Intrinsic value of AirMedia Group ADR - AMCN

Previous Close

$2.57

  Intrinsic Value

$1.55

stock screener

  Rating & Target

sell

-40%

  Value-price divergence*

+113%

Previous close

$2.57

 
Intrinsic value

$1.55

 
Up/down potential

-40%

 
Rating

sell

 
Value-price divergence*

+113%

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

We calculate the intrinsic value of AMCN 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 2015), $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 0.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2015(a)
   2016
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -33.33
  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
  50
  51
  52
  54
  55
  57
  59
  61
  63
  65
  67
  70
  73
  76
  79
  83
  86
  90
  94
  98
  103
  108
  113
  118
  124
  130
  136
  142
  149
  156
  164
Variable operating expenses, $m
 
  17
  18
  18
  19
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  37
  38
  40
  42
  44
  46
  48
  51
  53
  56
Fixed operating expenses, $m
 
  110
  112
  115
  118
  121
  124
  127
  130
  134
  137
  140
  144
  148
  151
  155
  159
  163
  167
  171
  175
  180
  184
  189
  194
  198
  203
  208
  214
  219
  224
Total operating expenses, $m
  126
  127
  130
  133
  137
  140
  144
  148
  151
  156
  160
  164
  169
  174
  178
  183
  188
  194
  199
  204
  210
  217
  222
  229
  236
  242
  249
  256
  265
  272
  280
Operating income, $m
  -76
  -76
  -78
  -80
  -82
  -84
  -85
  -87
  -89
  -91
  -92
  -94
  -96
  -97
  -99
  -100
  -102
  -103
  -105
  -106
  -107
  -109
  -110
  -111
  -112
  -113
  -114
  -114
  -115
  -116
  -116
EBITDA, $m
  -70
  -72
  -73
  -75
  -77
  -79
  -80
  -82
  -83
  -85
  -86
  -88
  -89
  -91
  -92
  -93
  -94
  -95
  -96
  -97
  -98
  -99
  -100
  -100
  -101
  -101
  -102
  -102
  -102
  -102
  -102
Interest expense (income), $m
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  8
  8
  9
  9
  10
  11
Earnings before tax, $m
  -74
  -76
  -78
  -80
  -82
  -84
  -86
  -88
  -90
  -92
  -94
  -96
  -98
  -100
  -102
  -103
  -105
  -107
  -109
  -111
  -112
  -114
  -116
  -117
  -119
  -120
  -122
  -123
  -125
  -126
  -127
Tax expense, $m
  7
  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
Net income, $m
  150
  -76
  -78
  -80
  -82
  -84
  -86
  -88
  -90
  -92
  -94
  -96
  -98
  -100
  -102
  -103
  -105
  -107
  -109
  -111
  -112
  -114
  -116
  -117
  -119
  -120
  -122
  -123
  -125
  -126
  -127

