Intrinsic value of First Capital Realty Inc. - FCR

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$20.09

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$20.09

 
Intrinsic value

$5.06

 
Up/down potential

-75%

 
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
  5.50
  5.45
  5.40
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
  5.16
  5.14
  5.13
  5.11
  5.10
  5.09
  5.08
  5.08
  5.07
  5.06
  5.05
  5.05
  5.04
  5.04
  5.04
  5.03
  5.03
  5.03
  5.02
Revenue, $m
  676
  713
  752
  793
  835
  880
  926
  975
  1,026
  1,080
  1,136
  1,195
  1,256
  1,321
  1,388
  1,459
  1,534
  1,612
  1,694
  1,780
  1,870
  1,965
  2,064
  2,168
  2,278
  2,392
  2,513
  2,639
  2,772
  2,912
  3,058
Variable operating expenses, $m
 
  431
  454
  479
  504
  531
  559
  589
  620
  652
  686
  721
  759
  798
  839
  881
  926
  974
  1,023
  1,075
  1,130
  1,187
  1,247
  1,310
  1,376
  1,445
  1,518
  1,594
  1,674
  1,759
  1,847
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
  431
  454
  479
  504
  531
  559
  589
  620
  652
  686
  721
  759
  798
  839
  881
  926
  974
  1,023
  1,075
  1,130
  1,187
  1,247
  1,310
  1,376
  1,445
  1,518
  1,594
  1,674
  1,759
  1,847
Operating income, $m
  476
  282
  298
  314
  331
  348
  367
  386
  406
  428
  450
  473
  497
  523
  550
  578
  607
  638
  671
  705
  741
  778
  817
  859
  902
  947
  995
  1,045
  1,098
  1,153
  1,211
EBITDA, $m
  477
  284
  299
  315
  332
  350
  368
  388
  408
  429
  452
  475
  499
  525
  552
  580
  610
  641
  673
  708
  743
  781
  821
  862
  905
  951
  999
  1,049
  1,102
  1,157
  1,216
Interest expense (income), $m
  141
  144
  155
  165
  175
  186
  198
  210
  223
  236
  250
  265
  281
  297
  314
  331
  350
  369
  390
  411
  434
  457
  482
  508
  535
  564
  594
  626
  659
  693
  730
Earnings before tax, $m
  476
  139
  143
  149
  155
  162
  169
  176
  183
  191
  199
  208
  217
  226
  236
  247
  258
  269
  281
  294
  307
  321
  335
  351
  367
  383
  401
  420
  439
  460
  481
Tax expense, $m
  90
  37
  39
  40
  42
  44
  46
  47
  49
  52
  54
  56
  59
  61
  64
  67
  70
  73
  76
  79
  83
  87
  91
  95
  99
  104
  108
  113
  119
  124
  130
Net income, $m
  383
  101
  105
  109
  113
  118
  123
  128
  134
  139
  145
  152
  158
  165
  172
  180
  188
  196
  205
  214
  224
  234
  245
  256
  268
  280
  293
  306
  321
  335
  351

