Intrinsic value of Braskem ADR - BAK

Previous Close

$24.67

  Intrinsic Value

$44.31

stock screener

  Rating & Target

str. buy

+80%

  Value-price divergence*

-45%

Previous close

$24.67

 
Intrinsic value

$44.31

 
Up/down potential

+80%

 
Rating

str. buy

 
Value-price divergence*

-45%

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

We calculate the intrinsic value of BAK 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 9.7

 

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, %
  2.08
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.43
  5.38
  5.34
  5.31
  5.28
  5.25
  5.23
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
  5.04
  5.04
Revenue, $m
  15,081
  15,956
  16,868
  17,821
  18,816
  19,856
  20,942
  22,078
  23,267
  24,510
  25,812
  27,174
  28,601
  30,096
  31,662
  33,303
  35,023
  36,826
  38,716
  40,699
  42,778
  44,958
  47,245
  49,645
  52,162
  54,804
  57,575
  60,484
  63,536
  66,740
  70,102
Variable operating expenses, $m
 
  13,594
  14,372
  15,184
  16,031
  16,917
  17,843
  18,811
  19,823
  20,883
  21,992
  23,152
  24,368
  25,642
  26,976
  28,374
  29,840
  31,376
  32,986
  34,675
  36,447
  38,304
  40,253
  42,297
  44,442
  46,693
  49,054
  51,532
  54,133
  56,862
  59,727
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
  13,210
  13,594
  14,372
  15,184
  16,031
  16,917
  17,843
  18,811
  19,823
  20,883
  21,992
  23,152
  24,368
  25,642
  26,976
  28,374
  29,840
  31,376
  32,986
  34,675
  36,447
  38,304
  40,253
  42,297
  44,442
  46,693
  49,054
  51,532
  54,133
  56,862
  59,727
Operating income, $m
  1,871
  2,361
  2,497
  2,638
  2,785
  2,939
  3,099
  3,268
  3,443
  3,628
  3,820
  4,022
  4,233
  4,454
  4,686
  4,929
  5,183
  5,450
  5,730
  6,023
  6,331
  6,654
  6,992
  7,347
  7,720
  8,111
  8,521
  8,952
  9,403
  9,877
  10,375
EBITDA, $m
  2,723
  2,457
  2,598
  2,744
  2,898
  3,058
  3,225
  3,400
  3,583
  3,775
  3,975
  4,185
  4,405
  4,635
  4,876
  5,129
  5,394
  5,671
  5,962
  6,268
  6,588
  6,924
  7,276
  7,645
  8,033
  8,440
  8,867
  9,315
  9,785
  10,278
  10,796
Interest expense (income), $m
  487
  448
  451
  487
  524
  563
  604
  646
  691
  737
  786
  837
  890
  946
  1,005
  1,066
  1,130
  1,197
  1,268
  1,342
  1,419
  1,501
  1,586
  1,676
  1,770
  1,868
  1,971
  2,080
  2,194
  2,313
  2,438
Earnings before tax, $m
  -53
  1,914
  2,045
  2,151
  2,261
  2,375
  2,496
  2,621
  2,753
  2,890
  3,034
  3,185
  3,343
  3,508
  3,681
  3,863
  4,053
  4,253
  4,462
  4,682
  4,912
  5,153
  5,406
  5,672
  5,951
  6,243
  6,550
  6,872
  7,210
  7,564
  7,937
Tax expense, $m
  198
  517
  552
  581
  610
  641
  674
  708
  743
  780
  819
  860
  903
  947
  994
  1,043
  1,094
  1,148
  1,205
  1,264
  1,326
  1,391
  1,460
  1,531
  1,607
  1,686
  1,768
  1,855
  1,947
  2,042
  2,143
Net income, $m
  -143
  1,397
  1,493
  1,570
  1,650
  1,734
  1,822
  1,914
  2,009
  2,110
  2,215
  2,325
  2,440
  2,561
  2,687
  2,820
  2,959
  3,105
  3,257
  3,418
  3,586
  3,762
  3,947
  4,140
  4,344
  4,557
  4,781
  5,016
  5,263
  5,522
  5,794

