Intrinsic value of Semafo Inc. - SMF

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$2.81

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$2.81

 
Intrinsic value

$2.28

 
Up/down potential

-19%

 
Rating

hold

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

We calculate the intrinsic value of SMF 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 0.9

 

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, %
  0.25
  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
  406
  414
  424
  435
  447
  460
  475
  491
  509
  528
  548
  570
  593
  617
  644
  671
  701
  732
  765
  800
  836
  875
  916
  959
  1,004
  1,052
  1,103
  1,156
  1,211
  1,270
  1,332
Variable operating expenses, $m
 
  323
  331
  339
  349
  359
  371
  384
  397
  412
  428
  445
  463
  482
  503
  524
  547
  572
  597
  624
  653
  683
  715
  749
  785
  822
  861
  903
  946
  992
  1,040
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
  325
  323
  331
  339
  349
  359
  371
  384
  397
  412
  428
  445
  463
  482
  503
  524
  547
  572
  597
  624
  653
  683
  715
  749
  785
  822
  861
  903
  946
  992
  1,040
Operating income, $m
  81
  91
  93
  95
  98
  101
  104
  108
  111
  116
  120
  125
  130
  135
  141
  147
  153
  160
  167
  175
  183
  192
  201
  210
  220
  230
  241
  253
  265
  278
  292
EBITDA, $m
  187
  199
  204
  209
  215
  221
  228
  236
  244
  254
  263
  274
  285
  297
  309
  323
  337
  352
  367
  384
  402
  420
  440
  461
  483
  506
  530
  555
  582
  610
  640
Interest expense (income), $m
  6
  5
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  23
  24
  26
  27
  29
  31
  33
  35
  38
Earnings before tax, $m
  80
  86
  88
  90
  92
  95
  97
  100
  103
  107
  111
  115
  119
  123
  128
  133
  139
  144
  150
  157
  163
  171
  178
  186
  194
  203
  212
  222
  232
  243
  254
Tax expense, $m
  24
  23
  24
  24
  25
  26
  26
  27
  28
  29
  30
  31
  32
  33
  35
  36
  37
  39
  41
  42
  44
  46
  48
  50
  52
  55
  57
  60
  63
  66
  69
Net income, $m
  46
  63
  64
  66
  67
  69
  71
  73
  76
  78
  81
  84
  87
  90
  94
  97
  101
  105
  110
  114
  119
  125
  130
  136
  142
  148
  155
  162
  169
  177
  186