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  91
  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
  532
  451
  462
  474
  487
  502
  518
  535
  555
  575
  597
  621
  646
  673
  701
  732
  764
  798
  834
  871
  911
  954
  998
  1,045
  1,095
  1,147
  1,202
  1,259
  1,320
  1,384
  1,451
Adjusted assets (=assets-cash), $m
  441
  451
  462
  474
  487
  502
  518
  535
  555
  575
  597
  621
  646
  673
  701
  732
  764
  798
  834
  871
  911
  954
  998
  1,045
  1,095
  1,147
  1,202
  1,259
  1,320
  1,384
  1,451
Revenue / Adjusted assets
  0.113
  0.113
  0.113
  0.114
  0.113
  0.114
  0.114
  0.114
  0.114
  0.113
  0.112
  0.113
  0.113
  0.113
  0.113
  0.113
  0.113
  0.113
  0.113
  0.113
  0.113
  0.113
  0.113
  0.113
  0.113
  0.113
  0.113
  0.113
  0.113
  0.113
  0.113
Average production assets, $m
  44
  45
  46
  47
  48
  50
  51
  53
  55
  57
  59
  62
  64
  67
  70
  73
  76
  79
  83
  87
  91
  95
  99
  104
  109
  114
  119
  125
  131
  138
  144
Working capital, $m
  236
  26
  26
  27
  28
  28
  29
  30
  31
  32
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  65
  68
  71
  75
  78
  82
Total debt, $m
  0
  3
  7
  11
  15
  20
  25
  31
  37
  44
  51
  59
  68
  76
  86
  96
  106
  117
  129
  142
  155
  169
  183
  199
  215
  232
  250
  269
  289
  310
  333
Total liabilities, $m
  145
  148
  152
  156
  160
  165
  170
  176
  182
  189
  196
  204
  213
  221
  231
  241
  251
  262
  274
  287
  300
  314
  328
  344
  360
  377
  395
  414
  434
  455
  478
Total equity, $m
  387
  303
  310
  318
  327
  337
  347
  359
  372
  386
  401
  417
  433
  451
  471
  491
  512
  535
  559
  585
  612
  640
  670
  701
  735
  770
  806
  845
  886
  929
  974
Total liabilities and equity, $m
  532
  451
  462
  474
  487
  502
  517
  535
  554
  575
  597
  621
  646
  672
  702
  732
  763
  797
  833
  872
  912
  954
  998
  1,045
  1,095
  1,147
  1,201
  1,259
  1,320
  1,384
  1,452
Debt-to-equity ratio
  0.000
  0.010
  0.020
  0.030
  0.050
  0.060
  0.070
  0.090
  0.100
  0.110
  0.130
  0.140
  0.160
  0.170
  0.180
  0.190
  0.210
  0.220
  0.230
  0.240
  0.250
  0.260
  0.270
  0.280
  0.290
  0.300
  0.310
  0.320
  0.330
  0.330
  0.340
Adjusted equity ratio
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  150
  -76
  -78
  -80
  -82
  -84
  -86
  -88
  -90
  -92
  -94
  -96
  -98
  -100
  -102
  -103
  -105
  -107
  -109
  -111
  -112
  -114
  -116
  -117
  -119
  -120
  -122
  -123
  -125
  -126
  -127
Depreciation, amort., depletion, $m
  6
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  14
Funds from operations, $m
  -24
  -72
  -74
  -75
  -77
  -79
  -81
  -83
  -85
  -86
  -88
  -90
  -91
  -93
  -95
  -96
  -98
  -99
  -101
  -102
  -103
  -105
  -106
  -107
  -108
  -109
  -110
  -111
  -111
  -112
  -113
Change in working capital, $m
  45
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
Cash from operations, $m
  -69
  -72
  -74
  -76
  -78
  -80
  -82
  -84
  -86
  -87
  -89
  -91
  -93
  -95
  -96
  -98
  -99
  -101
  -103
  -104
  -106
  -107
  -108
  -110
  -111
  -112
  -113
  -114
  -115
  -116
  -116
Maintenance CAPEX, $m
  0
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
New CAPEX, $m
  -10
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
Cash from investing activities, $m
  88
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -13
  -15
  -15
  -16
  -16
  -18
  -19
  -19
  -21
Free cash flow, $m
  19
  -77
  -80
  -82
  -84
  -86
  -89
  -91
  -93
  -95
  -97
  -99
  -101
  -104
  -106
  -108
  -110
  -112
  -114
  -116
  -118
  -120
  -122
  -124
  -126
  -128
  -130
  -132
  -133
  -135
  -137
Issuance/(repayment) of debt, $m
  -3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
Issuance/(repurchase) of shares, $m
  5
  83
  85
  88
  91
  94
  97
  100
  103
  106
  109
  112
  115
  118
  121
  124
  127
  130
  133
  136
  139
  142
  146
  149
  152
  155
  159
  162
  165
  169
  172
Cash from financing (excl. dividends), $m  
  2
  86
  88
  92
  95
  99
  102
  106
  109
  113
  116
  120
  123
  127
  130
  134
  138
  141
  145
  148
  152
  156
  161
  164
  168
  172
  177
  181
  185
  190
  194
Total cash flow (excl. dividends), $m
  20
  9
  9
  10
  11
  13
  14
  15
  16
  18
  19
  20
  22
  23
  24
  26
  27
  29
  31
  32
  34
  36
  38
  40
  42
  45
  47
  49
  52
  55
  57
Retained Cash Flow (-), $m
  -138
  -83
  -85
  -88
  -91
  -94
  -97
  -100
  -103
  -106
  -109
  -112
  -115
  -118
  -121
  -124
  -127
  -130
  -133
  -136
  -139
  -142
  -146
  -149
  -152
  -155
  -159
  -162
  -165
  -169
  -172
Prev. year cash balance distribution, $m
 
  91
  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
 
  17
  -76
  -78
  -80
  -81
  -83
  -85
  -87
  -88
  -90
  -92
  -93
  -95
  -96
  -98
  -99
  -101
  -102
  -104
  -105
  -106
  -108
  -109
  -110
  -111
  -112
  -113
  -113
  -114
  -115
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
 
