, %
  7.80
  4.00
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.69
  4.72
  4.75
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
Revenue, $m
  1,478
  1,537
  1,600
  1,667
  1,738
  1,814
  1,894
  1,979
  2,068
  2,162
  2,262
  2,367
  2,478
  2,595
  2,718
  2,848
  2,985
  3,128
  3,280
  3,439
  3,606
  3,782
  3,967
  4,161
  4,366
  4,580
  4,806
  5,043
  5,293
  5,555
  5,830
Variable operating expenses, $m
 
  1,349
  1,401
  1,457
  1,515
  1,578
  1,644
  1,714
  1,787
  1,865
  1,948
  1,953
  2,045
  2,141
  2,243
  2,350
  2,462
  2,581
  2,706
  2,837
  2,975
  3,120
  3,273
  3,433
  3,602
  3,779
  3,965
  4,161
  4,366
  4,582
  4,809
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
  1,352
  1,349
  1,401
  1,457
  1,515
  1,578
  1,644
  1,714
  1,787
  1,865
  1,948
  1,953
  2,045
  2,141
  2,243
  2,350
  2,462
  2,581
  2,706
  2,837
  2,975
  3,120
  3,273
  3,433
  3,602
  3,779
  3,965
  4,161
  4,366
  4,582
  4,809
Operating income, $m
  127
  188
  199
  210
  223
  236
  250
  265
  281
  297
  315
  414
  434
  454
  476
  498
  522
  547
  574
  602
  631
  662
  694
  728
  764
  802
  841
  883
  926
  972
  1,020
EBITDA, $m
  233
  319
  332
  346
  361
  377
  393
  411
  430
  449
  470
  492
  515
  539
  565
  592
  620
  650
  681
  714
  749
  786
  824
  864
  907
  951
  998
  1,048
  1,099
  1,154
  1,211
Interest expense (income), $m
  14
  15
  17
  18
  20
  22
  23
  25
  27
  30
  32
  34
  37
  40
  42
  45
  49
  52
  55
  59
  63
  67
  71
  76
  81
  86
  91
  96
  102
  108
  115
Earnings before tax, $m
  109
  173
  182
  192
  203
  215
  227
  240
  253
  268
  283
  380
  397
  415
  433
  453
  474
  496
  518
  543
  568
  595
  623
  652
  683
  716
  750
  786
  824
  864
  905
Tax expense, $m
  31
  47
  49
  52
  55
  58
  61
  65
  68
  72
  76
  103
  107
  112
  117
  122
  128
  134
  140
  147
  153
  161
  168
  176
  184
  193
  203
  212
  222
  233
  244
Net income, $m
  80
  126
  133
  140
  148
  157
  166
  175
  185
  195
  206
  277
  290
  303
  316
  331
  346
  362
  378
  396
  415
  434
  455
  476
  499
  523
  548
  574
  601
  631
  661