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  370
  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
  1,210
  857
  877
  900
  925
  953
  984
  1,017
  1,054
  1,093
  1,135
  1,179
  1,227
  1,278
  1,332
  1,390
  1,451
  1,515
  1,583
  1,655
  1,732
  1,812
  1,896
  1,986
  2,080
  2,179
  2,283
  2,393
  2,508
  2,630
  2,757
Adjusted assets (=assets-cash), $m
  840
  857
  877
  900
  925
  953
  984
  1,017
  1,054
  1,093
  1,135
  1,179
  1,227
  1,278
  1,332
  1,390
  1,451
  1,515
  1,583
  1,655
  1,732
  1,812
  1,896
  1,986
  2,080
  2,179
  2,283
  2,393
  2,508
  2,630
  2,757
Revenue / Adjusted assets
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
Average production assets, $m
  722
  736
  753
  773
  794
  818
  845
  874
  905
  938
  974
  1,013
  1,054
  1,098
  1,144
  1,194
  1,246
  1,301
  1,360
  1,422
  1,487
  1,556
  1,629
  1,705
  1,786
  1,871
  1,961
  2,055
  2,154
  2,258
  2,368
Working capital, $m
  388
  18
  19
  19
  20
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  39
  40
  42
  44
  46
  49
  51
  53
  56
  59
Total debt, $m
  77
  82
  88
  95
  102
  111
  120
  130
  141
  153
  165
  179
  193
  209
  225
  242
  261
  280
  301
  322
  345
  369
  395
  422
  450
  480
  511
  544
  579
  616
  654
Total liabilities, $m
  253
  258
  264
  271
  278
  287
  296
  306
  317
  329
  341
  355
  369
  385
  401
  418
  437
  456
  477
  498
  521
  545
  571
  598
  626
  656
  687
  720
  755
  792
  830
Total equity, $m
  957
  599
  613
  629
  647
  666
  688
  711
  736
  764
  793
  824
  858
  893
  931
  972
  1,014
  1,059
  1,107
  1,157
  1,210
  1,266
  1,326
  1,388
  1,454
  1,523
  1,596
  1,672
  1,753
  1,838
  1,927
Total liabilities and equity, $m
  1,210
  857
  877
  900
  925
  953
  984
  1,017
  1,053
  1,093
  1,134
  1,179
  1,227
  1,278
  1,332
  1,390
  1,451
  1,515
  1,584
  1,655
  1,731
  1,811
  1,897
  1,986
  2,080
  2,179
  2,283
  2,392
  2,508
  2,630
  2,757
Debt-to-equity ratio
  0.080
  0.140
  0.140
  0.150
  0.160
  0.170
  0.170
  0.180
  0.190
  0.200
  0.210
  0.220
  0.230
  0.230
  0.240
  0.250
  0.260
  0.260
  0.270
  0.280
  0.290
  0.290
  0.300
  0.300
  0.310
  0.320
  0.320
  0.330
  0.330
  0.330
  0.340
Adjusted equity ratio
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  46
  63
  64
  66
  67
  69
  71
  73
  76
  78
  81
  84
  87
  90
  94
  97
  101
  105
  110
  114
  119
  125
  130
  136
  142
  148
  155
  162
  169
  177
  186
Depreciation, amort., depletion, $m
  106
  108
  111
  114
  117
  120
  124
  128
  133
  138
  143
  149
  155
  161
  168
  176
  183
  191
  200
  209
  219
  229
  240
  251
  263
  275
  288
  302
  317
  332
  348
Funds from operations, $m
  210
  171
  175
  179
  184
  189
  195
  202
  209
  216
  224
  233
  242
  252
  262
  273
  284
  297
  310
  324
  338
  353
  369
  387
  404
  423
  443
  464
  486
  509
  534
Change in working capital, $m
  9
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
Cash from operations, $m
  201
  175
  174
  179
  183
  189
  195
  201
  208
  215
  223
  232
  241
  250
  261
  272
  283
  295
  308
  322
  336
  352
  368
  385
  402
  421
  441
  462
  484
  507
  531
Maintenance CAPEX, $m
  0
  -106
  -108
  -111
  -114
  -117
  -120
  -124
  -128
  -133
  -138
  -143
  -149
  -155
  -161
  -168
  -176
  -183
  -191
  -200
  -209
  -219
  -229
  -240
  -251
  -263
  -275
  -288
  -302
  -317
  -332
New CAPEX, $m
  -123
  -14
  -17
  -19
  -22
  -24
  -26
  -29
  -31
  -34
  -36
  -39
  -41
  -44
  -47
  -49
  -52
  -55
  -59
  -62
  -65
  -69
  -73
  -77
  -81
  -85
  -90
  -94
  -99
  -104
  -110
Cash from investing activities, $m
  -125
  -120
  -125
  -130
  -136
  -141
  -146
  -153
  -159
  -167
  -174
  -182
  -190
  -199
  -208
  -217
  -228
  -238
  -250
  -262
  -274
  -288
  -302
  -317
  -332
  -348
  -365
  -382
  -401
  -421
  -442
Free cash flow, $m
  76
  54
  49
  49
  48
  48
  48
  48
  48
  49
  49
  50
  51
  52
  53
  54
  55
  57
  58
  60
  62
  64
  66
  68
  71
  74
  76
  79
  82
  86
  89
Issuance/(repayment) of debt, $m
  -41
  5
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  21
  22
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
  38
Issuance/(repurchase) of shares, $m
  124
  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  
  69
  5
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  21
  22
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
  38
Total cash flow (excl. dividends), $m
  144
  59
  55
  55
  56
  56
  57
  58
  59
  60
  62
  63
  65
  67
  69
  71
  74
  76
  79
  82
  85
  88
  92
  95
  99
  103
  108
  112
  117
  122
  128
Retained Cash Flow (-), $m
  -180
  -12
  -14
  -16
  -18
  -20
  -22
  -23
  -25
  -27
  -29
  -31
  -33
  -36
  -38
  -40
  -43
  -45
  -48
  -50
  -53
  -56
  -59
  -62
  -66
  -69
  -73
  -77
  -81
  -85
  -89
Prev. year cash balance distribution, $m
 
