Intrinsic value of Mullen Group Ltd. - MTL

Previous Close

$15.38

  Intrinsic Value

$1.46

stock screener

  Rating & Target

str. sell

-90%

Previous close

$15.38

 
Intrinsic value

$1.46

 
Up/down potential

-90%

 
Rating

str. sell

We calculate the intrinsic value of MTL 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 1.6

 

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, %
  -14.74
  9.70
  9.23
  8.81
  8.43
  8.08
  7.78
  7.50
  7.25
  7.02
  6.82
  6.64
  6.47
  6.33
  6.19
  6.08
  5.97
  5.87
  5.78
  5.71
  5.63
  5.57
  5.51
  5.46
  5.42
  5.37
  5.34
  5.30
  5.27
  5.25
  5.22
Revenue, $m
  1,035
  1,135
  1,240
  1,349
  1,463
  1,581
  1,704
  1,832
  1,965
  2,103
  2,246
  2,396
  2,551
  2,712
  2,880
  3,055
  3,237
  3,427
  3,626
  3,832
  4,048
  4,274
  4,510
  4,756
  5,014
  5,283
  5,565
  5,860
  6,169
  6,493
  6,832
Variable operating expenses, $m
 
  1,091
  1,189
  1,290
  1,396
  1,506
  1,620
  1,739
  1,863
  1,991
  2,124
  2,228
  2,372
  2,522
  2,678
  2,841
  3,011
  3,187
  3,372
  3,564
  3,765
  3,975
  4,194
  4,423
  4,663
  4,913
  5,175
  5,450
  5,737
  6,038
  6,354
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
  963
  1,091
  1,189
  1,290
  1,396
  1,506
  1,620
  1,739
  1,863
  1,991
  2,124
  2,228
  2,372
  2,522
  2,678
  2,841
  3,011
  3,187
  3,372
  3,564
  3,765
  3,975
  4,194
  4,423
  4,663
  4,913
  5,175
  5,450
  5,737
  6,038
  6,354
Operating income, $m
  72
  44
  52
  59
  67
  76
  84
  93
  102
  112
  122
  168
  179
  190
  202
  214
  227
  240
  254
  268
  283
  299
  316
  333
  351
  370
  390
  410
  432
  455
  478
EBITDA, $m
  157
  149
  162
  177
  192
  207
  223
  240
  257
  276
  294
  314
  334
  355
  377
  400
  424
  449
  475
  502
  530
  560
  591
  623
  657
  692
  729
  768
  808
  851
  895
Interest expense (income), $m
  34
  26
  29
  33
  37
  41
  45
  49
  53
  58
  63
  68
  73
  78
  84
  89
  96
  102
  108
  115
  122
  130
  138
  146
  154
  163
  172
  182
  192
  203
  214
Earnings before tax, $m
  72
  19
  22
  26
  31
  35
  39
  44
  49
  54
  59
  100
  106
  112
  118
  124
  131
  138
  145
  153
  161
  169
  178
  187
  197
  207
  217
  228
  240
  251
  264
Tax expense, $m
  20
  5
  6
  7
  8
  9
  11
  12
  13
  15
  16
  27
  29
  30
  32
  34
  35
  37
  39
  41
  43
  46
  48
  51
  53
  56
  59
  62
  65
  68
  71
Net income, $m
  52
  14
  16
  19
  22
  26
  29
  32
  36
  40
  43
  73
  77
  82
  86
  91
  96
  101
  106
  112
  118
  124
  130
  137
  144
  151
  159
  166
  175
  184
  193

