Intrinsic value of Chartwell Retirement Residences - CSH-UN

Previous Close

$15.98

  Intrinsic Value

$1.08

stock screener

  Rating & Target

str. sell

-93%

  Value-price divergence*

0%

Previous close

$15.98

 
Intrinsic value

$1.08

 
Up/down potential

-93%

 
Rating

str. sell

 
Value-price divergence*

0%

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

We calculate the intrinsic value of CSH-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 3.1

 

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, %
  10.50
  3.20
  3.38
  3.54
  3.69
  3.82
  3.94
  4.04
  4.14
  4.23
  4.30
  4.37
  4.44
  4.49
  4.54
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.80
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
  4.91
  4.92
Revenue, $m
  758
  782
  809
  837
  868
  901
  937
  975
  1,015
  1,058
  1,104
  1,152
  1,203
  1,257
  1,314
  1,374
  1,438
  1,505
  1,576
  1,650
  1,729
  1,811
  1,898
  1,990
  2,086
  2,188
  2,294
  2,406
  2,524
  2,648
  2,778
Variable operating expenses, $m
 
  699
  723
  749
  776
  806
  838
  871
  907
  946
  987
  1,030
  1,075
  1,124
  1,175
  1,229
  1,285
  1,345
  1,409
  1,475
  1,545
  1,619
  1,697
  1,779
  1,865
  1,956
  2,051
  2,151
  2,256
  2,367
  2,483
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
  682
  699
  723
  749
  776
  806
  838
  871
  907
  946
  987
  1,030
  1,075
  1,124
  1,175
  1,229
  1,285
  1,345
  1,409
  1,475
  1,545
  1,619
  1,697
  1,779
  1,865
  1,956
  2,051
  2,151
  2,256
  2,367
  2,483
Operating income, $m
  76
  83
  86
  89
  92
  96
  99
  103
  108
  112
  117
  122
  128
  133
  139
  146
  152
  160
  167
  175
  183
  192
  201
  211
  221
  232
  243
  255
  268
  281
  294
EBITDA, $m
  223
  235
  243
  251
  260
  270
  281
  292
  304
  317
  331
  345
  361
  377
  394
  412
  431
  451
  473
  495
  518
  543
  569
  597
  626
  656
  688
  722
  757
  794
  833
Interest expense (income), $m
  73
  73
  76
  78
  81
  85
  88
  92
  96
  100
  105
  109
  115
  120
  126
  132
  138
  145
  152
  159
  167
  175
  184
  193
  203
  213
  223
  235
  246
  259
  272
Earnings before tax, $m
  -1
  10
  10
  10
  11
  11
  11
  11
  12
  12
  12
  13
  13
  13
  14
  14
  15
  15
  15
  16
  16
  17
  17
  18
  19
  19
  20
  21
  21
  22
  23
Tax expense, $m
  0
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
Net income, $m
  5
  7
  7
  8
  8
  8
  8
  8
  9
  9
  9
  9
  9
  10
  10
  10
  11
  11
  11
  12
  12
  12
  13
  13
  14
  14
  15
  15
  16
  16
  17