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
  9,638
  10,163
  10,712
  11,287
  11,888
  12,518
  13,177
  13,867
  14,590
  15,348
  16,142
  16,975
  17,847
  18,762
  19,722
  20,728
  21,784
  22,891
  24,053
  25,272
  26,551
  27,893
  29,302
  30,780
  32,331
  33,959
  35,668
  37,462
  39,345
  41,321
Adjusted assets (=assets-cash), $m
  9,080
  9,638
  10,163
  10,712
  11,287
  11,888
  12,518
  13,177
  13,867
  14,590
  15,348
  16,142
  16,975
  17,847
  18,762
  19,722
  20,728
  21,784
  22,891
  24,053
  25,272
  26,551
  27,893
  29,302
  30,780
  32,331
  33,959
  35,668
  37,462
  39,345
  41,321
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
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  31
Working capital, $m
  -555
  -98
  -104
  -109
  -115
  -121
  -128
  -135
  -142
  -149
  -157
  -165
  -173
  -182
  -192
  -201
  -212
  -222
  -234
  -246
  -258
  -271
  -285
  -299
  -314
  -330
  -347
  -364
  -383
  -402
  -422
Total debt, $m
  4,018
  4,293
  4,576
  4,871
  5,180
  5,504
  5,842
  6,197
  6,569
  6,958
  7,365
  7,793
  8,240
  8,710
  9,202
  9,718
  10,260
  10,828
  11,424
  12,049
  12,704
  13,392
  14,115
  14,872
  15,667
  16,502
  17,378
  18,297
  19,262
  20,275
  21,339
Total liabilities, $m
  4,909
  5,185
  5,468
  5,763
  6,072
  6,396
  6,734
  7,089
  7,461
  7,850
  8,257
  8,685
  9,132
  9,602
  10,094
  10,610
  11,152
  11,720
  12,316
  12,941
  13,596
  14,284
  15,007
  15,764
  16,559
  17,394
  18,270
  19,189
  20,154
  21,167
  22,231
Total equity, $m
  4,195
  4,453
  4,695
  4,949
  5,214
  5,492
  5,783
  6,088
  6,407
  6,741
  7,091
  7,458
  7,842
  8,246
  8,668
  9,112
  9,577
  10,064
  10,576
  11,113
  11,676
  12,267
  12,887
  13,537
  14,220
  14,937
  15,689
  16,479
  17,307
  18,177
  19,090
Total liabilities and equity, $m
  9,104
  9,638
  10,163
  10,712
  11,286
  11,888
  12,517
  13,177
  13,868
  14,591
  15,348
  16,143
  16,974
  17,848
  18,762
  19,722
  20,729
  21,784
  22,892
  24,054
  25,272
  26,551
  27,894
  29,301
  30,779
  32,331
  33,959
  35,668
  37,461
  39,344
  41,321
Debt-to-equity ratio
  0.958
  0.960
  0.970
  0.980
  0.990
  1.000
  1.010
  1.020
  1.030
  1.030
  1.040
  1.040
  1.050
  1.060
  1.060
  1.070
  1.070
  1.080
  1.080
  1.080
  1.090
  1.090
  1.100
  1.100
  1.100
  1.100
  1.110
  1.110
  1.110
  1.120
  1.120
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
  101
  105
  109
  113
  118
  123
  128
  134
  139
  145
  152
  158
  165
  172
  180
  188
  196
  205
  214
  224
  234
  245
  256
  268
  280
  293
  306
  321
  335
  351
Depreciation, amort., depletion, $m
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
Funds from operations, $m
  107
  102
  106
  110
  115
  120
  125
  130
  135
  141
  147
  154
  160
  167
  175
  182
  190
  199
  208
  217
  227
  237
  248
  259
  271
  284
  297
  310
  325
  340
  356
Change in working capital, $m
  -150
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
Cash from operations, $m
  257
  111
  111
  116
  121
  126
  131
  137
  142
  149
  155
  162
  169
  176
  184
  192
  201
  210
  219
  229
  239
  250
  262
  274
  286
  299
  313
  328
  343
  359
  376
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
New CAPEX, $m
  -539
  -1
  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
  -1
  -1
  -1
  -1
Cash from investing activities, $m
  -570
  -2
  -1
  -1
  -1
  -1
  -1
  -1
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
Free cash flow, $m
  -313
  109
  110
  114
  119
  124
  129
  135
  140
  146
  153
  159
  166
  174
  181
  189
  198
  206
  216
  225
  236
  246
  258
  269
  282
  295
  308
  323
  338
  353
  370
Issuance/(repayment) of debt, $m
  235
  300
  283
  296
  309
  324
  339
  355
  371
  389
  408
  427
  448
  470
  492
  516
  541
  568
  596
  625
  656
  688
  722
  758
  795
  835
  876
  919
  965
  1,013
  1,063
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
  300
  283
  296
  309
  324
  339
  355
  371
  389
  408
  427
  448
  470
  492
  516
  541
  568
  596
  625
  656
  688
  722
  758
  795
  835
  876
  919
  965
  1,013
  1,063
Total cash flow (excl. dividends), $m
  213
  409
  392
  410
  428
  447
  468
  489
  512
  536
  560
  587
  614
  643
  674
  706
  739
  774
  812
  850
  891
  934
  980
  1,027
  1,077
  1,129
  1,184
  1,242
  1,303
  1,366
  1,433
Retained Cash Flow (-), $m
  -555
  -258
  -243
  -254
  -265
  -278
  -291
  -305
  -319
  -334
  -350
  -367
  -385
  -403
  -423
  -443
  -465
  -488
  -512
  -537
  -563
  -591
  -620
  -651
  -683
  -717
  -752
  -790
  -829
  -870
  -913
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
 
  152
  150
  156
  163
  170
  177
  185
  193
  201
  210
  220
  230
  240
  251
  262
  274
  287
  300
  314
  328
  344
  360
  376
  394
  413
  432
  453
  474
  497
  520
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
 
  140
  126
  118
  111
  103
  94
  85
  77
  68
  59
  51
  43
  36
  30
  24
  19
  15
  11
  8
  6
  4
  3
  2
  1
  1
  1
  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 12.8
Price to Sales 7.2
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 19
Price to Free Cash Flow -17.3
Growth Rates
Sales Growth Rate 3.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 44.9%
Cap. Spend. - 3 Yr. Gr. Rate 2.3%
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 5.5% 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 244.908 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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