Intrinsic value of Arc Logistics Partners - ARCX

Previous Close

$14.33

  Intrinsic Value

$3.19

stock screener

  Rating & Target

str. sell

-78%

  Value-price divergence*

+83%

Previous close

$14.33

 
Intrinsic value

$3.19

 
Up/down potential

-78%

 
Rating

str. sell

 
Value-price divergence*

+83%

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

We calculate the intrinsic value of ARCX 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 0.3

 

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, %
  28.05
  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
  105
  107
  110
  112
  116
  119
  123
  127
  132
  136
  142
  147
  153
  160
  166
  174
  181
  189
  198
  207
  216
  226
  237
  248
  260
  272
  285
  299
  313
  328
  344
Variable operating expenses, $m
 
  42
  43
  44
  45
  46
  47
  49
  50
  52
  54
  52
  54
  56
  59
  61
  64
  67
  70
  73
  76
  80
  83
  87
  91
  96
  100
  105
  110
  116
  121
Fixed operating expenses, $m
 
  44
  45
  46
  47
  49
  50
  51
  52
  54
  55
  56
  58
  59
  61
  62
  64
  65
  67
  69
  70
  72
  74
  76
  78
  80
  82
  84
  86
  88
  90
Total operating expenses, $m
  83
  86
  88
  90
  92
  95
  97
  100
  102
  106
  109
  108
  112
  115
  120
  123
  128
  132
  137
  142
  146
  152
  157
  163
  169
  176
  182
  189
  196
  204
  211
Operating income, $m
  22
  21
  22
  23
  23
  25
  26
  27
  29
  31
  33
  39
  42
  44
  47
  50
  54
  57
  61
  65
  70
  74
  80
  85
  91
  97
  103
  110
  117
  125
  133
EBITDA, $m
  53
  55
  56
  57
  59
  61
  64
  66
  69
  72
  76
  79
  84
  88
  93
  98
  103
  109
  115
  122
  129
  137
  145
  153
  162
  171
  181
  192
  203
  215
  228
Interest expense (income), $m
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  28
  29
  31
  32
  34
  36
Earnings before tax, $m
  22
  13
  13
  13
  14
  14
  15
  16
  17
  19
  20
  26
  28
  30
  32
  34
  37
  39
  42
  45
  49
  52
  56
  60
  64
  69
  74
  79
  85
  91
  97
Tax expense, $m
  0
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  7
  7
  8
  9
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  23
  25
  26
Net income, $m
  15
  9
  9
  10
  10
  11
  11
  12
  13
  14
  15
  19
  20
  22
  23
  25
  27
  29
  31
  33
  35
  38
  41
  44
  47
  50
  54
  58
  62
  66
  71

