Intrinsic value of Dream Office Real Estate Investment Trus - D-UN

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$20.19

  Intrinsic Value

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  Value-price divergence*

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

We calculate the intrinsic value of D-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 2.1

 

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, %
  -3.91
  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
  664
  677
  693
  711
  731
  753
  777
  804
  832
  863
  896
  932
  969
  1,010
  1,053
  1,098
  1,146
  1,197
  1,251
  1,308
  1,368
  1,431
  1,498
  1,569
  1,643
  1,721
  1,803
  1,890
  1,981
  2,077
  2,178
Variable operating expenses, $m
 
  729
  746
  765
  787
  811
  837
  865
  896
  930
  965
  1,003
  1,044
  1,087
  1,134
  1,182
  1,234
  1,289
  1,347
  1,408
  1,473
  1,541
  1,613
  1,689
  1,769
  1,854
  1,942
  2,036
  2,134
  2,237
  2,346
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
  1,542
  729
  746
  765
  787
  811
  837
  865
  896
  930
  965
  1,003
  1,044
  1,087
  1,134
  1,182
  1,234
  1,289
  1,347
  1,408
  1,473
  1,541
  1,613
  1,689
  1,769
  1,854
  1,942
  2,036
  2,134
  2,237
  2,346
Operating income, $m
  -878
  -52
  -53
  -55
  -56
  -58
  -60
  -62
  -64
  -66
  -69
  -72
  -75
  -78
  -81
  -85
  -88
  -92
  -96
  -101
  -105
  -110
  -115
  -121
  -126
  -133
  -139
  -146
  -153
  -160
  -168
EBITDA, $m
  -854
  -49
  -50
  -52
  -53
  -55
  -56
  -58
  -60
  -63
  -65
  -68
  -70
  -73
  -76
  -80
  -83
  -87
  -91
  -95
  -99
  -104
  -109
  -114
  -119
  -125
  -131
  -137
  -144
  -151
  -158
Interest expense (income), $m
  118
  111
  114
  117
  120
  124
  129
  133
  139
  144
  150
  157
  164
  171
  179
  188
  197
  206
  216
  227
  238
  250
  262
  275
  289
  304
  319
  335
  352
  370
  389
Earnings before tax, $m
  -878
  -163
  -167
  -172
  -177
  -182
  -188
  -195
  -203
  -211
  -219
  -229
  -238
  -249
  -260
  -272
  -285
  -298
  -312
  -327
  -343
  -360
  -377
  -396
  -416
  -436
  -458
  -481
  -505
  -530
  -557
Tax expense, $m
  2
  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
  -880
  -163
  -167
  -172
  -177
  -182
  -188
  -195
  -203
  -211
  -219
  -229
  -238
  -249
  -260
  -272
  -285
  -298
  -312
  -327
  -343
  -360
  -377
  -396
  -416
  -436
  -458
  -481
  -505
  -530
  -557

