Intrinsic value of Chemtrade Logistics Income Fund - CHE-UN

Previous Close

$18.02

  Intrinsic Value

$0.72

stock screener

  Rating & Target

str. sell

-96%

  Value-price divergence*

-53%

Previous close

$18.02

 
Intrinsic value

$0.72

 
Up/down potential

-96%

 
Rating

str. sell

 
Value-price divergence*

-53%

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

We calculate the intrinsic value of CHE-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 1.7

 

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, %
  -5.32
  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
  1,067
  1,088
  1,113
  1,142
  1,174
  1,210
  1,249
  1,291
  1,337
  1,387
  1,440
  1,497
  1,558
  1,623
  1,691
  1,764
  1,842
  1,923
  2,010
  2,101
  2,198
  2,300
  2,407
  2,521
  2,640
  2,766
  2,898
  3,037
  3,184
  3,338
  3,500
Variable operating expenses, $m
 
  1,131
  1,156
  1,183
  1,214
  1,249
  1,287
  1,328
  1,372
  1,420
  1,472
  1,448
  1,507
  1,570
  1,636
  1,707
  1,781
  1,861
  1,944
  2,033
  2,126
  2,225
  2,329
  2,438
  2,554
  2,675
  2,803
  2,938
  3,080
  3,229
  3,386
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
  1,084
  1,131
  1,156
  1,183
  1,214
  1,249
  1,287
  1,328
  1,372
  1,420
  1,472
  1,448
  1,507
  1,570
  1,636
  1,707
  1,781
  1,861
  1,944
  2,033
  2,126
  2,225
  2,329
  2,438
  2,554
  2,675
  2,803
  2,938
  3,080
  3,229
  3,386
Operating income, $m
  -17
  -43
  -42
  -41
  -40
  -39
  -38
  -36
  -35
  -33
  -32
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
  75
  79
  82
  86
  90
  95
  99
  104
  109
  114
EBITDA, $m
  131
  125
  128
  131
  135
  139
  143
  148
  153
  159
  165
  172
  179
  186
  194
  202
  211
  220
  230
  241
  252
  264
  276
  289
  303
  317
  332
  348
  365
  383
  401
Interest expense (income), $m
  32
  31
  32
  33
  34
  36
  38
  40
  42
  44
  46
  49
  51
  54
  57
  61
  64
  68
  72
  76
  80
  85
  90
  95
  100
  106
  112
  118
  125
  132
  139
Earnings before tax, $m
  -79
  -74
  -74
  -74
  -75
  -75
  -76
  -76
  -77
  -77
  -78
  0
  -1
  -1
  -2
  -3
  -4
  -5
  -6
  -7
  -9
  -10
  -11
  -13
  -14
  -16
  -17
  -19
  -21
  -23
  -25
Tax expense, $m
  -78
  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
  -13
  -74
  -74
  -74
  -75
  -75
  -76
  -76
  -77
  -77
  -78
  0
  -1
  -1
  -2
  -3
  -4
  -5
  -6
  -7
  -9
  -10
  -11
  -13
  -14
  -16
  -17
  -19
  -21
  -23
  -25