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,496
  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
  16,384
  17,343
  18,335
  19,371
  20,452
  21,582
  22,763
  23,998
  25,290
  26,642
  28,056
  29,537
  31,088
  32,713
  34,415
  36,199
  38,068
  40,028
  42,083
  44,238
  46,497
  48,868
  51,354
  53,962
  56,698
  59,569
  62,582
  65,743
  69,061
  72,543
  76,198
Adjusted assets (=assets-cash), $m
  13,888
  17,343
  18,335
  19,371
  20,452
  21,582
  22,763
  23,998
  25,290
  26,642
  28,056
  29,537
  31,088
  32,713
  34,415
  36,199
  38,068
  40,028
  42,083
  44,238
  46,497
  48,868
  51,354
  53,962
  56,698
  59,569
  62,582
  65,743
  69,061
  72,543
  76,198
Revenue / Adjusted assets
  1.086
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
Average production assets, $m
  901
  957
  1,012
  1,069
  1,129
  1,191
  1,257
  1,325
  1,396
  1,471
  1,549
  1,630
  1,716
  1,806
  1,900
  1,998
  2,101
  2,210
  2,323
  2,442
  2,567
  2,697
  2,835
  2,979
  3,130
  3,288
  3,455
  3,629
  3,812
  4,004
  4,206
Working capital, $m
  680
  -734
  -776
  -820
  -866
  -913
  -963
  -1,016
  -1,070
  -1,127
  -1,187
  -1,250
  -1,316
  -1,384
  -1,456
  -1,532
  -1,611
  -1,694
  -1,781
  -1,872
  -1,968
  -2,068
  -2,173
  -2,284
  -2,399
  -2,521
  -2,648
  -2,782
  -2,923
  -3,070
  -3,225
Total debt, $m
  11,189
  11,281
  12,174
  13,106
  14,079
  15,096
  16,159
  17,270
  18,433
  19,649
  20,923
  22,256
  23,651
  25,114
  26,646
  28,251
  29,934
  31,697
  33,547
  35,486
  37,520
  39,653
  41,890
  44,238
  46,700
  49,284
  51,996
  54,841
  57,827
  60,961
  64,250
Total liabilities, $m
  15,517
  15,609
  16,502
  17,434
  18,407
  19,424
  20,487
  21,598
  22,761
  23,977
  25,251
  26,584
  27,979
  29,442
  30,974
  32,579
  34,262
  36,025
  37,875
  39,814
  41,848
  43,981
  46,218
  48,566
  51,028
  53,612
  56,324
  59,169
  62,155
  65,289
  68,578
Total equity, $m
  867
  1,734
  1,834
  1,937
  2,045
  2,158
  2,276
  2,400
  2,529
  2,664
  2,806
  2,954
  3,109
  3,271
  3,442
  3,620
  3,807
  4,003
  4,208
  4,424
  4,650
  4,887
  5,135
  5,396
  5,670
  5,957
  6,258
  6,574
  6,906
  7,254
  7,620
Total liabilities and equity, $m
  16,384
  17,343
  18,336
  19,371
  20,452
  21,582
  22,763
  23,998
  25,290
  26,641
  28,057
  29,538
  31,088
  32,713
  34,416
  36,199
  38,069
  40,028
  42,083
  44,238
  46,498
  48,868
  51,353
  53,962
  56,698
  59,569
  62,582
  65,743
  69,061
  72,543
  76,198
Debt-to-equity ratio
  12.905
  6.500
  6.640
  6.770
  6.880
  6.990
  7.100
  7.200
  7.290
  7.380
  7.460
  7.530
  7.610
  7.680
  7.740
  7.800
  7.860
  7.920
  7.970
  8.020
  8.070
  8.110
  8.160
  8.200
  8.240
  8.270
  8.310
  8.340
  8.370
  8.400
  8.430
Adjusted equity ratio
  -0.117
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -143
  1,397
  1,493
  1,570
  1,650
  1,734
  1,822
  1,914
  2,009
  2,110
  2,215
  2,325
  2,440
  2,561
  2,687
  2,820
  2,959
  3,105
  3,257
  3,418
  3,586
  3,762
  3,947
  4,140
  4,344
  4,557
  4,781
  5,016
  5,263
  5,522
  5,794
Depreciation, amort., depletion, $m