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  34
  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
  1,728
  1,763
  1,835
  1,912
  1,994
  2,080
  2,172
  2,269
  2,372
  2,480
  2,594
  2,715
  2,842
  2,976
  3,118
  3,266
  3,423
  3,588
  3,761
  3,943
  4,135
  4,337
  4,549
  4,772
  5,007
  5,253
  5,512
  5,784
  6,070
  6,370
  6,685
Adjusted assets (=assets-cash), $m
  1,694
  1,763
  1,835
  1,912
  1,994
  2,080
  2,172
  2,269
  2,372
  2,480
  2,594
  2,715
  2,842
  2,976
  3,118
  3,266
  3,423
  3,588
  3,761
  3,943
  4,135
  4,337
  4,549
  4,772
  5,007
  5,253
  5,512
  5,784
  6,070
  6,370
  6,685
Revenue / Adjusted assets
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
  0.872
Average production assets, $m
  678
  704
  733
  764
  796
  831
  867
  906
  947
  990
  1,036
  1,084
  1,135
  1,189
  1,245
  1,304
  1,367
  1,433
  1,502
  1,575
  1,652
  1,732
  1,817
  1,906
  1,999
  2,098
  2,201
  2,310
  2,424
  2,544
  2,670
Working capital, $m
  -220
  -261
  -272
  -283
  -296
  -308
  -322
  -336
  -352
  -368
  -385
  -402
  -421
  -441
  -462
  -484
  -507
  -532
  -558
  -585
  -613
  -643
  -674
  -707
  -742
  -779
  -817
  -857
  -900
  -944
  -991
Total debt, $m
  412
  448
  490
  534
  581
  631
  684
  740
  799
  861
  927
  997
  1,070
  1,147
  1,229
  1,314
  1,405
  1,499
  1,599
  1,704
  1,815
  1,931
  2,053
  2,182
  2,317
  2,459
  2,608
  2,764
  2,929
  3,102
  3,284
Total liabilities, $m
  979
  1,015
  1,057
  1,101
  1,148
  1,198
  1,251
  1,307
  1,366
  1,428
  1,494
  1,564
  1,637
  1,714
  1,796
  1,881
  1,972
  2,066
  2,166
  2,271
  2,382
  2,498
  2,620
  2,749
  2,884
  3,026
  3,175
  3,331
  3,496
  3,669
  3,851
Total equity, $m
  749
  747
  778
  811
  845
  882
  921
  962
  1,006
  1,051
  1,100
  1,151
  1,205
  1,262
  1,322
  1,385
  1,451
  1,521
  1,595
  1,672
  1,753
  1,839
  1,929
  2,023
  2,123
  2,227
  2,337
  2,452
  2,573
  2,701
  2,835
Total liabilities and equity, $m
  1,728
  1,762
  1,835
  1,912
  1,993
  2,080
  2,172
  2,269
  2,372
  2,479
  2,594
  2,715
  2,842
  2,976
  3,118
  3,266
  3,423
  3,587
  3,761
  3,943
  4,135
  4,337
  4,549
  4,772
  5,007
  5,253
  5,512
  5,783
  6,069
  6,370
  6,686
Debt-to-equity ratio
  0.550
  0.600
  0.630
  0.660
  0.690
  0.720
  0.740
  0.770
  0.790
  0.820
  0.840
  0.870
  0.890
  0.910
  0.930
  0.950
  0.970
  0.990
  1.000
  1.020
  1.040
  1.050
  1.060
  1.080
  1.090
  1.100
  1.120
  1.130
  1.140
  1.150
  1.160
Adjusted equity ratio
  0.422
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  80
  126
  133
  140
  148
  157
  166
  175
  185
  195
  206
  277
  290
  303
  316
  331
  346
  362
  378
  396
  415
  434
  455
  476
  499
  523
  548
  574
  601
  631
  661
Depreciation, amort., depletion, $m
  106
  132
  134
  136
  138
  141
  143
  146
  149
  152
  155
  77
  81
  85
  89
  93
  98
  102
  107
  112
  118
  124
  130
  136
  143
  150
  157
  165
  173
  182
  191
Funds from operations, $m
  148
  258
  267
  276
  286
  297
  309
  321
  334
  347
  362
  355
  371
  388
  405
  424
  443
  464
  486
  509
  533
  558
  584
  612
  642
  672
  705
  739
  775
  812
  852
Change in working capital, $m
  -18
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -33
  -35
  -37
  -38
  -40
  -42
  -45
  -47
Cash from operations, $m
  166
  268
  277
  288
  299
  310
  322
  335
  349
  363
  379
  373
  390
  407
  426
  446
  467
  489
  511
  536
  561
  588
  616
  645
  676
  709
  743
  779
  817
  857
  898
Maintenance CAPEX, $m
  0
  -48
  -50
  -52
  -55
  -57
  -59
  -62
  -65
  -68
  -71
  -74
  -77
  -81
  -85
  -89
  -93
  -98
  -102
  -107
  -112
  -118
  -124
  -130
  -136
  -143
  -150
  -157
  -165
  -173
  -182
New CAPEX, $m
  -106
  -27
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -51
  -54
  -56
  -59
  -63
  -66
  -69
  -73
  -77
  -81
  -85
  -89
  -94
  -98
  -103
  -109
  -114
  -120
  -126
Cash from investing activities, $m
  -135
  -75
  -79
  -83
  -88
  -92
  -96
  -101
  -106
  -111
  -117
  -122
  -128
  -135
  -141
  -148
  -156
  -164
  -171
  -180
  -189
  -199
  -209
  -219
  -230
  -241
  -253
  -266
  -279
  -293
  -308
Free cash flow, $m
  31
  193
  198
  205
  211
  219
  226
  235
  243
  253
  262
  251
  261
  273
  285
  298
  311
  325
  340
  356
  372
  389
  407
  427
  447
  468
  490
  513
  538
  564
  591
Issuance/(repayment) of debt, $m
  70
  39
  42
  44
  47
  50
  53
  56
  59
  62
  66
  70
  73
  77
  81
  86
  90
  95
  100
  105
  111
  116
  122
  128
  135
  142
  149
  157
  165
  173
  182
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  
  68
  39
  42
  44
  47
  50
  53
  56
  59
  62
  66
  70
  73
  77
  81
  86
  90
  95
  100
  105
  111
  116
  122
  128
  135
  142
  149
  157
  165
  173
  182
Total cash flow (excl. dividends), $m
  99
  232
  240
  249
  258
  269
  279
  291
  302
  315
  328
  320
  335
  350
  366
  383
  401
  420
  440
  461
  482
  505
  530
  555
  582
  610
  639
  670
  703
  737
  772
Retained Cash Flow (-), $m
  18
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -44
  -46
  -49
  -51
  -54
  -57
  -60
  -63
  -66
  -70
  -74
  -77
  -81
  -86
  -90
  -95
  -99
  -104
  -110
  -115
  -121
  -127
  -134
Prev. year cash balance distribution, $m
 