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  270
  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
  1,873
  1,758
  1,920
  2,089
  2,265
  2,448
  2,638
  2,836
  3,042
  3,255
  3,477
  3,708
  3,948
  4,198
  4,458
  4,729
  5,011
  5,305
  5,612
  5,933
  6,267
  6,616
  6,981
  7,362
  7,761
  8,178
  8,615
  9,071
  9,550
  10,051
  10,576
Adjusted assets (=assets-cash), $m
  1,603
  1,758
  1,920
  2,089
  2,265
  2,448
  2,638
  2,836
  3,042
  3,255
  3,477
  3,708
  3,948
  4,198
  4,458
  4,729
  5,011
  5,305
  5,612
  5,933
  6,267
  6,616
  6,981
  7,362
  7,761
  8,178
  8,615
  9,071
  9,550
  10,051
  10,576
Revenue / Adjusted assets
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
Average production assets, $m
  998
  1,095
  1,196
  1,301
  1,410
  1,524
  1,643
  1,766
  1,894
  2,027
  2,166
  2,309
  2,459
  2,614
  2,776
  2,945
  3,121
  3,304
  3,495
  3,694
  3,903
  4,120
  4,347
  4,585
  4,833
  5,093
  5,365
  5,649
  5,947
  6,259
  6,586
Working capital, $m
  243
  119
  130
  142
  154
  166
  179
  192
  206
  221
  236
  252
  268
  285
  302
  321
  340
  360
  381
  402
  425
  449
  474
  499
  526
  555
  584
  615
  648
  682
  717
Total debt, $m
  696
  635
  714
  796
  881
  970
  1,063
  1,159
  1,258
  1,362
  1,470
  1,581
  1,698
  1,819
  1,945
  2,077
  2,213
  2,356
  2,505
  2,660
  2,822
  2,992
  3,169
  3,354
  3,547
  3,749
  3,961
  4,183
  4,415
  4,658
  4,912
Total liabilities, $m
  913
  852
  931
  1,013
  1,098
  1,187
  1,280
  1,376
  1,475
  1,579
  1,687
  1,798
  1,915
  2,036
  2,162
  2,294
  2,430
  2,573
  2,722
  2,877
  3,039
  3,209
  3,386
  3,571
  3,764
  3,966
  4,178
  4,400
  4,632
  4,875
  5,129
Total equity, $m
  960
  905
  989
  1,076
  1,166
  1,261
  1,359
  1,461
  1,566
  1,676
  1,791
  1,910
  2,033
  2,162
  2,296
  2,435
  2,581
  2,732
  2,890
  3,055
  3,227
  3,407
  3,595
  3,792
  3,997
  4,212
  4,437
  4,672
  4,918
  5,176
  5,446
Total liabilities and equity, $m
  1,873
  1,757
  1,920
  2,089
  2,264
  2,448
  2,639
  2,837
  3,041
  3,255
  3,478
  3,708
  3,948
  4,198
  4,458
  4,729
  5,011
  5,305
  5,612
  5,932
  6,266
  6,616
  6,981
  7,363
  7,761
  8,178
  8,615
  9,072
  9,550
  10,051
  10,575
Debt-to-equity ratio
  0.725
  0.700
  0.720
  0.740
  0.760
  0.770
  0.780
  0.790
  0.800
  0.810
  0.820
  0.830
  0.840
  0.840
  0.850
  0.850
  0.860
  0.860
  0.870
  0.870
  0.870
  0.880
  0.880
  0.880
  0.890
  0.890
  0.890
  0.900
  0.900
  0.900
  0.900
Adjusted equity ratio
  0.430
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  52
  14
  16
  19
  22
  26
  29
  32
  36
  40
  43
  73
  77
  82
  86
  91
  96
  101
  106
  112
  118
  124
  130
  137
  144
  151
  159
  166
  175
  184
  193
