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

Previous Close

$11.65

  Intrinsic Value

$4.55

stock screener

  Rating & Target

str. sell

-61%

Previous close

$11.65

 
Intrinsic value

$4.55

 
Up/down potential

-61%

 
Rating

str. sell

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 2.0

 

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
  3.80
  3.92
  4.03
  4.13
  4.21
  4.29
  4.36
  4.43
  4.48
  4.54
  4.58
  4.62
  4.66
  4.69
  4.73
  4.75
  4.78
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
Revenue, $m
  204
  212
  220
  229
  238
  248
  259
  270
  282
  295
  308
  322
  337
  353
  370
  387
  406
  425
  445
  467
  489
  513
  538
  564
  592
  621
  652
  684
  717
  753
  790
Variable operating expenses, $m
 
  37
  39
  40
  42
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  75
  78
  82
  86
  90
  95
  99
  104
  109
  115
  120
  126
  132
  139
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
  39
  40
  42
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  75
  78
  82
  86
  90
  95
  99
  104
  109
  115
  120
  126
  132
  139
Operating income, $m
  174
  174
  181
  189
  196
  205
  213
  223
  233
  243
  254
  266
  278
  291
  305
  319
  334
  350
  367
  385
  403
  423
  443
  465
  488
  512
  537
  563
  591
  620
  651
EBITDA, $m
  174
  174
  181
  189
  196
  205
  213
  223
  233
  243
  254
  266
  278
  291
  305
  319
  334
  350
  367
  385
  403
  423
  443
  465
  488
  512
  537
  563
  591
  620
  651
Interest expense (income), $m
  0
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  74
  77
  81
  85
  89
  94
  99
  104
  109
  114
  120
  126
  132
  139
  146
  154
  161
  170
  178
  187
Earnings before tax, $m
  171
  127
  132
  137
  143
  149
  155
  162
  169
  176
  184
  192
  201
  210
  219
  230
  240
  252
  263
  276
  289
  303
  317
  333
  349
  366
  383
  402
  422
  442
  464
Tax expense, $m
  30
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  75
  78
  82
  86
  90
  94
  99
  104
  109
  114
  119
  125
Net income, $m
  140
  93
  97
  100
  104
  109
  113
  118
  123
  128
  134
  140
  146
  153
  160
  168
  175
  184
  192
  201
  211
  221
  232
  243
  255
  267
  280
  293
  308
  323
  339