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  15
  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
  2,162
  2,190
  2,240
  2,298
  2,362
  2,434
  2,513
  2,598
  2,691
  2,791
  2,898
  3,012
  3,135
  3,265
  3,403
  3,550
  3,705
  3,870
  4,044
  4,228
  4,422
  4,627
  4,844
  5,072
  5,312
  5,564
  5,831
  6,111
  6,406
  6,716
  7,042
Adjusted assets (=assets-cash), $m
  2,147
  2,190
  2,240
  2,298
  2,362
  2,434
  2,513
  2,598
  2,691
  2,791
  2,898
  3,012
  3,135
  3,265
  3,403
  3,550
  3,705
  3,870
  4,044
  4,228
  4,422
  4,627
  4,844
  5,072
  5,312
  5,564
  5,831
  6,111
  6,406
  6,716
  7,042
Revenue / Adjusted assets
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
Average production assets, $m
  1,172
  1,195
  1,222
  1,254
  1,289
  1,328
  1,371
  1,418
  1,468
  1,523
  1,581
  1,644
  1,711
  1,782
  1,857
  1,937
  2,022
  2,112
  2,207
  2,307
  2,413
  2,525
  2,643
  2,768
  2,899
  3,037
  3,182
  3,335
  3,496
  3,665
  3,843
Working capital, $m
  10
  32
  32
  33
  34
  35
  36
  37
  39
  40
  42
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  73
  77
  80
  84
  88
  92
  97
  102
Total debt, $m
  850
  863
  895
  932
  974
  1,020
  1,070
  1,125
  1,184
  1,249
  1,317
  1,391
  1,469
  1,553
  1,642
  1,736
  1,836
  1,942
  2,053
  2,171
  2,296
  2,428
  2,567
  2,713
  2,867
  3,029
  3,200
  3,380
  3,570
  3,769
  3,978
Total liabilities, $m
  1,393
  1,406
  1,438
  1,475
  1,517
  1,563
  1,613
  1,668
  1,727
  1,792
  1,860
  1,934
  2,012
  2,096
  2,185
  2,279
  2,379
  2,485
  2,596
  2,714
  2,839
  2,971
  3,110
  3,256
  3,410
  3,572
  3,743
  3,923
  4,113
  4,312
  4,521
Total equity, $m
  769
  784
  802
  823
  846
  871
  900
  930
  963
  999
  1,037
  1,078
  1,122
  1,169
  1,218
  1,271
  1,327
  1,385
  1,448
  1,514
  1,583
  1,657
  1,734
  1,816
  1,902
  1,992
  2,087
  2,188
  2,293
  2,404
  2,521
Total liabilities and equity, $m
  2,162
  2,190
  2,240
  2,298
  2,363
  2,434
  2,513
  2,598
  2,690
  2,791
  2,897
  3,012
  3,134
  3,265
  3,403
  3,550
  3,706
  3,870
  4,044
  4,228
  4,422
  4,628
  4,844
  5,072
  5,312
  5,564
  5,830
  6,111
  6,406
  6,716
  7,042
Debt-to-equity ratio
  1.105
  1.100
  1.120
  1.130
  1.150
  1.170
  1.190
  1.210
  1.230
  1.250
  1.270
  1.290
  1.310
  1.330
  1.350
  1.370
  1.380
  1.400
  1.420
  1.430
  1.450
  1.470
  1.480
  1.490
  1.510
  1.520
  1.530
  1.550
  1.560
  1.570
  1.580
Adjusted equity ratio
  0.351
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358
  0.358

