Intrinsic value of Crombie Real Estate Investment Trust - CRR-UN

Previous Close

$14.31

  Intrinsic Value

$12.93

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  Rating & Target

hold

-10%

  Value-price divergence*

+96%

Previous close

$14.31

 
Intrinsic value

$12.93

 
Up/down potential

-10%

 
Rating

hold

 
Value-price divergence*

+96%

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

We calculate the intrinsic value of CRR-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 1.3

 

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, %
  8.11
  7.40
  7.16
  6.94
  6.75
  6.57
  6.42
  6.28
  6.15
  6.03
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.49
  5.44
  5.40
  5.36
  5.32
  5.29
  5.26
  5.24
  5.21
  5.19
  5.17
  5.16
  5.14
  5.13
  5.11
Revenue, $m
  400
  430
  460
  492
  526
  560
  596
  633
  672
  713
  755
  799
  845
  893
  943
  996
  1,050
  1,108
  1,168
  1,230
  1,296
  1,364
  1,436
  1,511
  1,590
  1,672
  1,759
  1,850
  1,945
  2,044
  2,149
Variable operating expenses, $m
 
  241
  258
  276
  294
  314
  334
  355
  377
  399
  423
  448
  473
  500
  528
  558
  588
  620
  654
  689
  726
  764
  804
  846
  890
  937
  985
  1,036
  1,089
  1,145
  1,203
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
  173
  241
  258
  276
  294
  314
  334
  355
  377
  399
  423
  448
  473
  500
  528
  558
  588
  620
  654
  689
  726
  764
  804
  846
  890
  937
  985
  1,036
  1,089
  1,145
  1,203
Operating income, $m
  227
  189
  203
  217
  231
  246
  262
  279
  296
  314
  332
  352
  372
  393
  415
  438
  462
  487
  514
  541
  570
  600
  632
  665
  700
  736
  774
  814
  856
  900
  945
EBITDA, $m
  233
  195
  209
  224
  239
  255
  271
  288
  306
  324
  344
  364
  385
  406
  429
  453
  478
  504
  531
  560
  589
  621
  653
  688
  723
  761
  800
  842
  885
  930
  978
Interest expense (income), $m
  96
  101
  109
  117
  125
  134
  144
  153
  164
  174
  185
  196
  208
  221
  234
  247
  261
  276
  292
  308
  325
  342
  361
  380
  400
  422
  444
  467
  492
  517
  544
Earnings before tax, $m
  126
  88
  94
  100
  106
  112
  119
  125
  132
  140
  147
  155
  164
  172
  181
  191
  201
  211
  222
  234
  246
  258
  271
  285
  299
  314
  330
  347
  364
  382
  401
Tax expense, $m
  1
  24
  25
  27
  29
  30
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
  54
  57
  60
  63
  66
  70
  73
  77
  81
  85
  89
  94
  98
  103
  108
Net income, $m
  125
  65
  69
  73
  77
  82
  87
  91
  97
  102
  108
  113
  119
  126
  132
  139
  147
  154
  162
  171
  179
  188
  198
  208
  218
  229
  241
  253
  266
  279
  293

