Intrinsic value of Cominar Real Estate Investment Trust - CUF-UN

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$13.23

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$13.23

 
Intrinsic value

$4.95

 
Up/down potential

-63%

 
Rating

str. sell

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

We calculate the intrinsic value of CUF-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 2.4

 

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, %
  -2.47
  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
  867
  884
  905
  928
  954
  983
  1,015
  1,049
  1,087
  1,127
  1,170
  1,216
  1,266
  1,318
  1,374
  1,434
  1,496
  1,563
  1,633
  1,708
  1,786
  1,869
  1,956
  2,048
  2,145
  2,247
  2,355
  2,468
  2,587
  2,712
  2,844
Variable operating expenses, $m
 
  613
  626
  642
  659
  679
  700
  724
  749
  776
  805
  820
  853
  888
  926
  966
  1,008
  1,053
  1,100
  1,150
  1,203
  1,259
  1,318
  1,380
  1,445
  1,514
  1,586
  1,663
  1,743
  1,827
  1,916
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
  624
  613
  626
  642
  659
  679
  700
  724
  749
  776
  805
  820
  853
  888
  926
  966
  1,008
  1,053
  1,100
  1,150
  1,203
  1,259
  1,318
  1,380
  1,445
  1,514
  1,586
  1,663
  1,743
  1,827
  1,916
Operating income, $m
  243
  272
  278
  286
  295
  304
  314
  326
  338
  351
  365
  397
  413
  430
  448
  468
  488
  510
  533
  557
  583
  610
  638
  668
  700
  733
  768
  805
  844
  885
  928
EBITDA, $m
  243
  289
  295
  303
  311
  321
  331
  342
  355
  368
  382
  397
  413
  430
  448
  468
  488
  510
  533
  557
  583
  610
  638
  668
  700
  733
  768
  805
  844
  885
  928
Interest expense (income), $m
  181
  178
  182
  186
  191
  196
  202
  209
  216
  224
  233
  242
  252
  262
  273
  285
  297
  311
  325
  339
  355
  372
  389
  407
  427
  447
  469
  492
  515
  541
  567
Earnings before tax, $m
  243
  93
  97
  100
  104
  108
  112
  117
  122
  127
  132
  155
  161
  168
  175
  183
  191
  199
  208
  218
  228
  238
  249
  261
  273
  286
  299
  314
  329
  344
  361
Tax expense, $m
  1
  25
  26
  27
  28
  29
  30
  31
  33
  34
  36
  42
  44
  45
  47
  49
  52
  54
  56
  59
  61
  64
  67
  70
  74
  77
  81
  85
  89
  93
  97
Net income, $m
  242
  68
  71
  73
  76
  79
  82
  85
  89
  93
  97
  113
  118
  123
  128
  134
  139
  146
  152
  159
  166
  174
  182
  190
  199
  209
  219
  229
  240
  251
  263