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  8
  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
  5,487
  5,597
  5,726
  5,873
  6,038
  6,222
  6,422
  6,641
  6,878
  7,133
  7,407
  7,700
  8,012
  8,345
  8,698
  9,074
  9,471
  9,892
  10,337
  10,808
  11,304
  11,828
  12,381
  12,963
  13,577
  14,223
  14,904
  15,620
  16,374
  17,167
  18,001
Adjusted assets (=assets-cash), $m
  5,479
  5,597
  5,726
  5,873
  6,038
  6,222
  6,422
  6,641
  6,878
  7,133
  7,407
  7,700
  8,012
  8,345
  8,698
  9,074
  9,471
  9,892
  10,337
  10,808
  11,304
  11,828
  12,381
  12,963
  13,577
  14,223
  14,904
  15,620
  16,374
  17,167
  18,001
Revenue / Adjusted assets
  0.121
  0.121
  0.121
  0.121
  0.121
  0.121
  0.121
  0.121
  0.121
  0.121
  0.121
  0.121
  0.121
  0.121
  0.121
  0.121
  0.121
  0.121
  0.121
  0.121
  0.121
  0.121
  0.121
  0.121
  0.121
  0.121
  0.121
  0.121
  0.121
  0.121
  0.121
Average production assets, $m
  15
  15
  15
  16
  16
  17
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  31
  33
  35
  36
  38
  40
  42
  44
  46
  48
Working capital, $m
  -323
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
Total debt, $m
  2,650
  2,709
  2,782
  2,865
  2,959
  3,063
  3,177
  3,301
  3,435
  3,579
  3,735
  3,901
  4,078
  4,266
  4,467
  4,680
  4,905
  5,144
  5,396
  5,663
  5,944
  6,242
  6,555
  6,885
  7,233
  7,600
  7,985
  8,392
  8,819
  9,269
  9,741
Total liabilities, $m
  3,115
  3,174
  3,247
  3,330
  3,424
  3,528
  3,642
  3,766
  3,900
  4,044
  4,200
  4,366
  4,543
  4,731
  4,932
  5,145
  5,370
  5,609
  5,861
  6,128
  6,409
  6,707
  7,020
  7,350
  7,698
  8,065
  8,450
  8,857
  9,284
  9,734
  10,206
Total equity, $m
  2,372
  2,424
  2,479
  2,543
  2,615
  2,694
  2,781
  2,876
  2,978
  3,089
  3,207
  3,334
  3,469
  3,613
  3,766
  3,929
  4,101
  4,283
  4,476
  4,680
  4,895
  5,122
  5,361
  5,613
  5,879
  6,159
  6,453
  6,763
  7,090
  7,433
  7,794
Total liabilities and equity, $m
  5,487
  5,598
  5,726
  5,873
  6,039
  6,222
  6,423
  6,642
  6,878
  7,133
  7,407
  7,700
  8,012
  8,344
  8,698
  9,074
  9,471
  9,892
  10,337
  10,808
  11,304
  11,829
  12,381
  12,963
  13,577
  14,224
  14,903
  15,620
  16,374
  17,167
  18,000
Debt-to-equity ratio
  1.117
  1.120
  1.120
  1.130
  1.130
  1.140
  1.140
  1.150
  1.150
  1.160
  1.160
  1.170
  1.180
  1.180
  1.190
  1.190
  1.200
  1.200
  1.210
  1.210
  1.210
  1.220
  1.220
  1.230
  1.230
  1.230
  1.240
  1.240
  1.240
  1.250
  1.250
Adjusted equity ratio
  0.431
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -880
  -163
  -167
  -172
  -177
  -182
  -188
  -195
  -203
  -211
  -219
  -229
  -238
  -249
  -260
  -272
  -285
  -298
  -312
  -327
  -343
  -360
  -377
  -396
  -416
  -436
  -458
  -481
  -505
  -530
  -557
Depreciation, amort., depletion, $m
  24
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
Funds from operations, $m
  125
  -160
  -164
  -168
  -173
  -179
  -185
  -192
  -199
  -207
  -215
  -224
  -234
  -245
  -256
  -267
  -280
  -293
  -307
  -322
  -337
  -354
  -371
  -389
  -408
  -429
  -450
  -473
  -496
  -521
  -547
Change in working capital, $m
  -22
  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
  -1
Cash from operations, $m
  147
  -161
  -164
  -168
  -173
  -179
  -185
  -192
  -199
  -207
  -215
  -224
  -234
  -244
  -255
  -267
  -280
  -293
  -307
  -321
  -337
  -353
  -371
  -389
  -408
  -428
  -450
  -472
  -496
  -521
  -547
Maintenance CAPEX, $m
  0
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
New CAPEX, $m
  -48
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
Cash from investing activities, $m
  521
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
Free cash flow, $m
  668
  -164
  -167
  -172
  -177
  -183
  -189
  -196
  -203
  -211
  -220
  -229
  -239
  -250
  -261
  -273
  -285
  -299
  -313
  -328
  -344
  -361
  -378
  -397
  -417
  -437
  -459
  -482
  -506
  -532
  -558
Issuance/(repayment) of debt, $m
  -399
  67
  73
  83
  94
  104
  114
  124
  134
  145
  155
  166
  177
  189
  200
  213
  225
  239
  252
  267
  282
  297
  313
  330
  348
  366
  386
  406
  427
  450
  473
Issuance/(repurchase) of shares, $m
  -88
  149
  150
  152
  155
  158
  162
  166
  171
  177
  183
  190
  197
  205
  213
  222
  232
  242
  253
  265
  277
  290
  304
  319
  334
  351
  368
  386
  405
  425
  446
Cash from financing (excl. dividends), $m  
  -503
  216
  223
  235
  249
  262
  276
  290
  305
  322
  338
  356
  374
  394
  413
  435
  457
  481
  505
  532
  559
  587
  617
  649
  682
  717
  754
  792
  832
  875
  919
Total cash flow (excl. dividends), $m
  166
  -97
  -94
  -88
  -83
  -79
  -75
  -72
  -69
  -66
  -65
  -63
  -62
  -61
  -60
  -60
  -60
  -60
  -61
  -61
  -62
  -64
  -65
  -67
  -69
  -71
  -73
  -76
  -79
  -82
  -85
Retained Cash Flow (-), $m
  1,110
  -52
  -56
  -64
  -72
  -79
  -87
  -95
  -103
  -110
  -119
  -127
  -135
  -144
  -153
  -162
  -172
  -182
  -193
  -204
  -215
  -227
  -239
  -252
  -266
  -280
  -295
  -310
  -326
  -343
  -361
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
 