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  5
  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
  648
  657
  672
  689
  709
  730
  754
  780
  807
  837
  869
  904
  941
  980
  1,021
  1,065
  1,112
  1,161
  1,213
  1,269
  1,327
  1,388
  1,453
  1,522
  1,594
  1,670
  1,750
  1,834
  1,922
  2,015
  2,113
Adjusted assets (=assets-cash), $m
  643
  657
  672
  689
  709
  730
  754
  780
  807
  837
  869
  904
  941
  980
  1,021
  1,065
  1,112
  1,161
  1,213
  1,269
  1,327
  1,388
  1,453
  1,522
  1,594
  1,670
  1,750
  1,834
  1,922
  2,015
  2,113
Revenue / Adjusted assets
  0.163
  0.163
  0.164
  0.163
  0.164
  0.163
  0.163
  0.163
  0.164
  0.162
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
Average production assets, $m
  513
  523
  535
  549
  565
  582
  600
  621
  643
  667
  692
  720
  749
  780
  813
  848
  885
  925
  966
  1,010
  1,057
  1,106
  1,157
  1,212
  1,269
  1,330
  1,393
  1,460
  1,531
  1,605
  1,683
Working capital, $m
  4
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
Total debt, $m
  249
  257
  266
  276
  286
  299
  312
  326
  342
  359
  377
  397
  417
  439
  463
  488
  514
  542
  572
  603
  636
  670
  707
  746
  786
  829
  874
  922
  972
  1,025
  1,080
Total liabilities, $m
  364
  371
  380
  390
  400
  413
  426
  440
  456
  473
  491
  511
  531
  553
  577
  602
  628
  656
  686
  717
  750
  784
  821
  860
  900
  943
  988
  1,036
  1,086
  1,139
  1,194
Total equity, $m
  285
  286
  292
  300
  308
  318
  328
  339
  351
  364
  378
  393
  409
  426
  444
  463
  484
  505
  528
  552
  577
  604
  632
  662
  693
  726
  761
  798
  836
  877
  919
Total liabilities and equity, $m
  649
  657
  672
  690
  708
  731
  754
  779
  807
  837
  869
  904
  940
  979
  1,021
  1,065
  1,112
  1,161
  1,214
  1,269
  1,327
  1,388
  1,453
  1,522
  1,593
  1,669
  1,749
  1,834
  1,922
  2,016
  2,113
Debt-to-equity ratio
  0.874
  0.900
  0.910
  0.920
  0.930
  0.940
  0.950
  0.960
  0.970
  0.990
  1.000
  1.010
  1.020
  1.030
  1.040
  1.050
  1.060
  1.070
  1.080
  1.090
  1.100
  1.110
  1.120
  1.130
  1.130
  1.140
  1.150
  1.160
  1.160
  1.170
  1.170
Adjusted equity ratio
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  15
  9
  9
  10
  10
  11
  11
  12
  13
  14
  15
  19
  20
  22
  23
  25
  27
  29
  31
  33
  35
  38
  41
  44
  47
  50
  54
  58
  62
  66
  71
Depreciation, amort., depletion, $m
  31
  33
  34
  35
  36
  37
  38
  39
  40
  41
  43
  40
  42
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  75
  78
  82
  86
  90
  95
Funds from operations, $m
  53
  43
  43
  45
  46
  47
  49
  51
  53
  55
  58
  59
  62
  65
  69
  73
  76
  81
  85
  90
  95
  100
  106
  112
  118
  125
  132
  140
  148
  156
  165
Change in working capital, $m
  -3
  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
  56
  43
  43
  45
  46
  47
  49
  51
  53
  55
  58
  59
  62
  65
  69
  73
  76
  81
  85
  90
  95
  100
  106
  112
  119
  125
  132
  140
  148
  157
  166
Maintenance CAPEX, $m
  0
  -29
  -29
  -30
  -31
  -32
  -33
  -34
  -35
  -36
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -71
  -75
  -78
  -82
  -86
  -90
New CAPEX, $m
  -24
  -10
  -12
  -14
  -15
  -17
  -19
  -20
  -22
  -24
  -26
  -27
  -29
  -31
  -33
  -35
  -37
  -39
  -42
  -44
  -46
  -49
  -52
  -54
  -57
  -60
  -64
  -67
  -70
  -74
  -78
Cash from investing activities, $m
  -32
  -39
  -41
  -44
  -46
  -49
  -52
  -54
  -57
  -60
  -63
  -66
  -69
  -73
  -77
  -81
  -85
  -89
  -94
  -98
  -103
  -108
  -114
  -119
  -125
  -131
  -139
  -145
  -152
  -160
  -168
Free cash flow, $m
  24
  4
  2
  1
  0
  -2
  -2
  -3
  -4
  -5
  -5
  -7
  -7
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -7
  -7
  -6
  -6
  -5
  -4
  -3
  -3
Issuance/(repayment) of debt, $m
  23
  8
  9
  10
  11
  12
  13
  15
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
  55
Issuance/(repurchase) of shares, $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
  0
Cash from financing (excl. dividends), $m  
  9
  8
  9
  10
  11
  12
  13
  15
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
  55
Total cash flow (excl. dividends), $m
  33
  12
  11
  10
  10
  11
  11
  11
  12
  12
  13
  13
  13
  14
  15
  17
  18
  20
  21
  23
  25
  27
  29
  31
  34
  36
  39
  42
  46
  49
  53
Retained Cash Flow (-), $m
  15
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -37
  -38
  -40
  -43
Prev. year cash balance distribution, $m
 
  5
  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
 
  11
  4
  3
  2
  1
  1
  0
  0
  -1
  -1
  -2
  -3
  -3
  -3
  -2
  -2
  -2
  -2
  -1
  -1
  0
  1
  1
  2
  3
  5
  6
  7
  9
  10
Discount rate, %
 