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  10
  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
  8,288
  8,422
  8,616
  8,837
  9,086
  9,361
  9,664
  9,993
  10,349
  10,733
  11,145
  11,585
  12,056
  12,556
  13,088
  13,653
  14,251
  14,885
  15,554
  16,262
  17,009
  17,798
  18,629
  19,506
  20,429
  21,402
  22,426
  23,503
  24,638
  25,831
  27,086
Adjusted assets (=assets-cash), $m
  8,278
  8,422
  8,616
  8,837
  9,086
  9,361
  9,664
  9,993
  10,349
  10,733
  11,145
  11,585
  12,056
  12,556
  13,088
  13,653
  14,251
  14,885
  15,554
  16,262
  17,009
  17,798
  18,629
  19,506
  20,429
  21,402
  22,426
  23,503
  24,638
  25,831
  27,086
Revenue / Adjusted assets
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
Average production assets, $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
Working capital, $m
  0
  -11
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -34
Total debt, $m
  4,351
  4,427
  4,532
  4,651
  4,785
  4,934
  5,097
  5,275
  5,468
  5,675
  5,897
  6,135
  6,389
  6,659
  6,947
  7,252
  7,575
  7,917
  8,278
  8,661
  9,064
  9,490
  9,939
  10,412
  10,911
  11,436
  11,989
  12,571
  13,183
  13,828
  14,505
Total liabilities, $m
  4,472
  4,548
  4,653
  4,772
  4,906
  5,055
  5,218
  5,396
  5,589
  5,796
  6,018
  6,256
  6,510
  6,780
  7,068
  7,373
  7,696
  8,038
  8,399
  8,782
  9,185
  9,611
  10,060
  10,533
  11,032
  11,557
  12,110
  12,692
  13,304
  13,949
  14,626
Total equity, $m
  3,816
  3,874
  3,963
  4,065
  4,180
  4,306
  4,445
  4,597
  4,761
  4,937
  5,127
  5,329
  5,546
  5,776
  6,021
  6,280
  6,556
  6,847
  7,155
  7,481
  7,824
  8,187
  8,569
  8,973
  9,397
  9,845
  10,316
  10,812
  11,333
  11,882
  12,459
Total liabilities and equity, $m
  8,288
  8,422
  8,616
  8,837
  9,086
  9,361
  9,663
  9,993
  10,350
  10,733
  11,145
  11,585
  12,056
  12,556
  13,089
  13,653
  14,252
  14,885
  15,554
  16,263
  17,009
  17,798
  18,629
  19,506
  20,429
  21,402
  22,426
  23,504
  24,637
  25,831
  27,085
Debt-to-equity ratio
  1.140
  1.140
  1.140
  1.140
  1.140
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.160
  1.160
  1.160
  1.160
  1.160
  1.160
  1.160
  1.160
  1.160
  1.160
  1.160
  1.160
  1.160
  1.160
  1.160
Adjusted equity ratio
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  242
  68
  71
  73
  76
  79
  82
  85
  89
  93
  97
  113
  118
  123
  128
  134
  139
  146
  152
  159
  166
  174
  182
  190
  199
  209
  219
  229
  240
  251
  263
Depreciation, amort., depletion, $m
  0
  17
  17
  17
  17
  17
  17
  17
  17
  17
  17
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Funds from operations, $m
  291
  85
  87
  90
  93
  95
  98
  102
  105
  109
  113
  113
  118
  123
  128
  134
  139
  146
  152
  159
  166
  174
  182
  190
  199
  209
  219
  229
  240
  251
  263
Change in working capital, $m
  7
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
Cash from operations, $m
  284
  85
  88
  90
  93
  96
  99
  102
  106
  110
  114
  114
  118
  123
  129
  134
  140
  146
  153
  160
  167
  175
  183
  191
  200
  210
  220
  230
  241
  253
  265
Maintenance CAPEX, $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
New CAPEX, $m
  -218
  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 investing activities, $m
  -120
  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
Free cash flow, $m
  164
  85
  88
  90
  93
  96
  99
  102
  106
  110
  114
  114
  118
  123
  129
  134
  140
  146
  153
  160
  167
  175
  183
  191
  200
  210
  220
  230
  241
  253
  265
Issuance/(repayment) of debt, $m
  -74
  76
  105
  120
  134
  149
  163
  178
  192
  207
  222
  238
  254
  270
  287
  305
  323
  342
  362
  382
  403
  426
  449
  473
  499
  525
  553
  582
  612
  644
  678
Issuance/(repurchase) of shares, $m
  192
  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  
  76
  76
  105
  120
  134
  149
  163
  178
  192
  207
  222
  238
  254
  270
  287
  305
  323
  342
  362
  382
  403
  426
  449
  473
  499
  525
  553
  582
  612
  644
  678
Total cash flow (excl. dividends), $m
  241
  161
  192
  210
  227
  244
  262
  280
  298
  317
  336
  352
  372
  394
  416
  439
  463
  488
  515
  542
  571
  601
  632
  665
  699
  735
  773
  812
  854
  897
  943
Retained Cash Flow (-), $m
  -158
  -68
  -89
  -102
  -114
  -127
  -139
  -151
  -164
  -177
  -189
  -203
  -216
  -230
  -245
  -260
  -275
  -291
  -308
  -326
  -344
  -363
  -382
  -403
  -425
  -447
  -471
  -496
  -522
  -549
  -577
Prev. year cash balance distribution, $m
 