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  3,963
  4,253
  4,558
  4,875
  5,204
  5,546
  5,902
  6,272
  6,657
  7,059
  7,478
  7,914
  8,369
  8,845
  9,341
  9,859
  10,401
  10,967
  11,559
  12,179
  12,827
  13,506
  14,217
  14,962
  15,741
  16,559
  17,415
  18,313
  19,254
  20,241
  21,276
Adjusted assets (=assets-cash), $m
  3,963
  4,253
  4,558
  4,875
  5,204
  5,546
  5,902
  6,272
  6,657
  7,059
  7,478
  7,914
  8,369
  8,845
  9,341
  9,859
  10,401
  10,967
  11,559
  12,179
  12,827
  13,506
  14,217
  14,962
  15,741
  16,559
  17,415
  18,313
  19,254
  20,241
  21,276
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
  81
  86
  93
  99
  106
  113
  120
  127
  135
  143
  152
  161
  170
  180
  190
  200
  211
  223
  235
  247
  260
  274
  289
  304
  320
  336
  354
  372
  391
  411
  432
Working capital, $m
  -137
  -40
  -43
  -46
  -49
  -52
  -55
  -59
  -63
  -66
  -70
  -74
  -79
  -83
  -88
  -93
  -98
  -103
  -109
  -114
  -120
  -127
  -134
  -141
  -148
  -156
  -164
  -172
  -181
  -190
  -200
Total debt, $m
  2,396
  2,583
  2,781
  2,987
  3,200
  3,422
  3,653
  3,893
  4,144
  4,404
  4,676
  4,959
  5,255
  5,563
  5,885
  6,222
  6,573
  6,941
  7,325
  7,727
  8,148
  8,589
  9,050
  9,533
  10,039
  10,570
  11,125
  11,708
  12,319
  12,959
  13,631
Total liabilities, $m
  2,573
  2,760
  2,958
  3,164
  3,377
  3,599
  3,830
  4,070
  4,321
  4,581
  4,853
  5,136
  5,432
  5,740
  6,062
  6,399
  6,750
  7,118
  7,502
  7,904
  8,325
  8,766
  9,227
  9,710
  10,216
  10,747
  11,302
  11,885
  12,496
  13,136
  13,808
Total equity, $m
  1,390
  1,493
  1,600
  1,711
  1,826
  1,947
  2,071
  2,201
  2,337
  2,478
  2,625
  2,778
  2,938
  3,104
  3,279
  3,461
  3,651
  3,849
  4,057
  4,275
  4,502
  4,741
  4,990
  5,251
  5,525
  5,812
  6,113
  6,428
  6,758
  7,105
  7,468
Total liabilities and equity, $m
  3,963
  4,253
  4,558
  4,875
  5,203
  5,546
  5,901
  6,271
  6,658
  7,059
  7,478
  7,914
  8,370
  8,844
  9,341
  9,860
  10,401
  10,967
  11,559
  12,179
  12,827
  13,507
  14,217
  14,961
  15,741
  16,559
  17,415
  18,313
  19,254
  20,241
  21,276
Debt-to-equity ratio
  1.724
  1.730
  1.740
  1.750
  1.750
  1.760
  1.760
  1.770
  1.770
  1.780
  1.780
  1.790
  1.790
  1.790
  1.800
  1.800
  1.800
  1.800
  1.810
  1.810
  1.810
  1.810
  1.810
  1.820
  1.820
  1.820
  1.820
  1.820
  1.820
  1.820
  1.830
Adjusted equity ratio
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  125
  65
  69
  73
  77
  82
  87
  91
  97
  102
  108
  113
  119
  126
  132
  139
  147
  154
  162
  171
  179
  188
  198
  208
  218
  229
  241
  253
  266
  279
  293
Depreciation, amort., depletion, $m
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  18
  19
  20
  22
  23
  24
  25
  26
  28
  29
  31
  32
Funds from operations, $m
  65
  71
  76
  80
  85
  90
  95
  101
  107
  113
  119
  125
  132
  139
  147
  154
  162
  171
  180
  189
  199
  209
  219
  231
  242
  254
  267
  281
  295
  310
  325
Change in working capital, $m
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
Cash from operations, $m
  67
  74
  78
  83
  88
  93
  99
  104
  110
  116
  123
  129
  136
  144
  151
  159
  168
  176
  185
  195
  205
  215
  226
  238
  250
  262
  275
  289
  304
  319
  335
Maintenance CAPEX, $m
  0
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -31
New CAPEX, $m
  -656
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
Cash from investing activities, $m
  -463
  -12
  -12
  -13
  -14
  -15
  -15
  -17
  -18
  -18
  -19
  -20
  -21
  -23
  -23
  -25
  -26
  -27
  -29
  -31
  -31
  -33
  -34
  -37
  -39
  -41
  -42
  -44
  -47
  -49
  -52
Free cash flow, $m
  -396
  62
  66
  70
  74
  79
  83
  88
  93
  98
  104
  109
  115
  121
  128
  135
  142
  149
  157
  165
  173
  182
  191
  201
  211
  222
  233
  245
  257
  270
  283
Issuance/(repayment) of debt, $m
  404
  187
  198
  205
  214
  222
  231
  240
  250
  261
  272
  283
  295
  308
  322
  336
  352
  368
  384
  402
  421
  441
  461
  483
  506
  530
  556
  583
  611
  640
  672
Issuance/(repurchase) of shares, $m
  0
  38
  38
  38
  38
  38
  38
  39
  39
  39
  39
  40
  40
  41
  42
  43
  43
  45
  46
  47
  48
  50
  52
  53
  55
  57
  60
  62
  65
  67
  70
Cash from financing (excl. dividends), $m  
  395
  225
  236
  243
  252
  260
  269
  279
  289
  300
  311
  323
  335
  349
  364
  379
  395
  413
  430
  449
  469
  491
  513
  536
  561
  587
  616
  645
  676
  707
  742
Total cash flow (excl. dividends), $m
  -1
  288
  302
  314
  326
  339
  353
  367
  382
  398
  415
  432
  451
  471
  492
  513
  537
  561
  587
  614
  642
  672
  704
  737
  773
  810
  848
  889
  932
  978
  1,025
Retained Cash Flow (-), $m
  -243
  -103
  -107
  -111
  -115
  -120
  -125
  -130
  -135
  -141
  -147
  -153
  -160
  -167
  -174
  -182
  -190
  -199
  -208
  -217
  -228
  -238
  -249
  -261
  -274
  -287
  -301
  -315
  -330
  -346
  -363
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
 
