Intrinsic value of AirMedia Group ADR - AMCN

Previous Close

$1.94

  Intrinsic Value

$1.07

stock screener

  Rating & Target

sell

-45%

Previous close

$1.94

 
Intrinsic value

$1.07

 
Up/down potential

-45%

 
Rating

sell

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 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 0.1

 

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, %
  -66.00
  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
  17
  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
Variable operating expenses, $m
 
  10
  10
  11
  11
  11
  12
  12
  13
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
Fixed operating expenses, $m
 
  100
  103
  106
  108
  111
  114
  116
  119
  122
  125
  129
  132
  135
  138
  142
  145
  149
  153
  157
  161
  165
  169
  173
  177
  182
  186
  191
  196
  201
  206
Total operating expenses, $m
  106
  110
  113
  117
  119
  122
  126
  128
  132
  135
  138
  143
  147
  150
  154
  159
  162
  167
  172
  177
  182
  187
  192
  197
  202
  208
  213
  219
  226
  232
  239
Operating income, $m
  -90
  -93
  -96
  -98
  -100
  -103
  -105
  -108
  -111
  -113
  -116
  -119
  -122
  -124
  -127
  -130
  -133
  -136
  -140
  -143
  -146
  -150
  -153
  -156
  -160
  -164
  -167
  -171
  -175
  -179
  -183
EBITDA, $m
  -77
  -82
  -84
  -86
  -88
  -90
  -92
  -94
  -96
  -98
  -101
  -103
  -105
  -107
  -109
  -112
  -114
  -116
  -118
  -120
  -123
  -125
  -127
  -129
  -132
  -134
  -136
  -138
  -141
  -143
  -145
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
Earnings before tax, $m
  -85
  -93
  -96
  -98
  -101
  -103
  -106
  -109
  -111
  -114
  -117
  -120
  -123
  -126
  -129
  -133
  -136
  -139
  -143
  -146
  -150
  -154
  -157
  -161
  -165
  -169
  -173
  -178
  -182
  -186
  -191
Tax expense, $m
  4
  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
  -66
  -93
  -96
  -98
  -101
  -103
  -106
  -109
  -111
  -114
  -117
  -120
  -123
  -126
  -129
  -133
  -136
  -139
  -143
  -146
  -150
  -154
  -157
  -161
  -165
  -169
  -173
  -178
  -182
  -186
  -191

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  118
  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
  381
  267
  273
  280
  288
  297
  306
  317
  328
  340
  353
  367
  382
  398
  415
  432
  451
  471
  493
  515
  539
  564
  590
  618
  647
  678
  710
  744
  780
  818
  858
Adjusted assets (=assets-cash), $m
  263
  267
  273
  280
  288
  297
  306
  317
  328
  340
  353
  367
  382
  398
  415
  432
  451
  471
  493
  515
  539
  564
  590
  618
  647
  678
  710
  744
  780
  818
  858
Revenue / Adjusted assets
  0.065
  0.064
  0.066
  0.064
  0.066
  0.064
  0.065
  0.066
  0.064
  0.065
  0.065
  0.065
  0.065
  0.065
  0.065
  0.065
  0.064
  0.066
  0.065
  0.064
  0.065
  0.066
  0.064
  0.065
  0.065
  0.065
  0.065
  0.065
  0.065
  0.065
  0.065
Average production assets, $m
  57
  58
  59
  61
  63
  65
  67
  69
  71
  74
  77
  80
  83
  87
  90
  94
  98
  103
  107
  112
  117
  123
  129
  135
  141
  148
  155
  162
  170
  178
  187
Working capital, $m
  115
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
Total debt, $m
  0
  2
  4
  7
  11
  14
  18
  23
  28
  33
  38
  44
  51
  57
  65
  72
  80
  89
  98
  107
  118
  128
  139
  151
  164
  177
  191
  205
  220
  237
  253
Total liabilities, $m
  112
  114
  116
  119
  123
  126
  130
  135
  140
  145
  150
  156
  163
  169
  177
  184
  192
  201
  210
  219
  230
  240
  251
  263
  276
  289
  303
  317
  332
  349
  365
Total equity, $m
  269
  153
  157
  161
  165
  170
  176
  182
  188
  195
  203
  211
  219
  228
  238
  248
  259
  271
  283
  296
  309
  324
  339
  355
  371
  389
  408
  427
  448
  470
  492
Total liabilities and equity, $m
  381
  267
  273
  280
  288
  296
  306
  317
  328
  340
  353
  367
  382
  397
  415
  432
  451
  472
  493
  515
  539
  564
  590
  618
  647
  678
  711
  744
  780
  819
  857
Debt-to-equity ratio
  0.000
  0.010
  0.030
  0.050
  0.060
  0.080
  0.100
  0.130
  0.150
  0.170
  0.190
  0.210
  0.230
  0.250
  0.270
  0.290
  0.310
  0.330
  0.350
  0.360
  0.380
  0.400
  0.410
  0.430
  0.440
  0.450
  0.470
  0.480
  0.490
  0.500
  0.510
Adjusted equity ratio
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574
  0.574