  10
  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
 
  103
  103
  108
  113
  118
  123
  129
  134
  140
  147
  149
  156
  163
  171
  179
  188
  197
  206
  216
  227
  238
  249
  262
  274
  288
  302
  317
  332
  348
  365
Discount rate, %
 
  9.50
  9.98
  10.47
  11.00
  11.55
  12.12
  12.73
  13.37
  14.04
  14.74
  15.47
  16.25
  17.06
  17.91
  18.81
  19.75
  20.74
  21.77
  22.86
  24.01
  25.21
  26.47
  27.79
  29.18
  30.64
  32.17
  33.78
  35.47
  37.24
  39.10
PV of cash for distribution, $m
 
  94
  85
  80
  74
  68
  62
  56
  49
  43
  37
  31
  26
  21
  17
  14
  11
  8
  6
  4
  3
  2
  1
  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

Cominar Real Estate Investment Trust engages in the ownership and management of commercial real estate properties in the province of Quebec. As of May 18, 2006, its portfolio comprised 129 properties in the Greater Montreal and Quebec City areas, consisting of 14 office, 28 retail, and 87 industrial and mixed-use buildings representing approximately 9.7 million square feet of leasable area in the Montreal and Quebec City regions. The company was founded in 1997 and is headquartered in Quebec City, Canada.

FINANCIAL RATIOS  of  Cominar Real Estate Investment Trust (CUF-UN)

Valuation Ratios
P/E Ratio 10
Price to Sales 2.8
Price to Book 0.6
Price to Tangible Book
Price to Cash Flow 8.5
Price to Free Cash Flow 36.5
Growth Rates
Sales Growth Rate -2.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 14.1%
Cap. Spend. - 3 Yr. Gr. Rate -9.7%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 114%
Total Debt to Equity 114%
Interest Coverage 2
Management Effectiveness
Return On Assets 5.1%
Ret/ On Assets - 3 Yr. Avg. 5.3%
Return On Total Capital 3%
Ret/ On T. Cap. - 3 Yr. Avg. 3.1%
Return On Equity 6.5%
Return On Equity - 3 Yr. Avg. 6.9%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 54.1%
Gross Margin - 3 Yr. Avg. 54.8%
EBITDA Margin 48.9%
EBITDA Margin - 3 Yr. Avg. 49.8%
Operating Margin 28%
Oper. Margin - 3 Yr. Avg. 28.5%
Pre-Tax Margin 28%
Pre-Tax Margin - 3 Yr. Avg. 28.5%
Net Profit Margin 27.9%
Net Profit Margin - 3 Yr. Avg. 28.5%
Effective Tax Rate 0.4%
Eff/ Tax Rate - 3 Yr. Avg. 0.3%
Payout Ratio 97.5%

CUF-UN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CUF-UN stock intrinsic value calculation we used $867 million for the last fiscal year's total revenue generated by Cominar Real Estate Investment Trust. The default revenue input number comes from 2016 income statement of Cominar 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 CUF-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 9.5%, whose default value for CUF-UN is calculated based on our internal credit rating of Cominar 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 Cominar 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 CUF-UN stock the variable cost ratio is equal to 69.3%.

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 CUF-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 Cominar Real Estate Investment Trust.

Corporate tax rate of 27% is the nominal tax rate for Cominar 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 CUF-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 CUF-UN are equal to 0%.

Life of production assets of 10 years is the average useful life of capital assets used in Cominar 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 CUF-UN is equal to -1.2%. 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 - $3816 million for Cominar 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 184.151 million for Cominar 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 Cominar Real Estate Investment Trust at the current share price and the inputted number of shares is $2.4 billion.


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Stock chart of CUF-UN Financial statements of CUF-UN
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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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