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

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$14.03

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$14.03

 
Intrinsic value

$19.66

 
Up/down potential

+40%

 
Rating

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 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 1.2

 

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, %
  8.11
  12.90
  12.11
  11.40
  10.76
  10.18
  9.66
  9.20
  8.78
  8.40
  8.06
  7.75
  7.48
  7.23
  7.01
  6.81
  6.63
  6.46
  6.32
  6.19
  6.07
  5.96
  5.86
  5.78
  5.70
  5.63
  5.57
  5.51
  5.46
  5.41
  5.37
Revenue, $m
  400
  452
  506
  564
  625
  688
  755
  824
  897
  972
  1,050
  1,132
  1,216
  1,304
  1,396
  1,491
  1,590
  1,692
  1,799
  1,910
  2,026
  2,147
  2,273
  2,404
  2,541
  2,685
  2,834
  2,990
  3,153
  3,324
  3,503
Variable operating expenses, $m
 
  253
  284
  316
  350
  385
  423
  462
  502
  544
  588
  634
  681
  730
  782
  835
  890
  948
  1,008
  1,070
  1,135
  1,202
  1,273
  1,346
  1,423
  1,503
  1,587
  1,674
  1,766
  1,862
  1,962
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
  253
  284
  316
  350
  385
  423
  462
  502
  544
  588
  634
  681
  730
  782
  835
  890
  948
  1,008
  1,070
  1,135
  1,202
  1,273
  1,346
  1,423
  1,503
  1,587
  1,674
  1,766
  1,862
  1,962
Operating income, $m
  227
  199
  223
  248
  275
  303
  332
  363
  395
  428
  462
  498
  535
  574
  614
  656
  699
  745
  792
  841
  892
  945
  1,000
  1,058
  1,118
  1,181
  1,247
  1,316
  1,388
  1,463
  1,541
EBITDA, $m
  233
  205
  230
  257
  284
  313
  343
  375
  408
  442
  478
  515
  553
  593
  635
  678
  723
  770
  819
  869
  922
  977
  1,034
  1,094
  1,156
  1,221
  1,289
  1,361
  1,435
  1,512
  1,594
Interest expense (income), $m
  96
  101
  114
  129
  145
  161
  178
  196
  215
  235
  255
  276
  298
  321
  345
  369
  395
  422
  449
  478
  508
  539
  572
  606
  641
  678
  717
  757
  800
  844
  890
Earnings before tax, $m
  126
  98
  108
  119
  130
  142
  154
  166
  179
  193
  207
  222
  237
  253
  270
  287
  305
  323
  342
  362
  383
  405
  428
  452
  477
  503
  530
  558
  588
  619
  652
Tax expense, $m
  1
  26
  29
  32
  35
  38
  42
  45
  48
  52
  56
  60
  64
  68
  73
  77
  82
  87
  92
  98
  104
  109
  116
  122
  129
  136
  143
  151
  159
  167
  176
Net income, $m
  125
  72
  79
  87
  95
  103
  112
  121
  131
  141
  151
  162
  173
  185
  197
  209
  222
  236
  250
  265
  280
  296
  313
  330
  348
  367
  387
  408
  429
  452
  476

