Intrinsic value of Brookfield Property Partners - BPY

Previous Close

$23.70

  Intrinsic Value

$116.56

stock screener

  Rating & Target

str. buy

+392%

  Value-price divergence*

-28%

Previous close

$23.70

 
Intrinsic value

$116.56

 
Up/down potential

+392%

 
Rating

str. buy

 
Value-price divergence*

-28%

Our model is not good at valuating stocks of financial companies, such as BPY.

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

We calculate the intrinsic value of BPY 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 6.2

 

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, %
  10.28
  22.50
  20.75
  19.18
  17.76
  16.48
  15.33
  14.30
  13.37
  12.53
  11.78
  11.10
  10.49
  9.94
  9.45
  9.00
  8.60
  8.24
  7.92
  7.63
  7.36
  7.13
  6.91
  6.72
  6.55
  6.40
  6.26
  6.13
  6.02
  5.92
  5.82
Revenue, $m
  5,352
  6,556
  7,917
  9,435
  11,110
  12,941
  14,925
  17,060
  19,341
  21,765
  24,329
  27,030
  29,865
  32,835
  35,937
  39,173
  42,543
  46,049
  49,696
  53,486
  57,425
  61,518
  65,771
  70,193
  74,792
  79,576
  84,554
  89,738
  95,138
  100,766
  106,635
Variable operating expenses, $m
 
  4,395
  5,291
  6,291
  7,395
  8,601
  9,909
  11,315
  12,817
  14,414
  16,103
  17,807
  19,675
  21,631
  23,675
  25,806
  28,026
  30,336
  32,739
  35,236
  37,830
  40,527
  43,329
  46,242
  49,271
  52,423
  55,703
  59,118
  62,675
  66,383
  70,249
Fixed operating expenses, $m
 
  1,384
  1,418
  1,454
  1,490
  1,527
  1,566
  1,605
  1,645
  1,686
  1,728
  1,771
  1,816
  1,861
  1,908
  1,955
  2,004
  2,054
  2,106
  2,158
  2,212
  2,267
  2,324
  2,382
  2,442
  2,503
  2,565
  2,630
  2,695
  2,763
  2,832
Total operating expenses, $m
  4,921
  5,779
  6,709
  7,745
  8,885
  10,128
  11,475
  12,920
  14,462
  16,100
  17,831
  19,578
  21,491
  23,492
  25,583
  27,761
  30,030
  32,390
  34,845
  37,394
  40,042
  42,794
  45,653
  48,624
  51,713
  54,926
  58,268
  61,748
  65,370
  69,146
  73,081
Operating income, $m
  431
  777
  1,207
  1,689
  2,225
  2,812
  3,451
  4,140
  4,878
  5,664
  6,497
  7,452
  8,375
  9,343
  10,355
  11,411
  12,512
  13,659
  14,852
  16,092
  17,382
  18,724
  20,118
  21,569
  23,079
  24,650
  26,286
  27,991
  29,768
  31,621
  33,554
EBITDA, $m
  671
  924
  1,368
  1,866
  2,420
  3,027
  3,687
  4,399
  5,162
  5,973
  6,834
  7,741
  8,695
  9,694
  10,739
  11,830
  12,967
  14,151
  15,383
  16,665
  17,997
  19,382
  20,822
  22,320
  23,879
  25,501
  27,191
  28,951
  30,786
  32,699
  34,695
Interest expense (income), $m
  1,383
  1,441
  2,083
  2,846
  3,698
  4,637
  5,664
  6,777
  7,974
  9,254
  10,613
  12,051
  13,566
  15,157
  16,822
  18,562
  20,377
  22,267
  24,234
  26,279
  28,405
  30,614
  32,910
  35,295
  37,776
  40,355
  43,038
  45,830
  48,737
  51,766
  54,923
Earnings before tax, $m
  2,142
  -664
  -876
  -1,157
  -1,473
  -1,825
  -2,213
  -2,637
  -3,096
  -3,589
  -4,116
  -4,600
  -5,191
  -5,814
  -6,467
  -7,151
  -7,865
  -8,608
  -9,382
  -10,187
  -11,023
  -11,890
  -12,791
  -13,726
  -14,697
  -15,705
  -16,752
  -17,839
  -18,970
  -20,145
  -21,369
Tax expense, $m
  -575
  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
  660
  -664
  -876
  -1,157
  -1,473
  -1,825
  -2,213
  -2,637
  -3,096
  -3,589
  -4,116
  -4,600
  -5,191
  -5,814
  -6,467
  -7,151
  -7,865
  -8,608
  -9,382
  -10,187
  -11,023
  -11,890
  -12,791
  -13,726
  -14,697
  -15,705
  -16,752
  -17,839
  -18,970
  -20,145
  -21,369

