Intrinsic value of Advanced Semiconductor Engineering ADR - ASX

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$6.22

  Intrinsic Value

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  Value-price divergence*

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$6.22

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

We calculate the intrinsic value of ASX 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 10.3

 

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, %
  -2.98
  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
  8,837
  288,969
  295,615
  303,213
  311,742
  321,193
  331,563
  342,855
  355,078
  368,246
  382,379
  397,498
  413,631
  430,808
  449,063
  468,434
  488,962
  510,692
  533,672
  557,952
  583,589
  610,640
  639,167
  669,237
  700,920
  734,288
  769,421
  806,401
  845,314
  886,253
  929,313
Variable operating expenses, $m
 
  256,006
  261,870
  268,573
  276,098
  284,437
  293,586
  303,549
  314,333
  325,951
  338,420
  350,709
  364,943
  380,098
  396,204
  413,295
  431,407
  450,579
  470,854
  492,276
  514,895
  538,762
  563,932
  590,462
  618,415
  647,856
  678,854
  711,481
  745,813
  781,933
  819,925
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
  8,010
  256,006
  261,870
  268,573
  276,098
  284,437
  293,586
  303,549
  314,333
  325,951
  338,420
  350,709
  364,943
  380,098
  396,204
  413,295
  431,407
  450,579
  470,854
  492,276
  514,895
  538,762
  563,932
  590,462
  618,415
  647,856
  678,854
  711,481
  745,813
  781,933
  819,925
Operating income, $m
  827
  32,963
  33,746
  34,640
  35,644
  36,757
  37,977
  39,306
  40,745
  42,295
  43,959
  46,789
  48,688
  50,710
  52,859
  55,139
  57,555
  60,113
  62,818
  65,676
  68,694
  71,878
  75,236
  78,775
  82,504
  86,432
  90,568
  94,920
  99,501
  104,320
  109,388
EBITDA, $m
  1,773
  62,228
  63,659
  65,295
  67,132
  69,167
  71,400
  73,832
  76,464
  79,300
  82,343
  85,599
  89,073
  92,772
  96,703
  100,875
  105,296
  109,975
  114,924
  120,152
  125,673
  131,498
  137,642
  144,117
  150,940
  158,125
  165,691
  173,655
  182,034
  190,850
  200,123
Interest expense (income), $m
  66
  2,318
  2,428
  2,555
  2,701
  2,864
  3,044
  3,242
  3,458
  3,692
  3,943
  4,214
  4,502
  4,811
  5,139
  5,488
  5,858
  6,250
  6,666
  7,105
  7,569
  8,059
  8,576
  9,121
  9,696
  10,301
  10,939
  11,611
  12,317
  13,061
  13,843
Earnings before tax, $m
  901
  30,645
  31,318
  32,085
  32,944
  33,893
  34,933
  36,064
  37,287
  38,603
  40,015
  42,575
  44,185
  45,899
  47,720
  49,651
  51,697
  53,862
  56,152
  58,571
  61,124
  63,819
  66,660
  69,654
  72,809
  76,131
  79,629
  83,310
  87,184
  91,259
  95,545
Tax expense, $m
  163
  8,274
  8,456
  8,663
  8,895
  9,151
  9,432
  9,737
  10,067
  10,423
  10,804
  11,495
  11,930
  12,393
  12,884
  13,406
  13,958
  14,543
  15,161
  15,814
  16,504
  17,231
  17,998
  18,807
  19,658
  20,555
  21,500
  22,494
  23,540
  24,640
  25,797
Net income, $m
  697
  22,371
  22,862
  23,422
  24,049
  24,742
  25,501
  26,327
  27,219
  28,180
  29,211
  31,080
  32,255
  33,506
  34,835
  36,245
  37,739
  39,320
  40,991
  42,757
  44,621
  46,588
  48,662
  50,847
  53,150
  55,576
  58,129
  60,816
  63,644
  66,619
  69,748