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -13
  -74
  -74
  -74
  -75
  -75
  -76
  -76
  -77
  -77
  -78
  0
  -1
  -1
  -2
  -3
  -4
  -5
  -6
  -7
  -9
  -10
  -11
  -13
  -14
  -16
  -17
  -19
  -21
  -23
  -25
Depreciation, amort., depletion, $m
  148
  168
  170
  172
  175
  178
  181
  184
  188
  192
  197
  123
  128
  133
  139
  145
  151
  158
  165
  172
  180
  188
  197
  207
  216
  227
  237
  249
  261
  274
  287
Funds from operations, $m
  104
  94
  96
  98
  100
  103
  105
  108
  112
  115
  119
  123
  127
  132
  136
  141
  147
  153
  159
  165
  172
  179
  186
  194
  202
  211
  220
  230
  240
  250
  262
Change in working capital, $m
  -49
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
Cash from operations, $m
  153
  93
  95
  97
  99
  102
  104
  107
  110
  114
  117
  121
  125
  130
  134
  139
  145
  150
  156
  162
  169
  176
  183
  191
  199
  207
  216
  226
  236
  246
  257
Maintenance CAPEX, $m
  0
  -87
  -89
  -91
  -94
  -96
  -99
  -102
  -106
  -110
  -114
  -118
  -123
  -128
  -133
  -139
  -145
  -151
  -158
  -165
  -172
  -180
  -188
  -197
  -207
  -216
  -227
  -237
  -249
  -261
  -274
New CAPEX, $m
  -57
  -23
  -27
  -31
  -35
  -39
  -43
  -47
  -51
  -54
  -58
  -63
  -67
  -71
  -75
  -80
  -85
  -90
  -95
  -100
  -106
  -112
  -118
  -124
  -131
  -138
  -145
  -153
  -161
  -169
  -178
Cash from investing activities, $m
  -51
  -110
  -116
  -122
  -129
  -135
  -142
  -149
  -157
  -164
  -172
  -181
  -190
  -199
  -208
  -219
  -230
  -241
  -253
  -265
  -278
  -292
  -306
  -321
  -338
  -354
  -372
  -390
  -410
  -430
  -452
Free cash flow, $m
  102
  -18
  -22
  -26
  -30
  -34
  -38
  -42
  -46
  -50
  -55
  -59
  -64
  -69
  -74
  -79
  -85
  -91
  -97
  -103
  -109
  -116
  -123
  -131
  -139
  -147
  -156
  -165
  -174
  -184
  -195
Issuance/(repayment) of debt, $m
  -4
  28
  32
  37
  41
  46
  50
  55
  59
  64
  69
  74
  78
  84
  89
  94
  100
  106
  112
  118
  125
  132
  139
  146
  154
  162
  171
  180
  189
  199
  209
Issuance/(repurchase) of shares, $m
  0
  89
  92
  95
  98
  101
  104
  107
  110
  113
  116
  41
  44
  48
  52
  56
  60
  64
  69
  73
  78
  83
  89
  94
  100
  106
  113
  120
  127
  134
  142
Cash from financing (excl. dividends), $m  
  -12
  117
  124
  132
  139
  147
  154
  162
  169
  177
  185
  115
  122
  132
  141
  150
  160
  170
  181
  191
  203
  215
  228
  240
  254
  268
  284
  300
  316
  333
  351
Total cash flow (excl. dividends), $m
  90
  99
  103
  106
  110
  113
  116
  120
  123
  127
  130
  55
  59
  63
  66
  71
  75
  79
  84
  88
  93
  99
  104
  110
  115
  122
  128
  135
  142
  149
  157
Retained Cash Flow (-), $m
  112
  -89
  -92
  -95
  -98
  -101
  -104
  -107
  -110
  -113
  -116
  -41
  -44
  -48
  -52
  -56
  -60
  -64
  -69
  -73
  -78
  -83
  -89
  -94
  -100
  -106
  -113
  -120
  -127
  -134
  -142
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
 
  10
  11
  11
  12
  12
  13
  13
  13
  14
  14
  14
  14
  15
  15
  15
  15
  15
  15
  15
  15
  15
  15
  15
  15
  15
  15
  15
  15
  15
  15
Discount rate, %
 
  7.80
  8.19
  8.60
  9.03
  9.48
  9.95
  10.45
  10.98
  11.52
  12.10
  12.71
  13.34
  14.01
  14.71
  15.44
  16.22
  17.03
  17.88
  18.77
  19.71
  20.70
  21.73
  22.82
  23.96
  25.16
  26.41
  27.73
  29.12
  30.58
  32.11
PV of cash for distribution, $m
 
  9
  9
  9
  8
  8
  7
  7
  6
  5
  4
  4
  3
  3
  2
  2
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  95.0
  90.1
  85.4
  81.0
  76.8
  72.8
  69.0
  65.5
  62.1
  59.0
  57.9
  56.9
  55.8
  54.6
  53.5
  52.4
  51.2
  50.1
  49.0
  47.8
  46.7
  45.6
  44.5
  43.4
  42.3
  41.2
  40.2
  39.1
  38.1
  37.1