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
  4,471
  5,013
  5,584
  6,185
  6,815
  7,473
  8,161
  8,877
  9,623
  10,399
  11,205
  12,043
  12,914
  13,819
  14,760
  15,738
  16,755
  17,814
  18,915
  20,063
  21,259
  22,506
  23,806
  25,163
  26,580
  28,059
  29,606
  31,222
  32,912
  34,680
Adjusted assets (=assets-cash), $m
  3,963
  4,471
  5,013
  5,584
  6,185
  6,815
  7,473
  8,161
  8,877
  9,623
  10,399
  11,205
  12,043
  12,914
  13,819
  14,760
  15,738
  16,755
  17,814
  18,915
  20,063
  21,259
  22,506
  23,806
  25,163
  26,580
  28,059
  29,606
  31,222
  32,912
  34,680
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
  91
  102
  113
  126
  138
  152
  166
  180
  195
  211
  227
  244
  262
  281
  300
  319
  340
  362
  384
  407
  432
  457
  483
  511
  540
  570
  601
  634
  668
  704
Working capital, $m
  -137
  -42
  -47
  -52
  -58
  -64
  -70
  -77
  -83
  -90
  -98
  -105
  -113
  -121
  -130
  -139
  -148
  -157
  -167
  -178
  -188
  -200
  -211
  -224
  -236
  -250
  -264
  -278
  -293
  -309
  -326
Total debt, $m
  2,396
  2,725
  3,076
  3,447
  3,837
  4,246
  4,673
  5,119
  5,584
  6,068
  6,572
  7,095
  7,639
  8,204
  8,792
  9,402
  10,037
  10,697
  11,384
  12,099
  12,844
  13,620
  14,429
  15,273
  16,154
  17,073
  18,034
  19,037
  20,086
  21,183
  22,330
Total liabilities, $m
  2,573
  2,902
  3,253
  3,624
  4,014
  4,423
  4,850
  5,296
  5,761
  6,245
  6,749
  7,272
  7,816
  8,381
  8,969
  9,579
  10,214
  10,874
  11,561
  12,276
  13,021
  13,797
  14,606
  15,450
  16,331
  17,250
  18,211
  19,214
  20,263
  21,360
  22,507
Total equity, $m
  1,390
  1,569
  1,759
  1,960
  2,171
  2,392
  2,623
  2,864
  3,116
  3,378
  3,650
  3,933
  4,227
  4,533
  4,850
  5,181
  5,524
  5,881
  6,253
  6,639
  7,042
  7,462
  7,899
  8,356
  8,832
  9,329
  9,849
  10,392
  10,959
  11,552
  12,173
Total liabilities and equity, $m
  3,963
  4,471
  5,012
  5,584
  6,185
  6,815
  7,473
  8,160
  8,877
  9,623
  10,399
  11,205
  12,043
  12,914
  13,819
  14,760
  15,738
  16,755
  17,814
  18,915
  20,063
  21,259
  22,505
  23,806
  25,163
  26,579
  28,060
  29,606
  31,222
  32,912
  34,680
Debt-to-equity ratio
  1.724
  1.740
  1.750
  1.760
  1.770
  1.780
  1.780
  1.790
  1.790
  1.800
  1.800
  1.800
  1.810
  1.810
  1.810
  1.810
  1.820
  1.820
  1.820
  1.820
  1.820
  1.830
  1.830
  1.830
  1.830
  1.830
  1.830
  1.830
  1.830
  1.830
  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
  72
  79
  87
  95
  103
  112
  121
  131
  141
  151
  162
  173
  185
  197
  209
  222
  236
  250
  265
  280
  296
  313
  330
  348
  367
  387
  408
  429
  452
  476
Depreciation, amort., depletion, $m
  6
  7
  8
  8
  9
  10
  11
  12
  13
  15
  16
  17
  18
  20
  21
  22
  24
  25
  27
  29
  30
  32
  34
  36
  38
  40
  43
  45
  47
  50
  53
Funds from operations, $m
  65
  78
  87
  95
  104
  114
  124
  134
  144
  156
  167
  179
  191
  204
  218
  232
  246
  261
  277
  293
  310
  328
  347
  366
  386
  407
  429
  452
  477
  502
  528
Change in working capital, $m
  -2
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
Cash from operations, $m
  67
  118
  92
  101
  110
  120
  130
  140
  151
  163
  174
  187
  199
  212
  226
  240
  255
  271
  287
  304
  321
  339
  358
  378
  399
  421
  443
  467
  492
  518
  545
Maintenance CAPEX, $m
  0
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -13
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -24
  -25
  -27
  -29
  -30
  -32
  -34
  -36
  -38
  -40
  -43
  -45
  -47
  -50
New CAPEX, $m
  -656
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -31
  -33
  -34
  -36
Cash from investing activities, $m
  -463
  -16
  -18
  -20
  -20
  -22
  -23
  -25
  -27
  -28
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -45
  -46
  -49
  -52
  -54
  -57
  -60
  -64
  -67
  -70
  -74
  -78
  -81
  -86
Free cash flow, $m
  -396
  101
  74
  81
  89
  98
  106
  115
  124
  134
  144
  154
  165
  177
  188
  200
  213
  226
  240
  254
  269
  285
  301
  318
  335
  354
  373
  393
  414
  436
  459
Issuance/(repayment) of debt, $m
  404
  329
  351
  371
  390
  409
  427
  446
  465
  484
  503
  523
  544
  565
  587
  611
  635
  660
  687
  715
  745
  776
  809
  844
  881
  919
  960
  1,003
  1,049
  1,097
  1,147
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  
  395
  329
  351
  371
  390
  409
  427
  446
  465
  484
  503
  523
  544
  565
  587
  611
  635
  660
  687
  715
  745
  776
  809
  844
  881
  919
  960
  1,003
  1,049
  1,097
  1,147
Total cash flow (excl. dividends), $m
  -1
  430
  425
  452
  479
  506
  534
  561
  589
  618
  647
  678
  709
  742
  776
  811
  848
  886
  927
  969
  1,014
  1,061
  1,110
  1,162
  1,216
  1,273
  1,333
  1,396
  1,463
  1,533
  1,606
Retained Cash Flow (-), $m
  -243
  -179
  -190
  -201
  -211
  -221
  -231
  -241
  -251
  -262
  -272
  -283
  -294
  -306
  -318
  -330
  -343
  -357
  -372
  -387
  -403
  -420
  -438
  -456
  -476
  -497
  -519
  -543
  -567
  -593
  -621
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
 
  251
  235
  252
  268
  285
  302
  320
  338
  356
  375
  395
  415
  436
  458
  481
  505
  529
  555
  583
  611
  641
  672
  705
  740
  776
  814
  854
  896
  940
  986
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
 
  226
  189
  179
  167
  153
  138
  123
  108
  93
  79
  65
  53
  43
  33
  26
  19
  14
  10
  7
  5
  3
  2
  1
  1
  0
  0
  0
  0
  0
  0
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

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 16.7
Price to Sales 5.2
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 31.1
Price to Free Cash Flow -3.5
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 12.9% 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 88.445 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 $1.2 billion.


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Stock chart of CRR-UN Financial statements of CRR-UN
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