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,342
  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
  11,507
  313,076
  320,277
  328,508
  337,749
  347,988
  359,223
  371,457
  384,700
  398,967
  414,278
  430,659
  448,137
  466,747
  486,525
  507,512
  529,753
  553,296
  578,193
  604,499
  632,274
  661,581
  692,489
  725,067
  759,393
  795,545
  833,609
  873,674
  915,834
  960,187
  1,006,840
Adjusted assets (=assets-cash), $m
  10,165
  313,076
  320,277
  328,508
  337,749
  347,988
  359,223
  371,457
  384,700
  398,967
  414,278
  430,659
  448,137
  466,747
  486,525
  507,512
  529,753
  553,296
  578,193
  604,499
  632,274
  661,581
  692,489
  725,067
  759,393
  795,545
  833,609
  873,674
  915,834
  960,187
  1,006,840
Revenue / Adjusted assets
  0.869
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
Average production assets, $m
  4,771
  155,176
  158,745
  162,825
  167,405
  172,481
  178,049
  184,113
  190,677
  197,748
  205,337
  213,456
  222,120
  231,344
  241,147
  251,549
  262,573
  274,242
  286,582
  299,620
  313,387
  327,914
  343,233
  359,380
  376,394
  394,313
  413,179
  433,037
  453,934
  475,918
  499,041
Working capital, $m
  1,232
  32,654
  33,405
  34,263
  35,227
  36,295
  37,467
  38,743
  40,124
  41,612
  43,209
  44,917
  46,740
  48,681
  50,744
  52,933
  55,253
  57,708
  60,305
  63,049
  65,946
  69,002
  72,226
  75,624
  79,204
  82,975
  86,945
  91,123
  95,521
  100,147
  105,012
Total debt, $m
  3,571
  69,380
  73,009
  77,158
  81,815
  86,976
  92,638
  98,804
  105,479
  112,669
  120,386
  128,642
  137,451
  146,831
  156,799
  167,376
  178,586
  190,451
  202,999
  216,257
  230,256
  245,027
  260,604
  277,024
  294,324
  312,545
  331,729
  351,922
  373,170
  395,524
  419,037
Total liabilities, $m
  6,449
  157,790
  161,419
  165,568
  170,225
  175,386
  181,048
  187,214
  193,889
  201,079
  208,796
  217,052
  225,861
  235,241
  245,209
  255,786
  266,996
  278,861
  291,409
  304,667
  318,666
  333,437
  349,014
  365,434
  382,734
  400,955
  420,139
  440,332
  461,580
  483,934
  507,447
Total equity, $m
  5,059
  155,286
  158,857
  162,940
  167,523
  172,602
  178,175
  184,243
  190,811
  197,888
  205,482
  213,607
  222,276
  231,507
  241,316
  251,726
  262,758
  274,435
  286,784
  299,831
  313,608
  328,144
  343,474
  359,633
  376,659
  394,591
  413,470
  433,342
  454,253
  476,253
  499,393
Total liabilities and equity, $m
  11,508
  313,076
  320,276
  328,508
  337,748
  347,988
  359,223
  371,457
  384,700
  398,967
  414,278
  430,659
  448,137
  466,748
  486,525
  507,512
  529,754
  553,296
  578,193
  604,498
  632,274
  661,581
  692,488
  725,067
  759,393
  795,546
  833,609
  873,674
  915,833
  960,187
  1,006,840
Debt-to-equity ratio
  0.706
  0.450
  0.460
  0.470
  0.490
  0.500
  0.520
  0.540
  0.550
  0.570
  0.590
  0.600
  0.620
  0.630
  0.650
  0.660
  0.680
  0.690
  0.710
  0.720
  0.730
  0.750
  0.760
  0.770
  0.780
  0.790
  0.800
  0.810
  0.820
  0.830
  0.840
Adjusted equity ratio
  0.432
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  697
  22,371
  22,862
  23,422
  24,049
  24,742
  25,501
  26,327
  27,219
  28,180
  29,211
  31,080
  32,255
  33,506
  34,835
  36,245
  37,739
  39,320
  40,991
  42,757
  44,621
  46,588
  48,662
  50,847
  53,150
  55,576
  58,129
  60,816
  63,644
  66,619
  69,748
Depreciation, amort., depletion, $m
  946
  29,265
  29,914
  30,655
  31,488
  32,411
  33,423
  34,526
  35,719
  37,005
  38,385
  38,810
  40,385
  42,062
  43,845
  45,736
  47,740
