Intrinsic value of First Capital Realty Inc. - FCR

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$19.89

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$19.89

 
Intrinsic value

$4.57

 
Up/down potential

-77%

 
Rating

str. sell

 
Value-price divergence* premium content

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

We calculate the intrinsic value of FCR 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 4.9

 

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, %
  3.21
  4.20
  4.28
  4.35
  4.42
  4.48
  4.53
  4.57
  4.62
  4.66
  4.69
  4.72
  4.75
  4.77
  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
  4.95
  4.95
  4.96
  4.96
Revenue, $m
  676
  704
  735
  767
  800
  836
  874
  914
  956
  1,001
  1,048
  1,097
  1,149
  1,204
  1,262
  1,323
  1,387
  1,454
  1,525
  1,599
  1,677
  1,759
  1,846
  1,937
  2,032
  2,133
  2,238
  2,349
  2,465
  2,587
  2,716
Variable operating expenses, $m
 
  425
  444
  463
  483
  505
  528
  552
  578
  604
  633
  663
  694
  727
  762
  799
  838
  878
  921
  966
  1,013
  1,063
  1,115
  1,170
  1,227
  1,288
  1,352
  1,419
  1,489
  1,563
  1,640
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
  200
  425
  444
  463
  483
  505
  528
  552
  578
  604
  633
  663
  694
  727
  762
  799
  838
  878
  921
  966
  1,013
  1,063
  1,115
  1,170
  1,227
  1,288
  1,352
  1,419
  1,489
  1,563
  1,640
Operating income, $m
  476
  279
  291
  304
  317
  331
  346
  362
  379
  396
  415
  434
  455
  477
  500
  524
  549
  576
  604
  633
  664
  697
  731
  767
  805
  844
  886
  930
  976
  1,025
  1,075
EBITDA, $m
  477
  280
  292
  305
  318
  332
  347
  363
  380
  398
  416
  436
  457
  479
  502
  526
  551
  578
  606
  636
  667
  699
  734
  770
  808
  848
  890
  934
  980
  1,029
  1,080
Interest expense (income), $m
  141
  144
  152
  160
  169
  177
  187
  197
  207
  218
  230
  242
  255
  269
  283
  298
  314
  331
  348
  367
  386
  407
  428
  451
  475
  500
  526
  554
  583
  613
  645
Earnings before tax, $m
  476
  135
  139
  143
  148
  154
  159
  165
  172
  178
  185
  192
  200
  208
  217
  226
  235
  245
  255
  266
  278
  290
  303
  316
  330
  345
  360
  376
  394
  411
  430
Tax expense, $m
  90
  37
  37
  39
  40
  42
  43
  45
  46
  48
  50
  52
  54
  56
  58
  61
  63
  66
  69
  72
  75
  78
  82
  85
  89
  93
  97
  102
  106
  111
  116
Net income, $m
  383
  99
  101
  105
  108
  112
  116
  121
  125
  130
  135
  140
  146
  152
  158
  165
  172
  179
  186
  194
  203
  212
  221
  231
  241
  252
  263
  275
  287
  300
  314