  370
  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
 
  417
  41
  40
  38
  37
  36
  35
  34
  33
  33
  32
  32
  31
  31
  31
  31
  31
  31
  31
  32
  32
  33
  33
  34
  34
  35
  36
  36
  37
  38
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  400
  38
  34
  31
  28
  26
  23
  21
  19
  17
  15
  14
  12
  10
  9
  8
  7
  6
  5
  4
  3
  3
  2
  2
  1
  1
  1
  1
  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

SEMAFO Inc., a mining company, engages in the exploration, development, and operation of gold properties in West Africa. It operates the Mana Mine in Burkina Faso, which includes the satellite deposits of Siou and Fofina; and is developing the gold deposit of Natougou. The company was formerly known as West Africa Mining Exploration Corporation Inc. and changed its name to SEMAFO Inc. in May 1997. SEMAFO Inc. was founded in 1994 and is headquartered in Saint-Laurent, Canada.

FINANCIAL RATIOS  of  Semafo Inc. (SMF)

Valuation Ratios
P/E Ratio 19.8
Price to Sales 2.2
Price to Book 1
Price to Tangible Book
Price to Cash Flow 4.5
Price to Free Cash Flow 11.7
Growth Rates
Sales Growth Rate 0.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 15%
Cap. Spend. - 3 Yr. Gr. Rate -3.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 8%
Total Debt to Equity 8%
Interest Coverage 14
Management Effectiveness
Return On Assets 4.4%
Ret/ On Assets - 3 Yr. Avg. 3%
Return On Total Capital 4.8%
Ret/ On T. Cap. - 3 Yr. Avg. 3.3%
Return On Equity 5.3%
Return On Equity - 3 Yr. Avg. 3.6%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 60.3%
Gross Margin - 3 Yr. Avg. 58.2%
EBITDA Margin 47.3%
EBITDA Margin - 3 Yr. Avg. 45%
Operating Margin 20%
Oper. Margin - 3 Yr. Avg. 19.3%
Pre-Tax Margin 19.7%
Pre-Tax Margin - 3 Yr. Avg. 17.3%
Net Profit Margin 11.3%
Net Profit Margin - 3 Yr. Avg. 7.1%
Effective Tax Rate 30%
Eff/ Tax Rate - 3 Yr. Avg. 42.1%
Payout Ratio 0%

SMF stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SMF stock intrinsic value calculation we used $406 million for the last fiscal year's total revenue generated by Semafo Inc.. The default revenue input number comes from 2016 income statement of Semafo 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 SMF 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 4.3%, whose default value for SMF is calculated based on our internal credit rating of Semafo 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 Semafo 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 SMF stock the variable cost ratio is equal to 78.1%.

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 SMF 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 6.1% for Semafo Inc..

Corporate tax rate of 27% is the nominal tax rate for Semafo 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 SMF 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 SMF are equal to 177.8%.

Life of production assets of 6.8 years is the average useful life of capital assets used in Semafo 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 SMF is equal to 4.4%. 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 - $957 million for Semafo 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 325.815 million for Semafo 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 Semafo Inc. at the current share price and the inputted number of shares is $0.9 billion.


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Stock chart of SMF Financial statements of SMF
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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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