  49,862
  52,106
  54,476
  56,979
  59,621
  62,406
  65,342
  68,435
  71,693
  75,124
  78,734
  82,533
  86,531
  90,735
Funds from operations, $m
  1,422
  51,636
  52,775
  54,077
  55,537
  57,153
  58,924
  60,853
  62,939
  65,185
  67,596
  69,890
  72,641
  75,569
  78,680
  81,981
  85,479
  89,182
  93,097
  97,233
  101,600
  106,208
  111,067
  116,189
  121,585
  127,269
  133,252
  139,550
  146,177
  153,149
  160,483
Change in working capital, $m
  -253
  640
  751
  858
  964
  1,068
  1,172
  1,276
  1,381
  1,488
  1,597
  1,708
  1,823
  1,941
  2,063
  2,189
  2,320
  2,455
  2,597
  2,744
  2,897
  3,057
  3,224
  3,398
  3,580
  3,771
  3,970
  4,179
  4,397
  4,626
  4,866
Cash from operations, $m
  1,675
  50,157
  52,024
  53,219
  54,573
  56,085
  57,753
  59,577
  61,557
  63,697
  65,999
  68,182
  70,818
  73,628
  76,617
  79,792
  83,160
  86,726
  90,500
  94,489
  98,703
  103,152
  107,844
  112,791
  118,005
  123,498
  129,282
  135,372
  141,780
  148,523
  155,617
Maintenance CAPEX, $m
  0
  -27,676
  -28,214
  -28,863
  -29,605
  -30,437
  -31,360
  -32,373
  -33,475
  -34,669
  -35,954
  -37,334
  -38,810
  -40,385
  -42,062
  -43,845
  -45,736
  -47,740
  -49,862
  -52,106
  -54,476
  -56,979
  -59,621
  -62,406
  -65,342
  -68,435
  -71,693
  -75,124
  -78,734
  -82,533
  -86,531
New CAPEX, $m
  -875
  -2,959
  -3,569
  -4,080
  -4,580
  -5,075
  -5,569
  -6,064
  -6,564
  -7,071
  -7,589
  -8,119
  -8,663
  -9,224
  -9,803
  -10,402
  -11,024
  -11,669
  -12,340
  -13,039
  -13,767
  -14,526
  -15,319
  -16,148
  -17,013
  -17,919
  -18,866
  -19,858
  -20,896
  -21,984
  -23,123
Cash from investing activities, $m
  -1,388
  -30,635
  -31,783
  -32,943
  -34,185
  -35,512
  -36,929
  -38,437
  -40,039
  -41,740
  -43,543
  -45,453
  -47,473
  -49,609
  -51,865
  -54,247
  -56,760
  -59,409
  -62,202
  -65,145
  -68,243
  -71,505
  -74,940
  -78,554
  -82,355
  -86,354
  -90,559
  -94,982
  -99,630
  -104,517
  -109,654
Free cash flow, $m
  287
  19,522
  20,241
  20,276
  20,388
  20,572
  20,824
  21,140
  21,519
  21,957
  22,456
  22,729
  23,344
  24,018
  24,752
  25,545
  26,400
  27,317
  28,298
  29,345
  30,460
  31,646
  32,904
  34,238
  35,650
  37,144
  38,723
  40,390
  42,150
  44,006
  45,963
Issuance/(repayment) of debt, $m
  -225
  3,145
  3,629
  4,148
  4,657
  5,161
  5,662
  6,166
  6,674
  7,191
  7,717
  8,256
  8,809
  9,379
  9,968
  10,578
  11,209
  11,866
  12,548
  13,258
  13,999
  14,771
  15,577
  16,420
  17,300
  18,221
  19,184
  20,193
  21,248
  22,354
  23,513
Issuance/(repurchase) of shares, $m
  32
  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  
  -284
  3,145
  3,629
  4,148
  4,657
  5,161
  5,662
  6,166
  6,674
  7,191
  7,717
  8,256
  8,809
  9,379
  9,968
  10,578
  11,209
  11,866
  12,548
  13,258
  13,999
  14,771
  15,577
  16,420
  17,300
  18,221
  19,184
  20,193
  21,248
  22,354
  23,513
Total cash flow (excl. dividends), $m
  -148
  22,667
  23,870
  24,425
  25,046
  25,733
  26,486
  27,306
  28,193
  29,148
  30,173
  30,985
  32,153
  33,398
  34,720
  36,123
  37,609
  39,182
  40,846
  42,603
  44,459
  46,417
  48,481
  50,657
  52,950
  55,365
  57,907
  60,583
  63,398
  66,360
  69,476
Retained Cash Flow (-), $m
  -23
  -2,866
  -3,572
  -4,083
  -4,583
  -5,079
  -5,573
  -6,068
  -6,568
  -7,076
  -7,594
  -8,125
  -8,669
  -9,230
  -9,810
  -10,410
  -11,031
  -11,677
  -12,349
  -13,048
  -13,776
  -14,537
  -15,330
  -16,159
  -17,025
  -17,932
  -18,880
  -19,872
  -20,911
  -21,999
  -23,140
Prev. year cash balance distribution, $m
 
