Intrinsic value of Dream Global Real Estate Investment Trus - DRG-UN

Previous Close

$10.53

  Intrinsic Value

$5.23

stock screener

  Rating & Target

str. sell

-50%

  Value-price divergence*

0%

Previous close

$10.53

 
Intrinsic value

$5.23

 
Up/down potential

-50%

 
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 DRG-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 1.5

 

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, %
  2.00
  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
  204
  208
  213
  218
  224
  231
  239
  247
  256
  265
  275
  286
  298
  310
  323
  337
  352
  368
  384
  402
  420
  440
  460
  482
  505
  529
  554
  581
  609
  638
  669
Variable operating expenses, $m
 
  37
  37
  38
  40
  41
  42
  43
  45
  47
  48
  50
  52
  55
  57
  59
  62
  65
  68
  71
  74
  77
  81
  85
  89
  93
  98
  102
  107
  112
  118
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
  30
  37
  37
  38
  40
  41
  42
  43
  45
  47
  48
  50
  52
  55
  57
  59
  62
  65
  68
  71
  74
  77
  81
  85
  89
  93
  98
  102
  107
  112
  118
Operating income, $m
  174
  171
  175
  180
  185
  191
  197
  203
  211
  218
  227
  236
  245
  256
  266
  278
  290
  303
  317
  331
  346
  362
  379
  397
  416
  436
  457
  478
  502
  526
  551
EBITDA, $m
  174
  171
  175
  180
  185
  191
  197
  203
  211
  218
  227
  236
  245
  256
  266
  278
  290
  303
  317
  331
  346
  362
  379
  397
  416
  436
  457
  478
  502
  526
  551
Interest expense (income), $m
  0
  47
  48
  49
  51
  52
  54
  56
  58
  60
  63
  65
  68
  71
  74
  78
  81
  85
  89
  93
  98
  102
  107
  113
  118
  124
  130
  136
  143
  150
  158
Earnings before tax, $m
  171
  124
  127
  131
  134
  138
  143
  147
  153
  158
  164
  171
  177
  185
  192
  200
  209
  218
  228
  238
  249
  260
  272
  285
  298
  312
  327
  342
  358
  375
  393
Tax expense, $m
  30
  34
  34
  35
  36
  37
  39
  40
  41
  43
  44
  46
  48
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  77
  80
  84
  88
  92
  97
  101
  106
Net income, $m
  140
  91
  93
  95
  98
  101
  104
  108
  111
  115
  120
  124
  129
  135
  140
  146
  153
  159
  166
  174
  182
  190
  199
  208
  217
  228
  238
  250
  262
  274
  287