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,456
  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
  78,127
  95,017
  114,734
  136,734
  161,014
  187,552
  216,311
  247,243
  280,300
  315,431
  352,588
  391,732
  432,831
  475,866
  520,827
  567,719
  616,560
  667,382
  720,229
  775,158
  832,241
  891,560
  953,209
  1,017,297
  1,083,940
  1,153,268
  1,225,420
  1,300,547
  1,378,809
  1,460,377
  1,545,434
Adjusted assets (=assets-cash), $m
  76,671
  95,017
  114,734
  136,734
  161,014
  187,552
  216,311
  247,243
  280,300
  315,431
  352,588
  391,732
  432,831
  475,866
  520,827
  567,719
  616,560
  667,382
  720,229
  775,158
  832,241
  891,560
  953,209
  1,017,297
  1,083,940
  1,153,268
  1,225,420
  1,300,547
  1,378,809
  1,460,377
  1,545,434
Revenue / Adjusted assets
  0.070
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
Average production assets, $m
  571
  702
  847
  1,010
  1,189
  1,385
  1,597
  1,825
  2,069
  2,329
  2,603
  2,892
  3,196
  3,513
  3,845
  4,191
  4,552
  4,927
  5,317
  5,723
  6,144
  6,582
  7,038
  7,511
  8,003
  8,515
  9,047
  9,602
  10,180
  10,782
  11,410
Working capital, $m
  -4,164
  -643
  -776
  -925
  -1,089
  -1,268
  -1,463
  -1,672
  -1,895
  -2,133
  -2,384
  -2,649
  -2,927
  -3,218
  -3,522
  -3,839
  -4,169
  -4,513
  -4,870
  -5,242
  -5,628
  -6,029
  -6,446
  -6,879
  -7,330
  -7,798
  -8,286
  -8,794
  -9,324
  -9,875
  -10,450
Total debt, $m
  33,519
  48,450
  66,194
  85,994
  107,847
  131,731
  157,613
  185,453
  215,204
  246,822
  280,263
  315,493
  352,482
  391,213
  431,678
  473,881
  517,838
  563,578
  611,140
  660,576
  711,951
  765,338
  820,822
  878,501
  938,480
  1,000,875
  1,065,812
  1,133,426
  1,203,862
  1,277,274
  1,353,824
Total liabilities, $m
  70,585
  85,516
  103,260
  123,060
  144,913
  168,797
  194,679
  222,519
  252,270
  283,888
  317,329
  352,559
  389,548
  428,279
  468,744
  510,947
  554,904
  600,644
  648,206
  697,642
  749,017
  802,404
  857,888
  915,567
  975,546
  1,037,941
  1,102,878
  1,170,492
  1,240,928
  1,314,340
  1,390,890
Total equity, $m
  7,542
  9,502
  11,473
  13,673
  16,101
  18,755
  21,631
  24,724
  28,030
  31,543
  35,259
  39,173
  43,283
  47,587
  52,083
  56,772
  61,656
  66,738
  72,023
  77,516
  83,224
  89,156
  95,321
  101,730
  108,394
  115,327
  122,542
  130,055
  137,881
  146,038
  154,543
Total liabilities and equity, $m
  78,127
  95,018
  114,733
  136,733
  161,014
  187,552
  216,310
  247,243
  280,300
  315,431
  352,588
  391,732
  432,831
  475,866
  520,827
  567,719
  616,560
  667,382
  720,229
  775,158
  832,241
  891,560
  953,209
  1,017,297
  1,083,940
  1,153,268
  1,225,420
  1,300,547
  1,378,809
  1,460,378
  1,545,433
Debt-to-equity ratio
  4.444
  5.100
  5.770
  6.290
  6.700
  7.020
  7.290
  7.500
  7.680
  7.820
  7.950
  8.050
  8.140
  8.220
  8.290
  8.350
  8.400
  8.440
  8.490
  8.520
  8.550
  8.580
  8.610
  8.640
  8.660
  8.680
  8.700
  8.710
  8.730
  8.750
  8.760
Adjusted equity ratio
  0.079
  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
  660
  -664
  -876
  -1,157
  -1,473
  -1,825
  -2,213
  -2,637
  -3,096
  -3,589
  -4,116
  -4,600
  -5,191
  -5,814
  -6,467
  -7,151
  -7,865
  -8,608
  -9,382
  -10,187
  -11,023
  -11,890
  -12,791
  -13,726
  -14,697
  -15,705
  -16,752
  -17,839
  -18,970
  -20,145
  -21,369
Depreciation, amort., depletion, $m
  240
  146
  161
  177
  195
  215
  236
  259
  283
  309
  336
  289
  320
  351
  385
  419
  455
  493
  532
  572
  614
  658