  852
  96
  101
  107
  113
  119
  126
  132
  140
  147
  155
  163
  172
  181
  190
  200
  210
  221
  232
  244
  257
  270
  283
  298
  313
  329
  345
  363
  381
  400
  421
Funds from operations, $m
  502
  1,493
  1,594
  1,677
  1,763
  1,853
  1,947
  2,046
  2,149
  2,257
  2,370
  2,488
  2,612
  2,742
  2,877
  3,020
  3,169
  3,326
  3,490
  3,662
  3,842
  4,031
  4,230
  4,438
  4,657
  4,886
  5,127
  5,379
  5,644
  5,922
  6,214
Change in working capital, $m
  -1,104
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -69
  -72
  -75
  -79
  -83
  -87
  -91
  -96
  -100
  -105
  -110
  -116
  -122
  -127
  -134
  -140
  -147
  -155
Cash from operations, $m
  1,606
  1,533
  1,636
  1,721
  1,809
  1,901
  1,997
  2,098
  2,204
  2,314
  2,430
  2,551
  2,677
  2,810
  2,949
  3,095
  3,248
  3,409
  3,577
  3,753
  3,938
  4,132
  4,335
  4,549
  4,773
  5,008
  5,254
  5,513
  5,785
  6,070
  6,369
Maintenance CAPEX, $m
  0
  -90
  -96
  -101
  -107
  -113
  -119
  -126
  -132
  -140
  -147
  -155
  -163
  -172
  -181
  -190
  -200
  -210
  -221
  -232
  -244
  -257
  -270
  -283
  -298
  -313
  -329
  -345
  -363
  -381
  -400
New CAPEX, $m
  -909
  -57
  -55
  -57
  -60
  -62
  -65
  -68
  -71
  -75
  -78
  -82
  -86
  -90
  -94
  -98
  -103
  -108
  -113
  -119
  -125
  -131
  -137
  -144
  -151
  -158
  -166
  -175
  -183
  -192
  -202
Cash from investing activities, $m
  -898
  -147
  -151
  -158
  -167
  -175
  -184
  -194
  -203
  -215
  -225
  -237
  -249
  -262
  -275
  -288
  -303
  -318
  -334
  -351
  -369
  -388
  -407
  -427
  -449
  -471
  -495
  -520
  -546
  -573
  -602
Free cash flow, $m
  708
  1,386
  1,486
  1,562
  1,642
  1,726
  1,813
  1,904
  2,000
  2,100
  2,205
  2,314
  2,429
  2,549
  2,675
  2,807
  2,945
  3,090
  3,242
  3,402
  3,569
  3,744
  3,928
  4,121
  4,324
  4,536
  4,759
  4,993
  5,239
  5,496
  5,767
Issuance/(repayment) of debt, $m
  -240
  92
  893
  932
  973
  1,017
  1,063
  1,111
  1,163
  1,216
  1,273
  1,333
  1,396
  1,462
  1,532
  1,605
  1,683
  1,764
  1,849
  1,939
  2,034
  2,133
  2,238
  2,347
  2,463
  2,584
  2,711
  2,845
  2,986
  3,134
  3,289
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  
  -240
  92
  893
  932
  973
  1,017
  1,063
  1,111
  1,163
  1,216
  1,273
  1,333
  1,396
  1,462
  1,532
  1,605
  1,683
  1,764
  1,849
  1,939
  2,034
  2,133
  2,238
  2,347
  2,463
  2,584
  2,711
  2,845
  2,986
  3,134
  3,289
Total cash flow (excl. dividends), $m
  654
  1,478
  2,379
  2,494
  2,616
  2,743
  2,876
  3,016
  3,163
  3,316
  3,478
  3,647
  3,825
  4,011
  4,207
  4,412
  4,628
  4,854
  5,092
  5,341
  5,603
  5,877
  6,166
  6,469
  6,786
  7,120
  7,471
  7,838
  8,225
  8,630
  9,056
Retained Cash Flow (-), $m
  -346
  -867
  -99
  -104
  -108
  -113
  -118
  -123
  -129
  -135
  -141
  -148
  -155
  -162
  -170
  -178
  -187
  -196
  -205
  -215
  -226
  -237
  -249
  -261
  -274
  -287
  -301
  -316
  -332
  -348
  -365
Prev. year cash balance distribution, $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 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
 