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -66
  -93
  -96
  -98
  -101
  -103
  -106
  -109
  -111
  -114
  -117
  -120
  -123
  -126
  -129
  -133
  -136
  -139
  -143
  -146
  -150
  -154
  -157
  -161
  -165
  -169
  -173
  -178
  -182
  -186
  -191
Depreciation, amort., depletion, $m
  13
  12
  12
  12
  13
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  21
  22
  23
  25
  26
  27
  28
  30
  31
  32
  34
  36
  37
Funds from operations, $m
  -150
  -82
  -84
  -86
  -88
  -90
  -93
  -95
  -97
  -99
  -102
  -104
  -106
  -109
  -111
  -114
  -116
  -119
  -121
  -124
  -126
  -129
  -132
  -134
  -137
  -140
  -142
  -145
  -148
  -151
  -153
Change in working capital, $m
  -46
  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 operations, $m
  -104
  -82
  -84
  -86
  -88
  -90
  -93
  -95
  -97
  -99
  -102
  -104
  -106
  -109
  -111
  -114
  -116
  -119
  -121
  -124
  -126
  -129
  -131
  -134
  -137
  -139
  -142
  -145
  -148
  -150
  -153
Maintenance CAPEX, $m
  0
  -11
  -12
  -12
  -12
  -13
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -36
New CAPEX, $m
  -22
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
Cash from investing activities, $m
  131
  -12
  -13
  -14
  -14
  -15
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -26
  -27
  -28
  -31
  -32
  -33
  -35
  -37
  -38
  -40
  -42
  -45
Free cash flow, $m
  27
  -94
  -97
  -99
  -102
  -105
  -108
  -110
  -113
  -116
  -119
  -122
  -126
  -129
  -132
  -136
  -139
  -143
  -146
  -150
  -154
  -158
  -162
  -166
  -170
  -174
  -179
  -183
  -188
  -193
  -197
Issuance/(repayment) of debt, $m
  0
  2
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  15
  15
  16
  17
Issuance/(repurchase) of shares, $m
  1
  95
  99
  102
  105
  108
  111
  115
  118
  121
  125
  128
  132
  135
  139
  143
  147
  151
  155
  159
  164
  168
  173
  177
  182
  187
  192
  197
  203
  208
  214
Cash from financing (excl. dividends), $m  
  11
  97
  102
  105
  108
  112
  115
  119
  123
  126
  131
  134
  138
  142
  146
  151
  155
  160
  164
  169
  174
  179
  184
  189
  194
  200
  206
  212
  218
  224
  231
Total cash flow (excl. dividends), $m
  31
  3
  5
  6
  7
  7
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  29
  30
  32
  33
Retained Cash Flow (-), $m
  118
  -95
  -99
  -102
  -105
  -108
  -111
  -115
  -118
  -121
  -125
  -128
  -132
  -135
  -139
  -143
  -147
  -151
  -155
  -159
  -164
  -168
  -173
  -177
  -182
  -187
  -192
  -197
  -203
  -208
  -214
Prev. year cash balance distribution, $m
 