  7.30
  7.67
  8.05
  8.45
  8.87
  9.32
  9.78
  10.27
  10.79
  11.32
  11.89
  12.49
  13.11
  13.77
  14.45
  15.18
  15.93
  16.73
  17.57
  18.45
  19.37
  20.34
  21.35
  22.42
  23.54
  24.72
  25.96
  27.25
  28.62
  30.05
PV of cash for distribution, $m
 
  10
  3
  2
  1
  1
  0
  0
  0
  0
  0
  -1
  -1
  -1
  0
  0
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Current shareholders' claim on cash, %
  100
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Arc Logistics Partners LP engages in the terminalling, storage, throughput, and transloading of crude oil and petroleum products. The company’s energy logistics assets serves various third-party customers, including oil companies, independent refiners, crude oil and petroleum product marketers, distributors, and various industrial manufacturers. Its energy logistics assets consist of 21 terminals in 12 states located in the East Coast, Gulf Coast, Midwest, Rocky Mountains, and West Coast regions of the United States with approximately 7.7 million barrels of crude oil and petroleum product storage capacity; 4 rail transloading facilities with approximately 126,000 barrel per day of throughput capacity; and the liquefied natural gas (LNG) interest in LNG facility, which has 320,000 cubic meters of LNG storage, 1.5 billion cubic feet per day natural gas sendout capacity, and interconnects to natural gas pipeline networks. Arc Logistics GP LLC operates as a general partner of the company. Arc Logistics Partners LP was founded in 2007 and is based in New York, New York.

FINANCIAL RATIOS  of  Arc Logistics Partners (ARCX)

Valuation Ratios
P/E Ratio 18.6
Price to Sales 2.7
Price to Book 1
Price to Tangible Book
Price to Cash Flow 5
Price to Free Cash Flow 8.7
Growth Rates
Sales Growth Rate 28%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 84.6%
Cap. Spend. - 3 Yr. Gr. Rate 11.4%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 87.4%
Total Debt to Equity 87.4%
Interest Coverage 4
Management Effectiveness
Return On Assets 3.5%
Ret/ On Assets - 3 Yr. Avg. 2.4%
Return On Total Capital 2.8%
Ret/ On T. Cap. - 3 Yr. Avg. 1.5%
Return On Equity 5.1%
Return On Equity - 3 Yr. Avg. 2.6%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 58.1%
EBITDA Margin - 3 Yr. Avg. 45.3%
Operating Margin 21%
Oper. Margin - 3 Yr. Avg. 7.2%
Pre-Tax Margin 21%
Pre-Tax Margin - 3 Yr. Avg. 12.1%
Net Profit Margin 14.3%
Net Profit Margin - 3 Yr. Avg. 7.8%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 226.7%

ARCX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ARCX stock intrinsic value calculation we used $105 million for the last fiscal year's total revenue generated by Arc Logistics Partners. The default revenue input number comes from 2016 income statement of Arc Logistics Partners. 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 ARCX 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 7.3%, whose default value for ARCX is calculated based on our internal credit rating of Arc Logistics Partners, 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 Arc Logistics Partners.
    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 ARCX stock the variable cost ratio is equal to 39%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $43 million in the base year in the intrinsic value calculation for ARCX 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 Arc Logistics Partners.

Corporate tax rate of 27% is the nominal tax rate for Arc Logistics Partners. 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 ARCX 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 ARCX are equal to 488.6%.

Life of production assets of 17.8 years is the average useful life of capital assets used in Arc Logistics Partners 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 ARCX is equal to -1%. 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 - $285 million for Arc Logistics Partners - 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 19.174 million for Arc Logistics Partners 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 Arc Logistics Partners at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ Arc Logistic misses Street 2Q forecasts   [Aug-08-17 11:38PM  Associated Press]
▶ LD Micro Index Reconstitution as of August 1, 2017   [Aug-01-17 09:40AM  ACCESSWIRE]
▶ Arc Logistic misses Street 1Q forecasts   [May-05-17 05:02AM  Associated Press]
Stock chart of ARCX Financial statements of ARCX
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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