  16
  -70
  -68
  -66
  -63
  -60
  -57
  -54
  -51
  -47
  -43
  -40
  -36
  -32
  -29
  -25
  -22
  -19
  -16
  -13
  -11
  -9
  -7
  -6
  -4
  -3
  -2
  -2
  -1
  -1
Current shareholders' claim on cash, %
  100
  71.4
  51.0
  36.2
  25.7
  18.2
  12.9
  9.1
  6.5
  4.6
  3.3
  2.4
  1.7
  1.2
  0.9
  0.6
  0.5
  0.3
  0.3
  0.2
  0.1
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

AirMedia Group Inc. operates out-of-home advertising platforms primarily in the People's Republic of China. The company operates a network of digital TV screens on planes operated by five airlines; and gas station media network, as well as other outdoor media advertising platforms in gas stations. It also displays non-advertising content, such as weather, sports, and comedy clips; and television programs, including documentaries and hidden camera type reality shows from other third-party content providers. In addition, the company holds concession rights to operate various traditional advertising media comprising light boxes, billboards, and display advertising; and install and operate Wi-Fi systems on trains administered by eight regional railway bureaus, as well as on long-haul buses. As of March 31, 2016, its programs were placed on digital TV screens on planes operated by 5 airlines; and it operated 71,904 digital TV screens on airplanes. AirMedia Group Inc. was founded in 2005 and is headquartered in Beijing, the People's Republic of China.

FINANCIAL RATIOS  of  AirMedia Group ADR (AMCN)

Valuation Ratios
P/E Ratio 2.1
Price to Sales 6.4
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow -4.6
Price to Free Cash Flow -4
Growth Rates
Sales Growth Rate -33.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -37.5%
Cap. Spend. - 3 Yr. Gr. Rate 2.1%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 32.3%
Ret/ On Assets - 3 Yr. Avg. 7.6%
Return On Total Capital 46.9%
Ret/ On T. Cap. - 3 Yr. Avg. 10.9%
Return On Equity 47.2%
Return On Equity - 3 Yr. Avg. 11%
Asset Turnover 0.1
Profitability Ratios
Gross Margin -78%
Gross Margin - 3 Yr. Avg. -38%
EBITDA Margin -136%
EBITDA Margin - 3 Yr. Avg. -72.8%
Operating Margin -152%
Oper. Margin - 3 Yr. Avg. -86.5%
Pre-Tax Margin -148%
Pre-Tax Margin - 3 Yr. Avg. -83.9%
Net Profit Margin 300%
Net Profit Margin - 3 Yr. Avg. 84.4%
Effective Tax Rate -9.5%
Eff/ Tax Rate - 3 Yr. Avg. -2.5%
Payout Ratio 0%

AMCN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AMCN stock intrinsic value calculation we used $50 million for the last fiscal year's total revenue generated by AirMedia Group ADR. The default revenue input number comes from 2015 income statement of AirMedia Group ADR. 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 AMCN 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 AMCN is calculated based on our internal credit rating of AirMedia Group ADR, 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 AirMedia Group ADR.
    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 AMCN stock the variable cost ratio is equal to 34%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $107 million in the base year in the intrinsic value calculation for AMCN 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 AirMedia Group ADR.

Corporate tax rate of 27% is the nominal tax rate for AirMedia Group ADR. 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 AMCN 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 AMCN are equal to 88%.

Life of production assets of 10 years is the average useful life of capital assets used in AirMedia Group ADR 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 AMCN is equal to 50%. 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 - $387 million for AirMedia Group ADR - 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 62.492 million for AirMedia Group ADR 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 AirMedia Group ADR at the current share price and the inputted number of shares is $0.2 billion.

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COMPANY NEWS

▶ AirMedia Files Its Annual Report on Form 20-F   [Jun-28-17 11:00AM  PR Newswire]
▶ Wednesdays Biggest Early Market Movers   [09:45AM  24/7 Wall St.]
▶ AirMedia Files Its Annual Report on Form 20-F   [May-17-16 06:00AM  PR Newswire]
▶ Qihoo, Mindray Buyouts Move Ahead, Boost Sentiment   [Mar-04-16 09:05AM  at Forbes]
▶ AirMedia Agrees to Management-Led Buyout   [08:13AM  at The Wall Street Journal]
▶ Top Chinese Stocks Massively Higher in New York   [Jul-09  11:25AM  at 24/7 Wall St.]
▶ AirMedia Special Committee Appoints Advisors   [Jul-06  06:15AM  PR Newswire]
Stock chart of AMCN Financial statements of AMCN
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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