Chemtrade Logistics Income Fund provides industrial chemicals and services in North America and internationally. Its Sulphur Products & Performance Chemicals segment removes and/or produces merchant, regenerated, and ultra pure sulphuric acid, liquid sulphur dioxide, sodium hydrosulphite, elemental sulphur, hydrogen sulphide, and sodium bisulphite. This segment also offers industrial services, such as processing hydrogen sulfide and other by-products, and waste streams. The company’s Water Solutions & Specialty Chemicals segment manufactures and markets a variety of inorganic coagulants used in water treatment, including aluminum sulphate, aluminum chlorohydrate, polyaluminum chloride, and ferric sulphate; and a range of specialty chemicals, such as sodium chlorate, sodium nitrite, potassium chloride, phosphorus pentasulphide, vaccine adjuvants, and sulphides. Its International segment provides removal and marketing services for elemental sulphur and sulphuric acid. This segment markets its products to customers in Europe, the Mediterranean, North Africa, Central and South America, and North America, as well as in the Pacific region. The company was founded in 2001 and is headquartered in Toronto, Canada.

FINANCIAL RATIOS  of  Chemtrade Logistics Income Fund (CHE-UN)

Valuation Ratios
P/E Ratio -95.9
Price to Sales 1.2
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 8.1
Price to Free Cash Flow 13
Growth Rates
Sales Growth Rate -5.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -10.9%
Cap. Spend. - 3 Yr. Gr. Rate 2.7%
Financial Strength
Quick Ratio 0
Current Ratio 0.2
LT Debt to Equity 105.9%
Total Debt to Equity 110.5%
Interest Coverage -1
Management Effectiveness
Return On Assets -0.6%
Ret/ On Assets - 3 Yr. Avg. 0.3%
Return On Total Capital -0.8%
Ret/ On T. Cap. - 3 Yr. Avg. -0.6%
Return On Equity -1.6%
Return On Equity - 3 Yr. Avg. -1.2%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 7.8%
Gross Margin - 3 Yr. Avg. 8%
EBITDA Margin 9.5%
EBITDA Margin - 3 Yr. Avg. 10.5%
Operating Margin -1.6%
Oper. Margin - 3 Yr. Avg. -1.6%
Pre-Tax Margin -7.4%
Pre-Tax Margin - 3 Yr. Avg. -6.4%
Net Profit Margin -1.2%
Net Profit Margin - 3 Yr. Avg. -1.2%
Effective Tax Rate 98.7%
Eff/ Tax Rate - 3 Yr. Avg. 62.7%
Payout Ratio -638.5%

CHE-UN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CHE-UN stock intrinsic value calculation we used $1067 million for the last fiscal year's total revenue generated by Chemtrade Logistics Income Fund. The default revenue input number comes from 2016 income statement of Chemtrade Logistics Income Fund. 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 CHE-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 7.8%, whose default value for CHE-UN is calculated based on our internal credit rating of Chemtrade Logistics Income Fund, 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 Chemtrade Logistics Income Fund.
    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 CHE-UN stock the variable cost ratio is equal to 104.1%.

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 CHE-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 3.7% for Chemtrade Logistics Income Fund.

Corporate tax rate of 27% is the nominal tax rate for Chemtrade Logistics Income Fund. 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 CHE-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 CHE-UN are equal to 109.8%.

Life of production assets of 13.4 years is the average useful life of capital assets used in Chemtrade Logistics Income Fund 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 CHE-UN is equal to 2.9%. 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 - $769 million for Chemtrade Logistics Income Fund - 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 92.778 million for Chemtrade Logistics Income Fund 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 Chemtrade Logistics Income Fund at the current share price and the inputted number of shares is $1.7 billion.

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Stock chart of CHE-UN Financial statements of CHE-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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