  31
  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
 
  234
  209
  216
  224
  232
  240
  249
  259
  269
  280
  269
  281
  293
  306
  320
  335
  350
  366
  383
  401
  420
  440
  460
  482
  505
  529
  555
  581
  609
  639
Discount rate, %
 
  5.10
  5.36
  5.62
  5.90
  6.20
  6.51
  6.83
  7.18
  7.54
  7.91
  8.31
  8.72
  9.16
  9.62
  10.10
  10.60
  11.13
  11.69
  12.27
  12.89
  13.53
  14.21
  14.92
  15.66
  16.45
  17.27
  18.13
  19.04
  19.99
  20.99
PV of cash for distribution, $m
 
  222
  188
  184
  178
  172
  165
  157
  149
  140
  131
  112
  103
  94
  85
  76
  67
  58
  50
  42
  36
  29
  24
  19
  15
  11
  8
  6
  4
  3
  2
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

Cineplex Inc. operates motion picture theatre circuits in Canada. It operates through two segments, Exhibition and Media. The company engages in various businesses, including theatrical exhibition, food services, gaming, alternative programming, Cineplex digital solutions, and the online sale of home entertainment content through CineplexStore.com and on apps embedded in various electronic devices. It also offers pre-show, show time, magazine, and lobby advertising services; and designs, installs, and operates digital signage networks. The company operates theatres under the Cineplex Odeon, SilverCity, Galaxy Cinemas, Colossus, Coliseum, Scotiabank Theatres, Cineplex Cinemas, Cineplex VIP Cinemas, Famous Players, and Cinema City, as well as the UltraAVX, Poptopia, and Outtakes brands. As of July 7, 2016, the company operated 162 theatres with 1,659 screens. Cineplex Inc. was founded in 2003 and is headquartered in Toronto, Canada.

FINANCIAL RATIOS  of  Cineplex Inc. (CGX)

Valuation Ratios
P/E Ratio 39.8
Price to Sales 2.2
Price to Book 4.2
Price to Tangible Book
Price to Cash Flow 19.2
Price to Free Cash Flow 53
Growth Rates
Sales Growth Rate 7.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 9.3%
Cap. Spend. - 3 Yr. Gr. Rate 11.3%
Financial Strength
Quick Ratio 11
Current Ratio 0
LT Debt to Equity 54.6%
Total Debt to Equity 55%
Interest Coverage 9
Management Effectiveness
Return On Assets 5.2%
Ret/ On Assets - 3 Yr. Avg. 6.5%
Return On Total Capital 7%
Ret/ On T. Cap. - 3 Yr. Avg. 8.8%
Return On Equity 10.6%
Return On Equity - 3 Yr. Avg. 12.9%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 67.2%
Gross Margin - 3 Yr. Avg. 66%
EBITDA Margin 15.5%
EBITDA Margin - 3 Yr. Avg. 17%
Operating Margin 8.5%
Oper. Margin - 3 Yr. Avg. 10.1%
Pre-Tax Margin 7.4%
Pre-Tax Margin - 3 Yr. Avg. 9.2%
Net Profit Margin 5.4%
Net Profit Margin - 3 Yr. Avg. 7.1%
Effective Tax Rate 28.4%
Eff/ Tax Rate - 3 Yr. Avg. 23.9%
Payout Ratio 126.3%

CGX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CGX stock intrinsic value calculation we used $1478 million for the last fiscal year's total revenue generated by Cineplex Inc.. The default revenue input number comes from 2016 income statement of Cineplex 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 CGX stock valuation model: a) initial revenue growth rate of 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 5.1%, whose default value for CGX is calculated based on our internal credit rating of Cineplex 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 Cineplex 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 CGX stock the variable cost ratio is equal to 88%.

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 CGX 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 3.7% for Cineplex Inc..

Corporate tax rate of 27% is the nominal tax rate for Cineplex 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 CGX 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 CGX are equal to 45.8%.

Life of production assets of 14 years is the average useful life of capital assets used in Cineplex 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 CGX is equal to -17%. 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 - $749 million for Cineplex 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 63.465 million for Cineplex 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 Cineplex Inc. at the current share price and the inputted number of shares is $3.2 billion.

RELATED COMPANIES Price Int.Val. Rating
Stock chart of CGX Financial statements of CGX
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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