Depreciation, amort., depletion, $m
  85
  104
  111
  118
  124
  132
  139
  147
  155
  164
  172
  146
  156
  165
  176
  186
  198
  209
  221
  234
  247
  261
  275
  290
  306
  322
  340
  358
  376
  396
  417
Funds from operations, $m
  163
  118
  127
  137
  147
  157
  168
  179
  191
  203
  216
  219
  233
  247
  262
  277
  293
  310
  327
  346
  365
  384
  405
  427
  450
  473
  498
  524
  551
  580
  610
Change in working capital, $m
  -11
  11
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  36
Cash from operations, $m
  174
  107
  116
  125
  135
  145
  155
  166
  177
  189
  201
  204
  217
  230
  244
  259
  274
  290
  307
  324
  342
  361
  380
  401
  422
  445
  468
  493
  519
  546
  574
Maintenance CAPEX, $m
  0
  -63
  -69
  -76
  -82
  -89
  -96
  -104
  -112
  -120
  -128
  -137
  -146
  -156
  -165
  -176
  -186
  -198
  -209
  -221
  -234
  -247
  -261
  -275
  -290
  -306
  -322
  -340
  -358
  -376
  -396
New CAPEX, $m
  -21
  -97
  -101
  -105
  -110
  -114
  -119
  -123
  -128
  -133
  -138
  -144
  -150
  -156
  -162
  -169
  -176
  -183
  -191
  -199
  -208
  -217
  -227
  -237
  -248
  -260
  -272
  -285
  -298
  -312
  -327
Cash from investing activities, $m
  -30
  -160
  -170
  -181
  -192
  -203
  -215
  -227
  -240
  -253
  -266
  -281
  -296
  -312
  -327
  -345
  -362
  -381
  -400
  -420
  -442
  -464
  -488
  -512
  -538
  -566
  -594
  -625
  -656
  -688
  -723
Free cash flow, $m
  144
  -53
  -54
  -56
  -57
  -58
  -60
  -61
  -63
  -64
  -66
  -77
  -79
  -81
  -83
  -86
  -88
  -91
  -94
  -97
  -100
  -104
  -108
  -112
  -116
  -121
  -126
  -131
  -137
  -143
  -149
Issuance/(repayment) of debt, $m
  -77
  75
  79
  82
  85
  89
  92
  96
  100
  104
  108
  112
  116
  121
  126
  131
  137
  143
  149
  155
  162
  169
  177
  185
  193
  202
  212
  222
  232
  243
  255
Issuance/(repurchase) of shares, $m
  153
  66
  67
  68
  68
  69
  69
  70
  70
  70
  71
  46
  46
  47
  48
  49
  50
  51
  52
  53
  55
  56
  58
  60
  62
  64
  66
  69
  72
  74
  78
Cash from financing (excl. dividends), $m  
  42
  141
  146
  150
  153
  158
  161
  166
  170
  174
  179
  158
  162
  168
  174
  180
  187
  194
  201
  208
  217
  225
  235
  245
  255
  266
  278
  291
  304
  317
  333
Total cash flow (excl. dividends), $m
  183
  88
  92
  94
  97
  99
  102
  104
  107
  110
  113
  81
  84
  87
  91
  94
  98
  103
  107
  112
  117
  122
  127
  133
  139
  146
  152
  159
  167
  175
  183
Retained Cash Flow (-), $m
  -153
  -79
  -84
  -87
  -91
  -94
  -98
  -102
  -106
  -110
  -114
  -119
  -124
  -129
  -134
  -139
  -145
  -152
  -158
  -165
  -172
  -180
  -188
  -196
  -205
  -215
  -225
  -235
  -246
  -258
  -270
Prev. year cash balance distribution, $m
 