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  25
  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
  9,105
  9,519
  9,926
  10,358
  10,816
  11,300
  11,811
  12,352
  12,922
  13,524
  14,158
  14,826
  15,530
  16,272
  17,052
  17,874
  18,738
  19,647
  20,603
  21,609
  22,666
  23,777
  24,945
  26,173
  27,463
  28,818
  30,243
  31,739
  33,311
  34,963
  36,698
Adjusted assets (=assets-cash), $m
  9,080
  9,519
  9,926
  10,358
  10,816
  11,300
  11,811
  12,352
  12,922
  13,524
  14,158
  14,826
  15,530
  16,272
  17,052
  17,874
  18,738
  19,647
  20,603
  21,609
  22,666
  23,777
  24,945
  26,173
  27,463
  28,818
  30,243
  31,739
  33,311
  34,963
  36,698
Revenue / Adjusted assets
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
Average production assets, $m
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  25
  26
  27
Working capital, $m
  -555
  -97
  -101
  -106
  -110
  -115
  -121
  -126
  -132
  -138
  -145
  -151
  -159
  -166
  -174
  -183
  -191
  -201
  -210
  -221
  -231
  -243
  -255
  -267
  -280
  -294
  -309
  -324
  -340
  -357
  -375
Total debt, $m
  4,018
  4,229
  4,448
  4,681
  4,927
  5,187
  5,462
  5,753
  6,060
  6,384
  6,725
  7,085
  7,463
  7,862
  8,282
  8,724
  9,189
  9,678
  10,193
  10,733
  11,302
  11,900
  12,528
  13,189
  13,883
  14,612
  15,379
  16,184
  17,029
  17,918
  18,851
Total liabilities, $m
  4,909
  5,121
  5,340
  5,573
  5,819
  6,079
  6,354
  6,645
  6,952
  7,276
  7,617
  7,977
  8,355
  8,754
  9,174
  9,616
  10,081
  10,570
  11,085
  11,625
  12,194
  12,792
  13,420
  14,081
  14,775
  15,504
  16,271
  17,076
  17,921
  18,810
  19,743
Total equity, $m
  4,195
  4,398
  4,586
  4,785
  4,997
  5,220
  5,457
  5,706
  5,970
  6,248
  6,541
  6,850
  7,175
  7,518
  7,878
  8,258
  8,657
  9,077
  9,519
  9,983
  10,472
  10,985
  11,525
  12,092
  12,688
  13,314
  13,972
  14,663
  15,390
  16,153
  16,954
Total liabilities and equity, $m
  9,104
  9,519
  9,926
  10,358
  10,816
  11,299
  11,811
  12,351
  12,922
  13,524
  14,158
  14,827
  15,530
  16,272
  17,052
  17,874
  18,738
  19,647
  20,604
  21,608
  22,666
  23,777
  24,945
  26,173
  27,463
  28,818
  30,243
  31,739
  33,311
  34,963
  36,697
Debt-to-equity ratio
  0.958
  0.960
  0.970
  0.980
  0.990
  0.990
  1.000
  1.010
  1.020
  1.020
  1.030
  1.030
  1.040
  1.050
  1.050
  1.060
  1.060
  1.070
  1.070
  1.080
  1.080
  1.080
  1.090
  1.090
  1.090
  1.100
  1.100
  1.100
  1.110
  1.110
  1.110
Adjusted equity ratio
  0.459
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  383
  99
  101
  105
  108
  112
  116
  121
  125
  130
  135
  140
  146
  152
  158
  165
  172
  179
  186
  194
  203
  212
  221
  231
  241
  252
  263
  275
  287
  300
  314
Depreciation, amort., depletion, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
Funds from operations, $m
  108
  100
  102
  106
  110
  114
  118
  122
  127
  132
  137
  142
  148
  154
  160
  167
  174
  181
  189
  197
  205
  214
  224
  234
  244
  255
  266
  278
  291
  304
  318
Change in working capital, $m
  -149
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
Cash from operations, $m
  257
  107
  106
  110
  114
  118
  123
  128
  133
  138
  143
  149
  155
  161
  168
  175
  183
  190
  199
  207
  216
  226
  236
  246
  257
  269
  281
  294
  307
  321
  336
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
New CAPEX, $m
  0
  -1
  0
  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
Cash from investing activities, $m
  -570
  -2
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
Free cash flow, $m
  -313
  106
  105
  109
  113
  117
  121
  126
  131
  136
  141
  147
  153
  159
  166
  173
  180
  188
  196
  204
  213
  222
  232
  242
  253
  265
  277
  289
  302
  316
  331
Issuance/(repayment) of debt, $m
  235
  236
  219
  232
  246
  260
  275
  291
  307
  324
  341
  360
  379
  399
  420
  442
  465
  489
  514
  541
  569
  598
  628
  660
  694
  729
  766
  805
  846
  889
  933
Issuance/(repurchase) of shares, $m
  291
  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  
  527
  236
  219
  232
  246
  260
  275
  291
  307
  324
  341
  360
  379
  399
  420
  442
  465
  489
  514
  541
  569
  598
  628
  660
  694
  729
  766
  805
  846
  889
  933
Total cash flow (excl. dividends), $m
  213
  342
  324
  341
  359
  377
  396
  417
  438
  459
  482
  506
  532
  558
  586
  614
  645
  677
  710
  745
  782
  820
  860
  903
  947
  994
  1,043
  1,094
  1,148
  1,205
  1,264
Retained Cash Flow (-), $m
  -555
  -203
  -188
  -200
  -211
  -224
  -236
  -250
  -263
  -278
  -293
  -309
  -325
  -343
  -361
  -379
  -399
  -420
  -442
  -465
  -488
  -513
  -540
  -567
  -596
  -626
  -658
  -691
  -726
  -763
  -802
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
 