  185
  195
  202
  210
  219
  228
  237
  247
  257
  268
  279
  291
  304
  317
  332
  346
  362
  379
  396
  415
  434
  455
  476
  499
  523
  548
  574
  602
  631
  662
Discount rate, %
 
  10.90
  11.45
  12.02
  12.62
  13.25
  13.91
  14.61
  15.34
  16.10
  16.91
  17.75
  18.64
  19.57
  20.55
  21.58
  22.66
  23.79
  24.98
  26.23
  27.54
  28.92
  30.37
  31.89
  33.48
  35.15
  36.91
  38.76
  40.69
  42.73
  44.87
PV of cash for distribution, $m
 
  167
  157
  144
  131
  117
  104
  91
  79
  67
  56
  46
  37
  30
  23
  18
  13
  10
  7
  5
  3
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  97.0
  94.4
  92.0
  89.8
  87.7
  85.9
  84.2
  82.6
  81.1
  79.7
  78.4
  77.1
  76.0
  74.9
  73.8
  72.8
  71.8
  70.9
  70.0
  69.2
  68.3
  67.5
  66.7
  66.0
  65.2
  64.5
  63.8
  63.1
  62.4
  61.7

Crombie Real Estate Investment Trust operates as an open-ended real estate investment trust. It owns and manages commercial real estate properties in Atlantic Canada. The company invests in retail, office, and mixed-use properties. As of December 31, 2007, it owned a portfolio of 52 commercial properties in 6 provinces comprising approximately 8.0 million square feet of gross leaseable area. Crombie Real Estate Investment Trust was founded in 2006 and is based in Stellarton, Canada.

FINANCIAL RATIOS  of  Crombie Real Estate Investment Trust (CRR-UN)

Valuation Ratios
P/E Ratio 17
Price to Sales 5.3
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 31.7
Price to Free Cash Flow -3.6
Growth Rates
Sales Growth Rate 8.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 451.3%
Cap. Spend. - 3 Yr. Gr. Rate -12.2%
Financial Strength
Quick Ratio 0
Current Ratio 0.2
LT Debt to Equity 165.2%
Total Debt to Equity 172.4%
Interest Coverage 2
Management Effectiveness
Return On Assets 5.9%
Ret/ On Assets - 3 Yr. Avg. 5.2%
Return On Total Capital 3.5%
Ret/ On T. Cap. - 3 Yr. Avg. 2.6%
Return On Equity 9.9%
Return On Equity - 3 Yr. Avg. 7.2%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 71.3%
Gross Margin - 3 Yr. Avg. 70.1%
EBITDA Margin 57%
EBITDA Margin - 3 Yr. Avg. 49.4%
Operating Margin 56.8%
Oper. Margin - 3 Yr. Avg. 49.2%
Pre-Tax Margin 31.5%
Pre-Tax Margin - 3 Yr. Avg. 22.7%
Net Profit Margin 31.3%
Net Profit Margin - 3 Yr. Avg. 23%
Effective Tax Rate 0.8%
Eff/ Tax Rate - 3 Yr. Avg. -1.7%
Payout Ratio 0%

CRR-UN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CRR-UN stock intrinsic value calculation we used $400 million for the last fiscal year's total revenue generated by Crombie Real Estate Investment Trust. The default revenue input number comes from 2016 income statement of Crombie 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 CRR-UN stock valuation model: a) initial revenue growth rate of 7.4% 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 10.9%, whose default value for CRR-UN is calculated based on our internal credit rating of Crombie 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 Crombie 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 CRR-UN stock the variable cost ratio is equal to 56%.

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 CRR-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 4.2% for Crombie Real Estate Investment Trust.

Corporate tax rate of 27% is the nominal tax rate for Crombie 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 CRR-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 CRR-UN are equal to 20.1%.

Life of production assets of 13.4 years is the average useful life of capital assets used in Crombie 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 CRR-UN is equal to -9.3%. 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 - $1390 million for Crombie 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 88.317 million for Crombie 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 Crombie Real Estate Investment Trust at the current share price and the inputted number of shares is $1.3 billion.

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Stock chart of CRR-UN Financial statements of CRR-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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