  611
  2,279
  2,391
  2,507
  2,630
  2,758
  2,892
  3,033
  3,181
  3,336
  3,499
  3,670
  3,849
  4,037
  4,234
  4,441
  4,658
  4,886
  5,125
  5,377
  5,640
  5,917
  6,208
  6,513
  6,833
  7,169
  7,522
  7,893
  8,282
  8,690
Discount rate, %
 
  8.90
  9.35
  9.81
  10.30
  10.82
  11.36
  11.93
  12.52
  13.15
  13.81
  14.50
  15.22
  15.98
  16.78
  17.62
  18.50
  19.43
  20.40
  21.42
  22.49
  23.61
  24.80
  26.03
  27.34
  28.70
  30.14
  31.65
  33.23
  34.89
  36.63
PV of cash for distribution, $m
 
  561
  1,906
  1,805
  1,694
  1,573
  1,446
  1,314
  1,180
  1,046
  915
  789
  670
  560
  460
  371
  294
  228
  173
  128
  93
  66
  45
  30
  20
  12
  8
  4
  3
  1
  1
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

Braskem S.A., together with its subsidiaries, produces and sells thermoplastic resins. Its Basic Petrochemicals segment offers olefins, such as ethylene, polymer and chemical grade propylene, butadiene, isoprene, and butene-1; BTX products comprising benzene, toluene, ortho-xylene, para-xylene, and mixed xylenes; fuels, including automotive gasoline and liquefied petroleum gas; intermediates, such as cumene; and other basic petrochemicals, which include ethyl tertiary butyl ether, solvent C9, and pyrolysis C9. This segment also supplies electric energy, steam, compressed air, and other products to second-generation producers. Its Polyolefins segment produces polyethylene, including LDPE, LLDPE, HDPE, ultra-high molecular weight polyethylene, and EVA; green polyethylene from renewable resources; and polypropylene. This segment’s products are used in plastic films for food and industrial packaging; bottles, shopping bags, and other consumer goods containers; automotive parts; and household appliances. Its Vinyls segment produces polyvinyl chloride, caustic soda, chlorine, hydrogen, caustic soda flake, and sodium hypochlorite. The company’s USA and Europe segment produces polypropylene in the United States and Germany. Its Chemical Distribution segment distributes solvents, including aliphatic, aromatic, synthetic, and ecologically-friendly solvents; engineering plastics; hydrocarbon solvents and isoparafins; and general purpose chemicals, such as process oils, chemical intermediates, blends, specialty chemicals, and pharmaceuticals. The company also imports and exports chemicals, petrochemicals, and fuels; produces, supplies, and sells utilities, such as water and industrial gases; and provides industrial services. The company was formerly known as Copene Petroquímica do Nordeste S.A. and changed its name to Braskem S.A. in 2002. Braskem S.A. was founded in 1972 and is headquartered in São Paulo, Brazil. Braskem S.A. is a subsidiary of Odebrecht S.A.

FINANCIAL RATIOS  of  Braskem ADR (BAK)

Valuation Ratios
P/E Ratio -137.3
Price to Sales 1.3
Price to Book 22.7
Price to Tangible Book
Price to Cash Flow 12.2
Price to Free Cash Flow 28.2
Growth Rates
Sales Growth Rate 2.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -30.3%
Cap. Spend. - 3 Yr. Gr. Rate -12.7%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 1161.5%
Total Debt to Equity 1290.5%
Interest Coverage 1
Management Effectiveness
Return On Assets 12.2%
Ret/ On Assets - 3 Yr. Avg. 7.4%
Return On Total Capital -1.1%
Ret/ On T. Cap. - 3 Yr. Avg. 3.2%
Return On Equity -20.6%
Return On Equity - 3 Yr. Avg. 23.5%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 26.5%
Gross Margin - 3 Yr. Avg. 20.4%
EBITDA Margin 8.5%
EBITDA Margin - 3 Yr. Avg. 11.4%
Operating Margin 12.4%
Oper. Margin - 3 Yr. Avg. 11.6%
Pre-Tax Margin -0.4%
Pre-Tax Margin - 3 Yr. Avg. 3.9%
Net Profit Margin -0.9%
Net Profit Margin - 3 Yr. Avg. 2.5%
Effective Tax Rate -373.6%
Eff/ Tax Rate - 3 Yr. Avg. -99.2%
Payout Ratio -442%

BAK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BAK stock intrinsic value calculation we used $15081 million for the last fiscal year's total revenue generated by Braskem ADR. The default revenue input number comes from 2016 income statement of Braskem 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 BAK stock valuation model: a) initial revenue growth rate of 5.8% 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 8.9%, whose default value for BAK is calculated based on our internal credit rating of Braskem 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 Braskem 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 BAK stock the variable cost ratio is equal to 85.2%.

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 BAK 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 4% for Braskem ADR.

Corporate tax rate of 27% is the nominal tax rate for Braskem 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 BAK 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 BAK are equal to 6%.

Life of production assets of 10 years is the average useful life of capital assets used in Braskem 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 BAK is equal to -4.6%. 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 - $867 million for Braskem 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 392.722 million for Braskem 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 Braskem ADR at the current share price and the inputted number of shares is $9.7 billion.

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COMPANY NEWS

▶ Braskem announces 2Q17 Results   [Aug-15-17 11:15PM  PR Newswire]
▶ Brazil's Braskem faces stock market suspension   [Jul-05-17 06:57PM  Reuters]
▶ Brazil petrochem co. to build $675M project in Houston area   [Jun-22-17 11:40AM  American City Business Journals]
▶ Odebrecht presents Argentina plea deal offer   [May-09-17 04:34PM  Reuters]
▶ Best Low-P/E Stocks to Buy in February   [Feb-15-17 07:38PM  Motley Fool]
Stock chart of BAK Financial statements of BAK
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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