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
  2,941
  3,056
  3,179
  3,311
  3,450
  3,598
  3,755
  3,921
  4,097
  4,283
  4,479
  4,686
  4,905
  5,135
  5,377
  5,633
  5,902
  6,185
  6,484
  6,797
  7,127
  7,474
  7,839
  8,223
  8,626
  9,050
  9,495
  9,964
  10,455
  10,972
Adjusted assets (=assets-cash), $m
  2,837
  2,941
  3,056
  3,179
  3,311
  3,450
  3,598
  3,755
  3,921
  4,097
  4,283
  4,479
  4,686
  4,905
  5,135
  5,377
  5,633
  5,902
  6,185
  6,484
  6,797
  7,127
  7,474
  7,839
  8,223
  8,626
  9,050
  9,495
  9,964
  10,455
  10,972
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
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  37
  38
  40
  42
  44
  47
Total debt, $m
  1,399
  1,403
  1,464
  1,528
  1,597
  1,670
  1,748
  1,830
  1,918
  2,010
  2,107
  2,211
  2,319
  2,434
  2,555
  2,682
  2,816
  2,958
  3,106
  3,263
  3,428
  3,601
  3,783
  3,975
  4,176
  4,388
  4,610
  4,844
  5,090
  5,348
  5,619
Total liabilities, $m
  1,540
  1,544
  1,605
  1,669
  1,738
  1,811
  1,889
  1,971
  2,059
  2,151
  2,248
  2,352
  2,460
  2,575
  2,696
  2,823
  2,957
  3,099
  3,247
  3,404
  3,569
  3,742
  3,924
  4,116
  4,317
  4,529
  4,751
  4,985
  5,231
  5,489
  5,760
Total equity, $m
  1,347
  1,397
  1,452
  1,510
  1,573
  1,639
  1,709
  1,784
  1,863
  1,946
  2,034
  2,128
  2,226
  2,330
  2,439
  2,554
  2,676
  2,804
  2,938
  3,080
  3,229
  3,385
  3,550
  3,724
  3,906
  4,097
  4,299
  4,510
  4,733
  4,966
  5,212
Total liabilities and equity, $m
  2,887
  2,941
  3,057
  3,179
  3,311
  3,450
  3,598
  3,755
  3,922
  4,097
  4,282
  4,480
  4,686
  4,905
  5,135
  5,377
  5,633
  5,903
  6,185
  6,484
  6,798
  7,127
  7,474
  7,840
  8,223
  8,626
  9,050
  9,495
  9,964
  10,455
  10,972
Debt-to-equity ratio
  1.039
  1.000
  1.010
  1.010
  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
  1.070
  1.070
  1.070
  1.070
  1.070
  1.070
  1.080
  1.080
  1.080
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
  93
  97
  100
  104
  109
  113
  118
  123
  128
  134
  140
  146
  153
  160
  168
  175
  184
  192
  201
  211
  221
  232
  243
  255
  267
  280
  293
  308
  323
  339
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
  93
  97
  100
  104
  109
  113
  118
  123
  128
  134
  140
  146
  153
  160
  168
  175
  184
  192
  201
  211
  221
  232
  243
  255
  267
  280
  293
  308
  323
  339
Change in working capital, $m
  -8
  0
  0
  1
  1
  1
  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 operations, $m
  60
  92
  96
  100
  104
  108
  113
  117
  122
  128
  133
  139
  146
  152
  159
  167
  174
  183
  191
  200
  210
  220
  230
  241
  253
  265
  278
  292
  306
  321
  336
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
  92
  96
  100
  104
  108
  113
  117
  122
  128
  133
  139
  146
  152
  159
  167
  174
  183
  191
  200
  210
  220
  230
  241
  253
  265
  278
  292
  306
  321
  336
Issuance/(repayment) of debt, $m
  88
  54
  61
  65
  69
  73
  78
  82
  87
  92
  98
  103
  109
  115
  121
  127
  134
  141
  149
  157
  165
  173
  182
  192
  201
  212
  223
  234
  246
  258
  271
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
  54
  61
  65
  69
  73
  78
  82
  87
  92
  98
  103
  109
  115
  121
  127
  134
  141
  149
  157
  165
  173
  182
  192
  201
  212
  223
  234
  246
  258
  271
Total cash flow (excl. dividends), $m
  104
  146
  157
  164
  173
  181
  190
  200
  210
  220
  231
  242
  254
  267
  280
  294
  309
  324
  340
  357
  374
  393
  412
  433
  454
  477
  501
  525
  552
  579
  608
Retained Cash Flow (-), $m
  -67
  -50
  -55
  -58
  -62
  -66
  -70
  -75
  -79
  -84
  -88
  -93
  -98
  -104
  -109
  -115
  -121
  -128
  -135
  -142
  -149
  -157
  -165
  -173
  -182
  -192
  -201
  -212
  -222
  -234
  -246
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
 
  96
  102
  106
  110
  115
  120
  125
  131
  136
  143
  149
  156
  163
  171
  179
  187
  196
  205
  215
  225
  236
  248
  260
  272
  285
  299
  314
  329
  345
  362
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
 
  88
  85
  79
  74
  68
  62
  55
  49
  43
  38
  32
  27
  22
  18
  15
  11
  9
  7
  5
  3
  2
  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

Dream Global REIT is an open-ended real estate investment trust (REIT). The Trust is an owner and operator of approximately 10 million square feet of office and mixed-use space in Germany and Austria. The Company allows investors to invest in commercial real estate outside of Canada. The Company's portfolio consists of approximately 170 properties, including properties located in Germany and Austria. The Company comprises approximately 13 million square feet of gross leasable area. The Company has a 50% interest in nine properties. The Trust's asset manager is Dream Asset Management Corporation.

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

Valuation Ratios
P/E Ratio 9.4
Price to Sales 6.5
Price to Book 1
Price to Tangible Book
Price to Cash Flow 21.9
Price to Free Cash Flow -6.8
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 3.8% 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 175.313 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 $2.0 billion.

RELATED COMPANIES Price Int.Val. Rating
Financial statements of DRG-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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.