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  50
  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
  2,887
  2,890
  2,956
  3,032
  3,118
  3,212
  3,316
  3,429
  3,551
  3,683
  3,824
  3,975
  4,137
  4,309
  4,491
  4,685
  4,890
  5,107
  5,337
  5,580
  5,837
  6,107
  6,392
  6,693
  7,010
  7,344
  7,695
  8,065
  8,454
  8,863
  9,294
Adjusted assets (=assets-cash), $m
  2,837
  2,890
  2,956
  3,032
  3,118
  3,212
  3,316
  3,429
  3,551
  3,683
  3,824
  3,975
  4,137
  4,309
  4,491
  4,685
  4,890
  5,107
  5,337
  5,580
  5,837
  6,107
  6,392
  6,693
  7,010
  7,344
  7,695
  8,065
  8,454
  8,863
  9,294
Revenue / Adjusted assets
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
  0.072
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
  -96
  12
  13
  13
  13
  14
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
  34
  36
  38
  39
Total debt, $m
  1,399
  1,376
  1,411
  1,451
  1,496
  1,545
  1,600
  1,659
  1,723
  1,793
  1,867
  1,946
  2,031
  2,121
  2,217
  2,319
  2,426
  2,540
  2,661
  2,789
  2,923
  3,065
  3,215
  3,373
  3,539
  3,714
  3,899
  4,093
  4,297
  4,512
  4,738
Total liabilities, $m
  1,540
  1,517
  1,552
  1,592
  1,637
  1,686
  1,741
  1,800
  1,864
  1,934
  2,008
  2,087
  2,172
  2,262
  2,358
  2,460
  2,567
  2,681
  2,802
  2,930
  3,064
  3,206
  3,356
  3,514
  3,680
  3,855
  4,040
  4,234
  4,438
  4,653
  4,879
Total equity, $m
  1,347
  1,373
  1,404
  1,440
  1,481
  1,526
  1,575
  1,629
  1,687
  1,749
  1,816
  1,888
  1,965
  2,047
  2,133
  2,225
  2,323
  2,426
  2,535
  2,651
  2,772
  2,901
  3,036
  3,179
  3,330
  3,488
  3,655
  3,831
  4,016
  4,210
  4,415
Total liabilities and equity, $m
  2,887
  2,890
  2,956
  3,032
  3,118
  3,212
  3,316
  3,429
  3,551
  3,683
  3,824
  3,975
  4,137
  4,309
  4,491
  4,685
  4,890
  5,107
  5,337
  5,581
  5,836
  6,107
  6,392
  6,693
  7,010
  7,343
  7,695
  8,065
  8,454
  8,863
  9,294
Debt-to-equity ratio
  1.039
  1.000
  1.000
  1.010
  1.010
  1.010
  1.020
  1.020
  1.020
  1.020
  1.030
  1.030
  1.030
  1.040
  1.040
  1.040
  1.040
  1.050
  1.050
  1.050
  1.050
  1.060
  1.060
  1.060
  1.060
  1.060
  1.070
  1.070
  1.070
  1.070
  1.070
Adjusted equity ratio
  0.457
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  140
  91
  93
  95
  98
  101
  104
  108
  111
  115
  120
  124
  129
  135
  140
  146
  153
  159
  166
  174
  182
  190
  199
  208
  217
  228
  238
  250
  262
  274
  287
Depreciation, amort., depletion, $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
Funds from operations, $m
  52
  91
  93
  95
  98
  101
  104
  108
  111
  115
  120
  124
  129
  135
  140
  146
  153
  159
  166
  174
  182
  190
  199
  208
  217
  228
  238
  250
  262
  274
  287
Change in working capital, $m
  -8
  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
  2
  2
Cash from operations, $m
  60
  90
  93
  95
  98
  101
  104
  107
  111
  115
  119
  124
  129
  134
  140
  145
  152
  158
  165
  173
  180
  189
  197
  206
  216
  226
  237
  248
  260
  272
  285
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
  -253
  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
  -128
  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
  -68
  90
  93
  95
  98
  101
  104
  107
  111
  115
  119
  124
  129
  134
  140
  145
  152
  158
  165
  173
  180
  189
  197
  206
  216
  226
  237
  248
  260
  272
  285
Issuance/(repayment) of debt, $m
  88
  27
  35
  40
  45
  50
  54
  59
  64
  69
  74
  79
  85
  90
  96
  102
  108
  114
  121
  127
  135
  142
  150
  158
  166
  175
  184
  194
  204
  215
  226
Issuance/(repurchase) of shares, $m
  98
  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  
  174
  27
  35
  40
  45
  50
  54
  59
  64
  69
  74
  79
  85
  90
  96
  102
  108
  114
  121
  127
  135
  142
  150
  158
  166
  175
  184
  194
  204
  215
  226
Total cash flow (excl. dividends), $m
  104
  118
  127
  135
  142
  150
  158
  166
  175
  184
  193
  203
  213
  224
  235
  247
  259
  272
  286
  300
  315
  331
  347
  364
  382
  401
  421
  442
  464
  487
  511
Retained Cash Flow (-), $m
  -67
  -26
  -32
  -36
  -41
  -45
  -49
  -54
  -58
  -63
  -67
  -72
  -77
  -82
  -87
  -92
  -98
  -103
  -109
  -115
  -122
  -129
  -136
  -143
  -151
  -159
  -167
  -176
  -185
  -194
  -205
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
 