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  30
  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
  2,797
  2,855
  2,951
  3,056
  3,169
  3,290
  3,419
  3,557
  3,705
  3,861
  4,027
  4,203
  4,390
  4,587
  4,795
  5,015
  5,248
  5,493
  5,751
  6,023
  6,309
  6,611
  6,928
  7,262
  7,614
  7,984
  8,373
  8,782
  9,211
  9,663
  10,138
Adjusted assets (=assets-cash), $m
  2,767
  2,855
  2,951
  3,056
  3,169
  3,290
  3,419
  3,557
  3,705
  3,861
  4,027
  4,203
  4,390
  4,587
  4,795
  5,015
  5,248
  5,493
  5,751
  6,023
  6,309
  6,611
  6,928
  7,262
  7,614
  7,984
  8,373
  8,782
  9,211
  9,663
  10,138
Revenue / Adjusted assets
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
Average production assets, $m
  2,543
  2,624
  2,712
  2,808
  2,912
  3,023
  3,142
  3,269
  3,405
  3,548
  3,701
  3,863
  4,034
  4,216
  4,407
  4,609
  4,823
  5,048
  5,285
  5,535
  5,798
  6,075
  6,367
  6,674
  6,997
  7,337
  7,694
  8,070
  8,465
  8,881
  9,317
Working capital, $m
  -206
  -95
  -98
  -101
  -105
  -109
  -113
  -118
  -123
  -128
  -134
  -139
  -146
  -152
  -159
  -166
  -174
  -182
  -191
  -200
  -209
  -219
  -230
  -241
  -252
  -265
  -278
  -291
  -305
  -320
  -336
Total debt, $m
  1,814
  1,846
  1,914
  1,987
  2,066
  2,151
  2,242
  2,339
  2,443
  2,553
  2,669
  2,793
  2,924
  3,062
  3,208
  3,363
  3,526
  3,698
  3,879
  4,070
  4,271
  4,483
  4,706
  4,940
  5,187
  5,447
  5,720
  6,007
  6,308
  6,626
  6,959
Total liabilities, $m
  1,972
  2,004
  2,072
  2,145
  2,224
  2,309
  2,400
  2,497
  2,601
  2,711
  2,827
  2,951
  3,082
  3,220
  3,366
  3,521
  3,684
  3,856
  4,037
  4,228
  4,429
  4,641
  4,864
  5,098
  5,345
  5,605
  5,878
  6,165
  6,466
  6,784
  7,117
Total equity, $m
  825
  851
  880
  911
  944
  980
  1,019
  1,060
  1,104
  1,151
  1,200
  1,253
  1,308
  1,367
  1,429
  1,495
  1,564
  1,637
  1,714
  1,795
  1,880
  1,970
  2,065
  2,164
  2,269
  2,379
  2,495
  2,617
  2,745
  2,880
  3,021
Total liabilities and equity, $m
  2,797
  2,855
  2,952
  3,056
  3,168
  3,289
  3,419
  3,557
  3,705
  3,862
  4,027
  4,204
  4,390
  4,587
  4,795
  5,016
  5,248
  5,493
  5,751
  6,023
  6,309
  6,611
  6,929
  7,262
  7,614
  7,984
  8,373
  8,782
  9,211
  9,664
  10,138
Debt-to-equity ratio
  2.199
  2.170
  2.180
  2.180
  2.190
  2.190
  2.200
  2.210
  2.210
  2.220
  2.220
  2.230
  2.230
  2.240
  2.250
  2.250
  2.250
  2.260
  2.260
  2.270
  2.270
  2.280
  2.280
  2.280
  2.290
  2.290
  2.290
  2.300
  2.300
  2.300
  2.300
Adjusted equity ratio
  0.287
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  5
  7
  7
  8
  8
  8
  8
  8
  9
  9
  9
  9
  9
  10
  10
  10
  11
  11
  11
  12
  12
  12
  13
  13
  14
  14
  15
  15
  16
  16
  17
Depreciation, amort., depletion, $m
  147
  152
  157
  162
  168
  175
  182
  189
  197
  205
  214
  223
  233
  244
  255
  266
  279
  292
  305
  320
  335
  351
  368
  386
  404
  424
  445
  466
  489
  513
  539
Funds from operations, $m
  87
  159
  164
  170
  176
  183
  190
  197
  205
  214
  223
  233
  243
  253
  265
  277
  289
  303
  317
  332
  347
  364
  381
  399
  418
  438
  459
  481
  505
  529
  555
Change in working capital, $m
  -71
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
Cash from operations, $m
  158
  162
  167
  173
  180
  187
  194
  202
  210
  219
  228
  238
  249
  260
  272
  284
  297
  311
  325
  341
  357
  374
  391
  410
  430
  450
  472
  495
  519
  544
  571
Maintenance CAPEX, $m
  0
  -147
  -152
  -157
  -162
  -168
  -175
  -182
  -189
  -197
  -205
  -214
  -223
  -233
  -244
  -255
  -266
  -279
  -292
  -305
  -320
  -335
  -351
  -368
  -386
  -404
  -424
  -445
  -466
  -489
  -513
New CAPEX, $m
  -254
  -81
  -89
  -96
  -104
  -111
  -119
  -127
  -135
  -144
  -153
  -162
  -171
  -181
  -191
  -202
  -213
  -225
  -237
  -250
  -263
  -277
  -292
  -307
  -323
  -340
  -357
  -376
  -395
  -415
  -436
Cash from investing activities, $m
  -232
  -228
  -241
  -253
  -266
  -279
  -294
  -309
  -324
  -341
  -358
  -376
  -394
  -414
  -435
  -457
  -479
  -504
  -529
  -555
  -583
  -612
  -643
  -675
  -709
  -744
  -781
  -821
  -861
  -904
  -949
Free cash flow, $m
  -74
  -66
  -73
  -80
  -86
  -93
  -100
  -107
  -114
  -122
  -129
  -137
  -146
  -154
  -163
  -173
  -183
  -193
  -204
  -215
  -227
  -239
  -252
  -265
  -279
  -294
  -309
  -325
  -342
  -360
  -379
Issuance/(repayment) of debt, $m
  190
  62
  68
  73
  79
  85
  91
  97
  103
  110
  117
  124
  131
  138
  146
  154
  163
  172
  181
  191
  201
  212
  223
  235
  247
  260
  273
  287
  302
  317
  333
Issuance/(repurchase) of shares, $m
  0
  19
  21
  24
  26
  28
  30
  33
  35
  38
  41
  43
  46
  49
  52
  55
  59
  62
  66
  69
  73
  78
  82
  86
  91
  96
  101
  107
  113
  119
  125
Cash from financing (excl. dividends), $m  
  183
  81
  89
  97
  105
  113
  121
  130
  138
  148
  158
  167
  177
  187
  198
  209
  222
  234
  247
  260
  274
  290
  305
  321
  338
  356
  374
  394
  415
  436
  458
Total cash flow (excl. dividends), $m
  110
  14
  16
  17
  19
  20
  22
  23
  25
  26
  28
  29
  31
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
  56
  59
  62
  65
  68
  72
  76
  79
Retained Cash Flow (-), $m
  -95
  -26
  -29
  -31
  -34
  -36
  -39
  -41
  -44
  -47
  -50
  -52
  -56
  -59
  -62
  -66
  -69
  -73
  -77
  -81
  -85
  -90
  -95
  -100
  -105
  -110
  -116
  -122
  -128
  -135
  -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
 