  704
  751
  800
  851
  905
  960
  1,018
  1,078
  1,141
Funds from operations, $m
  431
  -518
  -716
  -980
  -1,278
  -1,611
  -1,977
  -2,378
  -2,813
  -3,280
  -3,780
  -4,310
  -4,872
  -5,463
  -6,083
  -6,732
  -7,409
  -8,116
  -8,850
  -9,614
  -10,408
  -11,232
  -12,087
  -12,975
  -13,897
  -14,853
  -15,847
  -16,879
  -17,952
  -19,067
  -20,228
Change in working capital, $m
  -314
  -118
  -133
  -149
  -164
  -179
  -194
  -209
  -224
  -238
  -251
  -265
  -278
  -291
  -304
  -317
  -330
  -344
  -357
  -371
  -386
  -401
  -417
  -433
  -451
  -469
  -488
  -508
  -529
  -552
  -575
Cash from operations, $m
  745
  -400
  -582
  -831
  -1,114
  -1,431
  -1,783
  -2,169
  -2,589
  -3,043
  -3,529
  -4,046
  -4,594
  -5,172
  -5,779
  -6,415
  -7,079
  -7,772
  -8,493
  -9,243
  -10,022
  -10,831
  -11,671
  -12,542
  -13,446
  -14,385
  -15,359
  -16,371
  -17,423
  -18,516
  -19,652
Maintenance CAPEX, $m
  0
  -57
  -70
  -85
  -101
  -119
  -138
  -160
  -183
  -207
  -233
  -260
  -289
  -320
  -351
  -385
  -419
  -455
  -493
  -532
  -572
  -614
  -658
  -704
  -751
  -800
  -851
  -905
  -960
  -1,018
  -1,078
New CAPEX, $m
  -7,926
  -131
  -146
  -162
  -179
  -196
  -212
  -228
  -244
  -259
  -274
  -289
  -303
  -318
  -332
  -346
  -361
  -375
  -390
  -406
  -421
  -438
  -455
  -473
  -492
  -512
  -533
  -555
  -578
  -602
  -628
Cash from investing activities, $m
  -3,234
  -188
  -216
  -247
  -280
  -315
  -350
  -388
  -427
  -466
  -507
  -549
  -592
  -638
  -683
  -731
  -780
  -830
  -883
  -938
  -993
  -1,052
  -1,113
  -1,177
  -1,243
  -1,312
  -1,384
  -1,460
  -1,538
  -1,620
  -1,706
Free cash flow, $m
  -2,489
  -588
  -798
  -1,078
  -1,394
  -1,746
  -2,134
  -2,557
  -3,016
  -3,509
  -4,036
  -4,595
  -5,186
  -5,809
  -6,462
  -7,145
  -7,859
  -8,602
  -9,376
  -10,180
  -11,016
  -11,883
  -12,784
  -13,719
  -14,689
  -15,697
  -16,743
  -17,830
  -18,961
  -20,136
  -21,359
Issuance/(repayment) of debt, $m
  1,865
  14,931
  17,744
  19,800
  21,852
  23,884
  25,883
  27,840
  29,751
  31,617
  33,442
  35,229
  36,989
  38,731
  40,465
  42,203
  43,957
  45,740
  47,562
  49,436
  51,374
  53,387
  55,485
  57,679
  59,979
  62,395
  64,937
  67,614
  70,436
  73,412
  76,551
Issuance/(repurchase) of shares, $m
  2,791
  2,624
  2,848
  3,357
  3,901
  4,479
  5,089
  5,730
  6,402
  7,102
  7,832
  8,514
  9,301
  10,117
  10,963
  11,840
  12,749
  13,690
  14,667
  15,680
  16,731
  17,822
  18,956
  20,135
  21,361
  22,638
  23,967
  25,352
  26,796
  28,302
  29,874
Cash from financing (excl. dividends), $m  
  2,906
  17,555
  20,592
  23,157
  25,753
  28,363
  30,972
  33,570
  36,153
  38,719
  41,274
  43,743
  46,290
  48,848
  51,428
  54,043
  56,706
  59,430
  62,229
  65,116
  68,105
  71,209
  74,441
  77,814
  81,340
  85,033
  88,904
  92,966
  97,232
  101,714
  106,425
Total cash flow (excl. dividends), $m
  421
  16,967
  19,795
  22,079
  24,359
  26,617
  28,838
  31,013
  33,137
  35,211
  37,238
  39,148
  41,104
  43,039
  44,966
  46,898
  48,847
  50,828
  52,853
  54,936
  57,089
  59,326
  61,657
  64,095
  66,651
  69,336
  72,161
  75,136
  78,271
  81,578
  85,066
Retained Cash Flow (-), $m
  -111
  -2,624
  -2,848
  -3,357
  -3,901
  -4,479
  -5,089
  -5,730
  -6,402
  -7,102
  -7,832
  -8,514
  -9,301
  -10,117
  -10,963
  -11,840
  -12,749
  -13,690
  -14,667
  -15,680
  -16,731
  -17,822
  -18,956
  -20,135
  -21,361
  -22,638
  -23,967
  -25,352
  -26,796
  -28,302
  -29,874
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
 