  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
Discount rate, %
 
  9.40
  9.87
  10.36
  10.88
  11.43
  12.00
  12.60
  13.23
  13.89
  14.58
  15.31
  16.08
  16.88
  17.73
  18.61
  19.54
  20.52
  21.54
  22.62
  23.75
  24.94
  26.19
  27.50
  28.87
  30.32
  31.83
  33.42
  35.09
  36.85
  38.69
PV of cash for 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
Current shareholders' claim on cash, %
  100
  93.3
  87.2
  81.5
  76.2
  71.3
  66.8
  62.5
  58.5
  54.8
  51.4
  48.1
  45.1
  42.2
  39.6
  37.1
  34.7
  32.6
  30.5
  28.6
  26.8
  25.1
  23.5
  22.0
  20.6
  19.3
  18.1
  16.9
  15.8
  14.8
  13.9

Dream Office Real Estate Investment Trust is an open-ended real estate investment trust. The firm invests in the real estate markets of the Canada. It makes investments in office real estate properties to create its portfolio. The firm was formerly known as Dundee Real Estate Investment Trust. Dream Office Real Estate Investment Trust is based in Toronto, Canada.

FINANCIAL RATIOS  of  Dream Office Real Estate Investment Trus (D-UN)

Valuation Ratios
P/E Ratio -2.4
Price to Sales 3.2
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 14.4
Price to Free Cash Flow 21.4
Growth Rates
Sales Growth Rate -3.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 6.7%
Cap. Spend. - 3 Yr. Gr. Rate -38.1%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 97.9%
Total Debt to Equity 111.7%
Interest Coverage -6
Management Effectiveness
Return On Assets -12.4%
Ret/ On Assets - 3 Yr. Avg. -2.4%
Return On Total Capital -15.3%
Ret/ On T. Cap. - 3 Yr. Avg. -4.6%
Return On Equity -30.1%
Return On Equity - 3 Yr. Avg. -9.1%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 55.6%
Gross Margin - 3 Yr. Avg. 56.2%
EBITDA Margin -110.8%
EBITDA Margin - 3 Yr. Avg. -17.5%
Operating Margin -132.2%
Oper. Margin - 3 Yr. Avg. -39.1%
Pre-Tax Margin -132.2%
Pre-Tax Margin - 3 Yr. Avg. -39.1%
Net Profit Margin -132.5%
Net Profit Margin - 3 Yr. Avg. -39.3%
Effective Tax Rate -0.2%
Eff/ Tax Rate - 3 Yr. Avg. -1.1%
Payout Ratio -18.2%

D-UN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the D-UN stock intrinsic value calculation we used $664 million for the last fiscal year's total revenue generated by Dream Office Real Estate Investment Trus. The default revenue input number comes from 2016 income statement of Dream Office Real Estate Investment Trus. 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 D-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 9.4%, whose default value for D-UN is calculated based on our internal credit rating of Dream Office Real Estate Investment Trus, 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 Dream Office Real Estate Investment Trus.
    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 D-UN stock the variable cost ratio is equal to 107.7%.

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 D-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 Dream Office Real Estate Investment Trus.

Corporate tax rate of 27% is the nominal tax rate for Dream Office Real Estate Investment Trus. 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 D-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 D-UN are equal to 2.2%.

Life of production assets of 0.6 years is the average useful life of capital assets used in Dream Office Real Estate Investment Trus 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 D-UN is equal to -0.5%. 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 - $2372 million for Dream Office Real Estate Investment Trus - 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 103.21 million for Dream Office Real Estate Investment Trus 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 Dream Office Real Estate Investment Trus at the current share price and the inputted number of shares is $2.1 billion.


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Stock chart of D-UN Financial statements of D-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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