  4,215
  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
 
  24,017
  20,299
  20,342
  20,462
  20,654
  20,914
  21,238
  21,624
  22,072
  22,578
  22,860
  23,484
  24,167
  24,910
  25,713
  26,578
  27,505
  28,497
  29,556
  30,682
  31,880
  33,151
  34,498
  35,925
  37,433
  39,027
  40,711
  42,487
  44,361
  46,336
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
 
  23,027
  18,583
  17,703
  16,848
  16,009
  15,178
  14,348
  13,516
  12,679
  11,837
  10,856
  10,022
  9,189
  8,363
  7,549
  6,754
  5,985
  5,248
  4,551
  3,899
  3,297
  2,751
  2,261
  1,830
  1,456
  1,139
  874
  657
  484
  349
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

Advanced Semiconductor Engineering, Inc. provides semiconductor packaging and testing services in the United States, Taiwan, Asia, Europe, and internationally. It operates through Packaging, Testing, and Electronic Manufacturing Services segments. The company offers packaging services, including various packages, such as flip-chip ball grid array (BGA), flip-chip chip scale package, advanced chip scale packages, quad flat packages, thin quad flat packages, bump chip carrier and quad flat no-lead (QFN) packages, plastic BGAs, and 3D chip packages; stacked die solutions in various package types; and copper wire and silver bonding solutions. It also provides advanced packages, including wafer level chip scale, flip-chip (FC) chip scale, FC package in, FC BGA/HF FCBGA, FC and wire bonding, and integrated passive device packages; IC wire bonding packages, including lead frame-based package types, such as lead frame-based packages and substrate-based packages; system-in-package (SiP) products, as well as module assembly services; and interconnect materials. In addition, the company offers a range of semiconductor testing services, including front-end engineering testing, wafer probing, logic/mixed-signal/RF module and SiP/ MEMS/discrete final testing, and test-related services, as well as drop shipment services. Further, it provides electronic manufacturing services in relation to computers, peripherals, communications, industrial, automotive, and storage and server applications. Advanced Semiconductor Engineering, Inc. was founded in 1984 and is based in Kaohsiung, Taiwan.

FINANCIAL RATIOS  of  Advanced Semiconductor Engineering ADR (ASX)

Valuation Ratios
P/E Ratio 68.7
Price to Sales 5.4
Price to Book 9.5
Price to Tangible Book
Price to Cash Flow 28.6
Price to Free Cash Flow 59.9
Growth Rates
Sales Growth Rate -3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -11.5%
Cap. Spend. - 3 Yr. Gr. Rate -1.6%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 46.9%
Total Debt to Equity 70.6%
Interest Coverage 15
Management Effectiveness
Return On Assets 6.5%
Ret/ On Assets - 3 Yr. Avg. 6.9%
Return On Total Capital 8%
Ret/ On T. Cap. - 3 Yr. Avg. 8.4%
Return On Equity 13.8%
Return On Equity - 3 Yr. Avg. 14.6%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 19.4%
Gross Margin - 3 Yr. Avg. 19.3%
EBITDA Margin 21.6%
EBITDA Margin - 3 Yr. Avg. 21.3%
Operating Margin 9.4%
Oper. Margin - 3 Yr. Avg. 9.8%
Pre-Tax Margin 10.2%
Pre-Tax Margin - 3 Yr. Avg. 10.1%
Net Profit Margin 7.9%
Net Profit Margin - 3 Yr. Avg. 8%
Effective Tax Rate 18.1%
Eff/ Tax Rate - 3 Yr. Avg. 17.5%
Payout Ratio 56.5%

ASX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ASX stock intrinsic value calculation we used $283303 million for the last fiscal year's total revenue generated by Advanced Semiconductor Engineering ADR. The default revenue input number comes from 2016 income statement of Advanced Semiconductor Engineering 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 ASX 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 ASX is calculated based on our internal credit rating of Advanced Semiconductor Engineering 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 Advanced Semiconductor Engineering 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 ASX stock the variable cost ratio is equal to 88.6%.

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 ASX 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 Advanced Semiconductor Engineering ADR.

Corporate tax rate of 27% is the nominal tax rate for Advanced Semiconductor Engineering 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 ASX 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 ASX are equal to 53.7%.

Life of production assets of 5.5 years is the average useful life of capital assets used in Advanced Semiconductor Engineering 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 ASX is equal to 11.3%. 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 - $156635 million for Advanced Semiconductor Engineering 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 1654.72 million for Advanced Semiconductor Engineering 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 Advanced Semiconductor Engineering ADR at the current share price and the inputted number of shares is $10.3 billion.


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COMPANY NEWS

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▶ Joint Statement by ASE and SPIL   [05:45AM  PR Newswire]
▶ ADVANCED SEMICONDUCTOR ENGINEERING INC Financials   [01:04PM  EDGAR Online Financials]
▶ Orocobre Limited (ASX:ORE) (TOR:ORL) Company Presentation   [Apr-18-16 07:43PM  ABN Newswire]
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▶ ASE Inc. Press Release   [Mar-17-16 06:17AM  PR Newswire]
▶ ASE Participates at SEMICON China 2016   [Mar-14-16 03:38AM  Business Wire]
Stock chart of ASX Financial statements of ASX Annual reports of ASX
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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