  139
  136
  142
  148
  154
  160
  167
  174
  182
  189
  198
  206
  215
  225
  235
  246
  257
  268
  280
  293
  307
  321
  336
  351
  368
  385
  403
  422
  442
  463
Discount rate, %
 
  8.70
  9.14
  9.59
  10.07
  10.57
  11.10
  11.66
  12.24
  12.85
  13.50
  14.17
  14.88
  15.62
  16.41
  17.23
  18.09
  18.99
  19.94
  20.94
  21.98
  23.08
  24.24
  25.45
  26.72
  28.06
  29.46
  30.93
  32.48
  34.11
  35.81
PV of cash for distribution, $m
 
  128
  114
  108
  100
  93
  85
  77
  69
  61
  53
  46
  39
  33
  27
  22
  17
  13
  10
  8
  6
  4
  3
  2
  1
  1
  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

First Capital Realty Inc. acquires, develops, redevelops, owns, and manages urban retail-centered real estate properties. The company’s property portfolio comprises supermarkets, drugstores, banks, liquor stores, national and discount retailers, restaurants, fitness centers, medical, childcare facilities, and other personal services. It is also involved in the development of mixed-use properties that include residential condominiums and rental apartments. As at December 31, 2015, the company owned interests in 158 properties with approximately 24.4 million square feet of gross leasable area. The company was formerly known as Centrefund Realty Corporation and changed its name to First Capital Realty Inc. in September 2001. First Capital Realty Inc. was founded in 1957 and is headquartered in Toronto, Canada.

FINANCIAL RATIOS  of  First Capital Realty Inc. (FCR)

Valuation Ratios
P/E Ratio 12.6
Price to Sales 7.2
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 18.8
Price to Free Cash Flow 18.8
Growth Rates
Sales Growth Rate 3.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 84.2%
Total Debt to Equity 95.8%
Interest Coverage 4
Management Effectiveness
Return On Assets 5.7%
Ret/ On Assets - 3 Yr. Avg. 4.5%
Return On Total Capital 4.9%
Ret/ On T. Cap. - 3 Yr. Avg. 3.5%
Return On Equity 9.8%
Return On Equity - 3 Yr. Avg. 7.1%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 62.4%
Gross Margin - 3 Yr. Avg. 62.6%
EBITDA Margin 91.4%
EBITDA Margin - 3 Yr. Avg. 71.3%
Operating Margin 70.4%
Oper. Margin - 3 Yr. Avg. 49.3%
Pre-Tax Margin 70.4%
Pre-Tax Margin - 3 Yr. Avg. 49.4%
Net Profit Margin 56.7%
Net Profit Margin - 3 Yr. Avg. 39.4%
Effective Tax Rate 18.9%
Eff/ Tax Rate - 3 Yr. Avg. 20%
Payout Ratio 52.2%

FCR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FCR stock intrinsic value calculation we used $676 million for the last fiscal year's total revenue generated by First Capital Realty Inc.. The default revenue input number comes from 2016 income statement of First Capital Realty Inc.. 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 FCR stock valuation model: a) initial revenue growth rate of 4.2% 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 8.7%, whose default value for FCR is calculated based on our internal credit rating of First Capital Realty Inc., 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 First Capital Realty Inc..
    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 FCR stock the variable cost ratio is equal to 60.4%.

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 FCR 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 3.6% for First Capital Realty Inc..

Corporate tax rate of 27% is the nominal tax rate for First Capital Realty Inc.. 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 FCR 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 FCR are equal to 1%.

Life of production assets of 6.5 years is the average useful life of capital assets used in First Capital Realty Inc. 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 FCR is equal to -13.8%. 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 - $4195 million for First Capital Realty Inc. - 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 245.491 million for First Capital Realty Inc. 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 First Capital Realty Inc. at the current share price and the inputted number of shares is $4.9 billion.


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Stock chart of FCR Financial statements of FCR
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