  14,343
  16,946
  18,722
  20,458
  22,138
  23,749
  25,282
  26,735
  28,108
  29,406
  30,634
  31,803
  32,922
  34,003
  35,058
  36,098
  37,137
  38,186
  39,256
  40,358
  41,503
  42,701
  43,960
  45,290
  46,698
  48,194
  49,784
  51,475
  53,276
  55,192
Discount rate, %
 
  12.60
  13.23
  13.89
  14.59
  15.32
  16.08
  16.89
  17.73
  18.62
  19.55
  20.52
  21.55
  22.63
  23.76
  24.95
  26.19
  27.50
  28.88
  30.32
  31.84
  33.43
  35.10
  36.86
  38.70
  40.64
  42.67
  44.80
  47.04
  49.39
  51.86
PV of cash for distribution, $m
 
  12,738
  13,218
  12,673
  11,867
  10,857
  9,707
  8,482
  7,244
  6,047
  4,932
  3,930
  3,058
  2,322
  1,720
  1,241
  873
  597
  397
  256
  160
  97
  57
  32
  18
  9
  5
  2
  1
  0
  0
Current shareholders' claim on cash, %
  100
  70.3
  51.5
  38.0
  28.2
  21.1
  15.8
  12.0
  9.1
  7.0
  5.3
  4.1
  3.2
  2.5
  1.9
  1.5
  1.2
  0.9
  0.7
  0.6
  0.5
  0.4
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1
  0.1
  0.0

Brookfield Property Partners L.P. owns, operates, and invests in commercial properties in North America, Europe, Australia, and Brazil. As of April 1, 2013, the company had interests in approximately 300 office and retail properties covering approximately 250 million square feet; approximately 15,600 multi-family units; and 29 million square feet of industrial space, as well as an 18 million square foot office development pipeline. It also has investments in distressed and under-performing real estate assets and businesses; and commercial real estate mortgages and mezzanine loans. The company is headquartered in Hamilton, Bermuda. Brookfield Property Partners L.P. (NYSE:BPY.WI) operates independently of Brookfield Asset Management Inc. as of April 15, 2013.

FINANCIAL RATIOS  of  Brookfield Property Partners (BPY)

Valuation Ratios
P/E Ratio 9.3
Price to Sales 1.2
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow 8.3
Price to Free Cash Flow -0.9
Growth Rates
Sales Growth Rate 10.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -0.4%
Cap. Spend. - 3 Yr. Gr. Rate 20%
Financial Strength
Quick Ratio 0
Current Ratio 0.2
LT Debt to Equity 376.9%
Total Debt to Equity 444.4%
Interest Coverage 3
Management Effectiveness
Return On Assets 3.2%
Ret/ On Assets - 3 Yr. Avg. 3.3%
Return On Total Capital 1.7%
Ret/ On T. Cap. - 3 Yr. Avg. 2.9%
Return On Equity 8.8%
Return On Equity - 3 Yr. Avg. 16.4%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 63.6%
Gross Margin - 3 Yr. Avg. 63.2%
EBITDA Margin 70.3%
EBITDA Margin - 3 Yr. Avg. 112.4%
Operating Margin 8.1%
Oper. Margin - 3 Yr. Avg. 8.1%
Pre-Tax Margin 40%
Pre-Tax Margin - 3 Yr. Avg. 82.6%
Net Profit Margin 12.3%
Net Profit Margin - 3 Yr. Avg. 20.2%
Effective Tax Rate -26.8%
Eff/ Tax Rate - 3 Yr. Avg. -1.1%
Payout Ratio 0%

BPY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BPY stock intrinsic value calculation we used $5352 million for the last fiscal year's total revenue generated by Brookfield Property Partners. The default revenue input number comes from 2016 income statement of Brookfield Property 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 BPY stock valuation model: a) initial revenue growth rate of 22.5% 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 12.6%, whose default value for BPY is calculated based on our internal credit rating of Brookfield Property 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 Brookfield Property 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 BPY stock the variable cost ratio is equal to 67.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1350 million in the base year in the intrinsic value calculation for BPY 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 4.3% for Brookfield Property Partners.

Corporate tax rate of 27% is the nominal tax rate for Brookfield Property 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 BPY 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 BPY are equal to 10.7%.

Life of production assets of 10 years is the average useful life of capital assets used in Brookfield Property 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 BPY is equal to -9.8%. 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 - $7542 million for Brookfield Property 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 261.492 million for Brookfield Property 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 Brookfield Property Partners at the current share price and the inputted number of shares is $6.2 billion.

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Stock chart of BPY Financial statements of BPY
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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