  134
  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
 
  143
  8
  7
  6
  5
  4
  2
  1
  0
  -2
  -38
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -53
  -56
  -58
  -61
  -63
  -66
  -69
  -73
  -76
  -79
  -83
  -87
Discount rate, %
 
  5.00
  5.25
  5.51
  5.79
  6.08
  6.38
  6.70
  7.04
  7.39
  7.76
  8.14
  8.55
  8.98
  9.43
  9.90
  10.39
  10.91
  11.46
  12.03
  12.63
  13.27
  13.93
  14.63
  15.36
  16.13
  16.93
  17.78
  18.67
  19.60
  20.58
PV of cash for distribution, $m
 
  136
  7
  6
  5
  4
  2
  1
  1
  0
  -1
  -16
  -15
  -14
  -12
  -11
  -10
  -8
  -7
  -6
  -5
  -4
  -3
  -3
  -2
  -2
  -1
  -1
  -1
  0
  0
Current shareholders' claim on cash, %
  100
  95.4
  91.4
  87.8
  84.5
  81.6
  79.0
  76.7
  74.5
  72.6
  70.8
  69.7
  68.7
  67.7
  66.9
  66.0
  65.2
  64.5
  63.7
  63.0
  62.4
  61.7
  61.1
  60.5
  59.9
  59.3
  58.8
  58.2
  57.7
  57.2
  56.7

Mullen Group Ltd is a Canada-based supplier of trucking and logistics services. It operates through two operating segments: Trucking/Logistics and Oilfield Services. The Trucking/Logistics segment consists of over 10 Business Units, offering a range of truckload and less-than-truckload (LTL) general freight services to customers in Canada and the United States, such as transporting goods, including general freight; commodities, such as cable, pipe and steel; over-dimensional loads, such as heavy equipment and compressors, and dry bulk commodities, such as cement and frac sand. The Oilfield Services segment consists of over 10 Business Units that provide transportation services, drilling, well-servicing and dewatering services to the oil and natural gas industry, such as transporting of oversize and overweight shipments, conductor pipe setting, core drilling, and transportation and disposal of fluids. It operates through RDK Transportation Co Inc.

FINANCIAL RATIOS  of  Mullen Group Ltd. (MTL)

Valuation Ratios
P/E Ratio 30.7
Price to Sales 1.5
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 9.2
Price to Free Cash Flow 10.4
Growth Rates
Sales Growth Rate -14.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -71.2%
Cap. Spend. - 3 Yr. Gr. Rate -31%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 58.3%
Total Debt to Equity 72.5%
Interest Coverage 3
Management Effectiveness
Return On Assets 4.1%
Ret/ On Assets - 3 Yr. Avg. 4%
Return On Total Capital 3.2%
Ret/ On T. Cap. - 3 Yr. Avg. 3.5%
Return On Equity 5.9%
Return On Equity - 3 Yr. Avg. 6%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 31.2%
Gross Margin - 3 Yr. Avg. 30.9%
EBITDA Margin 18.5%
EBITDA Margin - 3 Yr. Avg. 16.5%
Operating Margin 7%
Oper. Margin - 3 Yr. Avg. 6.6%
Pre-Tax Margin 7%
Pre-Tax Margin - 3 Yr. Avg. 6.6%
Net Profit Margin 5%
Net Profit Margin - 3 Yr. Avg. 4.2%
Effective Tax Rate 27.8%
Eff/ Tax Rate - 3 Yr. Avg. 41.9%
Payout Ratio 115.4%

MTL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MTL stock intrinsic value calculation we used $1035 million for the last fiscal year's total revenue generated by Mullen Group Ltd.. The default revenue input number comes from 2016 income statement of Mullen Group Ltd.. 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 MTL stock valuation model: a) initial revenue growth rate of 9.7% 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 5%, whose default value for MTL is calculated based on our internal credit rating of Mullen Group Ltd., 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 Mullen Group Ltd..
    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 MTL stock the variable cost ratio is equal to 96.4%.

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 MTL 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 4.6% for Mullen Group Ltd..

Corporate tax rate of 27% is the nominal tax rate for Mullen Group Ltd.. 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 MTL 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 MTL are equal to 96.4%.

Life of production assets of 15.8 years is the average useful life of capital assets used in Mullen Group Ltd. 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 MTL is equal to 10.5%. 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 - $960 million for Mullen Group Ltd. - 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 103.888 million for Mullen Group Ltd. 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 Mullen Group Ltd. at the current share price and the inputted number of shares is $1.6 billion.

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Financial statements of MTL
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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