  92
  96
  99
  102
  105
  109
  113
  117
  121
  126
  131
  137
  143
  149
  155
  162
  169
  177
  185
  193
  202
  212
  221
  232
  243
  254
  267
  279
  293
  307
Discount rate, %
 
  9.20
  9.66
  10.14
  10.65
  11.18
  11.74
  12.33
  12.95
  13.59
  14.27
  14.99
  15.74
  16.52
  17.35
  18.22
  19.13
  20.08
  21.09
  22.14
  23.25
  24.41
  25.63
  26.91
  28.26
  29.67
  31.15
  32.71
  34.35
  36.07
  37.87
PV of cash for distribution, $m
 
  84
  80
  74
  68
  62
  56
  50
  44
  39
  33
  28
  24
  20
  16
  13
  10
  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

Dream Global Real Estate Investment Trust is real estate investment trust externally managed by Dream Unlimited Corp. The firm invests in real estate markets across the globe excluding Canada with a focus on Germany. It seeks to invest in a combination of office, mixed use, and industrial properties. The firm was formerly known as Dundee International REIT. Dream Global Real Estate Investment Trust was formed on April 21, 2011 and is based in Toronto, Canada.

FINANCIAL RATIOS  of  Dream Global Real Estate Investment Trus (DRG-UN)

Valuation Ratios
P/E Ratio 8.5
Price to Sales 5.8
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 19.8
Price to Free Cash Flow -6.2
Growth Rates
Sales Growth Rate 2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0.8%
Cap. Spend. - 3 Yr. Gr. Rate -25.3%
Financial Strength
Quick Ratio 0
Current Ratio 0.2
LT Debt to Equity 92.1%
Total Debt to Equity 103.9%
Interest Coverage 0
Management Effectiveness
Return On Assets 5%
Ret/ On Assets - 3 Yr. Avg. 6.3%
Return On Total Capital 5.2%
Ret/ On T. Cap. - 3 Yr. Avg. 6.6%
Return On Equity 10.7%
Return On Equity - 3 Yr. Avg. 14.1%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 65.7%
Gross Margin - 3 Yr. Avg. 67.4%
EBITDA Margin 83.8%
EBITDA Margin - 3 Yr. Avg. 84.4%
Operating Margin 85.3%
Oper. Margin - 3 Yr. Avg. 85.6%
Pre-Tax Margin 83.8%
Pre-Tax Margin - 3 Yr. Avg. 84.4%
Net Profit Margin 68.6%
Net Profit Margin - 3 Yr. Avg. 74.4%
Effective Tax Rate 17.5%
Eff/ Tax Rate - 3 Yr. Avg. 11.6%
Payout Ratio 58.6%

DRG-UN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DRG-UN stock intrinsic value calculation we used $204 million for the last fiscal year's total revenue generated by Dream Global Real Estate Investment Trus. The default revenue input number comes from 2016 income statement of Dream Global 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 DRG-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 9.2%, whose default value for DRG-UN is calculated based on our internal credit rating of Dream Global 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 Global 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 DRG-UN stock the variable cost ratio is equal to 17.6%.

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 DRG-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 3.5% for Dream Global Real Estate Investment Trus.

Corporate tax rate of 27% is the nominal tax rate for Dream Global 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 DRG-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 DRG-UN are equal to 0%.

Life of production assets of 10 years is the average useful life of capital assets used in Dream Global 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 DRG-UN is equal to 5.9%. 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 - $1347 million for Dream Global 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 138.783 million for Dream Global 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 Global Real Estate Investment Trus at the current share price and the inputted number of shares is $1.5 billion.

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Stock chart of DRG-UN Financial statements of DRG-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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