  -11
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -36
  -37
  -39
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -59
  -62
Discount rate, %
 
  10.30
  10.82
  11.36
  11.92
  12.52
  13.15
  13.80
  14.49
  15.22
  15.98
  16.78
  17.62
  18.50
  19.42
  20.39
  21.41
  22.48
  23.61
  24.79
  26.03
  27.33
  28.70
  30.13
  31.64
  33.22
  34.88
  36.62
  38.45
  40.38
  42.40
PV of cash for distribution, $m
 
  -10
  -10
  -10
  -9
  -9
  -8
  -7
  -7
  -6
  -5
  -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
  99.4
  98.7
  98.0
  97.3
  96.5
  95.7
  94.9
  94.0
  93.2
  92.3
  91.4
  90.5
  89.6
  88.7
  87.8
  86.9
  86.0
  85.0
  84.1
  83.2
  82.3
  81.4
  80.5
  79.6
  78.7
  77.8
  76.9
  76.0
  75.1
  74.3

Chartwell Retirement Residences is an independent real estate investment trust. The firm invests in the real estate markets of Canada and the United States. It is primarily engaged in ownership, operation, and management of retirement and long term care seniors housing communities. Chartwell Retirement Residences was founded on July 7, 2003 and is based in Mississauga, Canada.

FINANCIAL RATIOS  of  Chartwell Retirement Residences (CSH-UN)

Valuation Ratios
P/E Ratio 612.7
Price to Sales 4
Price to Book 3.7
Price to Tangible Book
Price to Cash Flow 19.4
Price to Free Cash Flow -31.9
Growth Rates
Sales Growth Rate 10.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -48.9%
Cap. Spend. - 3 Yr. Gr. Rate 10.8%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 202.4%
Total Debt to Equity 219.9%
Interest Coverage 1
Management Effectiveness
Return On Assets 2.9%
Ret/ On Assets - 3 Yr. Avg. 9.4%
Return On Total Capital 0.2%
Ret/ On T. Cap. - 3 Yr. Avg. 4.8%
Return On Equity 0.6%
Return On Equity - 3 Yr. Avg. 20.4%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 34.7%
Gross Margin - 3 Yr. Avg. 32.8%
EBITDA Margin 28.9%
EBITDA Margin - 3 Yr. Avg. 33.5%
Operating Margin 10%
Oper. Margin - 3 Yr. Avg. 9.4%
Pre-Tax Margin -0.1%
Pre-Tax Margin - 3 Yr. Avg. -1.2%
Net Profit Margin 0.7%
Net Profit Margin - 3 Yr. Avg. 17.4%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. -44.3%
Payout Ratio 1660%

CSH-UN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CSH-UN stock intrinsic value calculation we used $758 million for the last fiscal year's total revenue generated by Chartwell Retirement Residences. The default revenue input number comes from 2016 income statement of Chartwell Retirement Residences. 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 CSH-UN stock valuation model: a) initial revenue growth rate of 3.2% 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 10.3%, whose default value for CSH-UN is calculated based on our internal credit rating of Chartwell Retirement Residences, 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 Chartwell Retirement Residences.
    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 CSH-UN stock the variable cost ratio is equal to 89.4%.

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 CSH-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 4.1% for Chartwell Retirement Residences.

Corporate tax rate of 27% is the nominal tax rate for Chartwell Retirement Residences. 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 CSH-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 CSH-UN are equal to 335.4%.

Life of production assets of 17.3 years is the average useful life of capital assets used in Chartwell Retirement Residences 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 CSH-UN is equal to -12.1%. 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 - $825 million for Chartwell Retirement Residences - 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 191.875 million for Chartwell Retirement Residences 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 Chartwell Retirement Residences at the current share price and the inputted number of shares is $3.1 billion.

RELATED COMPANIES Price Int.Val. Rating
Stock chart of CSH-UN Financial statements of CSH-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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