  118
  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
 
  25
  -94
  -96
  -99
  -101
  -103
  -106
  -108
  -111
  -114
  -116
  -119
  -122
  -125
  -128
  -131
  -134
  -137
  -140
  -144
  -147
  -150
  -154
  -158
  -161
  -165
  -169
  -172
  -176
  -180
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
 
  24
  -86
  -84
  -81
  -78
  -75
  -72
  -68
  -64
  -60
  -55
  -51
  -46
  -42
  -38
  -33
  -29
  -25
  -22
  -18
  -15
  -12
  -10
  -8
  -6
  -5
  -4
  -3
  -2
  -1
Current shareholders' claim on cash, %
  100
  52.6
  27.3
  14.1
  7.3
  3.8
  1.9
  1.0
  0.5
  0.3
  0.1
  0.1
  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
  0.0
  0.0
  0.0
  0.0

AirMedia Group Inc. is an operator of out-of-home advertising platforms in China. The Company is engaged in selling advertising time slots on its network, primarily air travel advertising network. It holds concession rights to install and operate wireless fidelity (Wi-Fi) systems on trains administered by over eight regional railway administrative bureaus in China. It also holds concession rights to install and operate Wi-Fi systems on various long-haul buses in China. It operates approximately 71,900 digital television screens on airplanes operated by over five airlines, including Air China, China Eastern Airlines, China Southern Airlines, Shanghai Airlines and Xiamen Airlines. It also holds concession rights to operate the advertising media platforms at Sinopec gas stations across China. It provides in-flight advertising and non-advertising contents. It offers advertising services from the platforms, digital television screens on airplanes and gas station media displays.

FINANCIAL RATIOS  of  AirMedia Group ADR (AMCN)

Valuation Ratios
P/E Ratio -3.7
Price to Sales 14.3
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow -2.3
Price to Free Cash Flow -1.9
Growth Rates
Sales Growth Rate -66%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 120%
Cap. Spend. - 3 Yr. Gr. Rate -17.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0.5
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -14.5%
Ret/ On Assets - 3 Yr. Avg. 3.8%
Return On Total Capital -20.1%
Ret/ On T. Cap. - 3 Yr. Avg. 5.6%
Return On Equity -20.1%
Return On Equity - 3 Yr. Avg. 5.7%
Asset Turnover 0
Profitability Ratios
Gross Margin -194.1%
Gross Margin - 3 Yr. Avg. -100.5%
EBITDA Margin -423.5%
EBITDA Margin - 3 Yr. Avg. -207.4%
Operating Margin -523.5%
Oper. Margin - 3 Yr. Avg. -249.6%
Pre-Tax Margin -500%
Pre-Tax Margin - 3 Yr. Avg. -239.6%
Net Profit Margin -388.2%
Net Profit Margin - 3 Yr. Avg. -41%
Effective Tax Rate -4.7%
Eff/ Tax Rate - 3 Yr. Avg. -4.1%
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 $17 million for the last fiscal year's total revenue generated by AirMedia Group ADR. The default revenue input number comes from 2016 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 58.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $98 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 335.3%.

Life of production assets of 4.4 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 -17.6%. 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 - $269 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 62.817 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 $0.1 billion.

RELATED COMPANIES Price Int.Val. Rating
SINA Sina 98.20 305.74  str.buy
ZNH China Southern 46.23 24.30  sell
CEA China Eastern 29.61 19.17  sell
CNET ChinaNet Onlin 1.03 0.34  str.sell

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]
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.