Intrinsic value of Barnwell Industries - BRN

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$2.00

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$2.00

 
Intrinsic value

$334.32

 
Up/down potential

+999%

 
Rating

str. buy

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

We calculate the intrinsic value of BRN 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 0.0

 

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, %
  -27.78
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  13
  21
  32
  48
  70
  98
  135
  182
  238
  307
  387
  481
  588
  709
  844
  992
  1,154
  1,329
  1,517
  1,719
  1,932
  2,158
  2,396
  2,645
  2,906
  3,179
  3,464
  3,760
  4,068
  4,389
  4,722
Variable operating expenses, $m
 
  8
  12
  19
  27
  38
  52
  70
  92
  118
  149
  185
  226
  273
  325
  382
  444
  512
  584
  662
  744
  831
  922
  1,018
  1,119
  1,224
  1,334
  1,448
  1,566
  1,690
  1,818
Fixed operating expenses, $m
 
  15
  16
  16
  17
  17
  17
  18
  18
  19
  19
  20
  20
  21
  21
  22
  22
  23
  23
  24
  25
  25
  26
  26
  27
  28
  29
  29
  30
  31
  31
Total operating expenses, $m
  20
  23
  28
  35
  44
  55
  69
  88
  110
  137
  168
  205
  246
  294
  346
  404
  466
  535
  607
  686
  769
  856
  948
  1,044
  1,146
  1,252
  1,363
  1,477
  1,596
  1,721
  1,849
Operating income, $m
  -7
  -3
  4
  13
  26
  44
  66
  94
  128
  170
  219
  276
  342
  415
  498
  588
  687
  795
  910
  1,033
  1,164
  1,302
  1,448
  1,600
  1,760
  1,927
  2,102
  2,283
  2,472
  2,668
  2,873
EBITDA, $m
  -5
  -3
  4
  13
  26
  44
  66
  94
  128
  170
  219
  276
  342
  415
  498
  588
  687
  795
  910
  1,033
  1,164
  1,302
  1,448
  1,600
  1,760
  1,927
  2,102
  2,283
  2,472
  2,668
  2,873
Interest expense (income), $m
  0
  0
  0
  1
  1
  2
  3
  5
  6
  9
  11
  14
  18
  22
  27
  32
  38
  44
  51
  58
  66
  74
  83
  92
  102
  112
  123
  134
  145
  157
  169
Earnings before tax, $m
  -4
  -3
  4
  13
  25
  41
  63
  89
  122
  161
  208
  262
  324
  393
  471
  556
  650
  751
  859
  975
  1,098
  1,228
  1,365
  1,508
  1,659
  1,816
  1,979
  2,150
  2,327
  2,512
  2,703
Tax expense, $m
  -1
  0
  1
  3
  7
  11
  17
  24
  33
  44
  56
  71
  87
  106
  127
  150
  175
  203
  232
  263
  296
  331
  368
  407
  448
  490
  534
  580
  628
  678
  730
Net income, $m
  -4
  -3
  3
  9
  18
  30
  46
  65
  89
  118
  152
  191
  236
  287
  344
  406
  474
  548
  627
  712
  801
  896
  996
  1,101
  1,211
  1,325
  1,445
  1,569
  1,699
  1,833
  1,973

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  16
  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
  32
  26
  40
  59
  86
  121
  166
  223
  293
  377
  477
  592
  723
  872
  1,038
  1,220
  1,419
  1,635
  1,866
  2,114
  2,377
  2,654
  2,947
  3,254
  3,575
  3,911
  4,261
  4,625
  5,004
  5,398
  5,808
Adjusted assets (=assets-cash), $m
  16
  26
  40
  59
  86
  121
  166
  223
  293
  377
  477
  592
  723
  872
  1,038
  1,220
  1,419
  1,635
  1,866
  2,114
  2,377
  2,654
  2,947
  3,254
  3,575
  3,911
  4,261
  4,625
  5,004
  5,398
  5,808
Revenue / Adjusted assets
  0.813
  0.808
  0.800
  0.814
  0.814
  0.810
  0.813
  0.816
  0.812
  0.814
  0.811
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
  0.813
Average production assets, $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
Working capital, $m
  16
  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 debt, $m
  0
  4
  17
  34
  58
  90
  131
  182
  245
  321
  410
  514
  632
  766
  915
  1,079
  1,258
  1,452
  1,661
  1,883
  2,120
  2,370
  2,633
  2,909
  3,199
  3,501
  3,816
  4,143
  4,485
  4,840
  5,208
Total liabilities, $m
  18
  23
  36
  53
  77
  109
  150
  201
  264
  340
  429
  533
  651
  785
  934
  1,098
  1,277
  1,471
  1,680
  1,902
  2,139
  2,389
  2,652
  2,928
  3,218
  3,520
  3,835
  4,162
  4,504
  4,859
  5,227
Total equity, $m
  13
  3
  4
  6
  9
  12
  17
  22
  29
  38
  48
  59
  72
  87
  104
  122
  142
  163
  187
  211
  238
  265
  295
  325
  358
  391
  426
  462
  500
  540
  581
Total liabilities and equity, $m
  31
  26
  40
  59
  86
  121
  167
  223
  293
  378
  477
  592
  723
  872
  1,038
  1,220
  1,419
  1,634
  1,867
  2,113
  2,377
  2,654
  2,947
  3,253
  3,576
  3,911
  4,261
  4,624
  5,004
  5,399
  5,808
Debt-to-equity ratio
  0.000
  1.570
  4.190
  5.790
  6.780
  7.430
  7.860
  8.150
  8.350
  8.500
  8.600
  8.680
  8.740
  8.780
  8.820
  8.840
  8.870
  8.880
  8.900
  8.910
  8.920
  8.930
  8.940
  8.940
  8.950
  8.950
  8.960
  8.960
  8.960
  8.960
  8.970
Adjusted equity ratio
  -0.188
  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
  -4
  -3
  3
  9
  18
  30
  46
  65
  89
  118
  152
  191
  236
  287
  344
  406
  474
  548
  627
  712
  801
  896
  996
  1,101
  1,211
  1,325
  1,445
  1,569
  1,699
  1,833
  1,973
Depreciation, amort., depletion, $m
  2
  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
Funds from operations, $m
  6
  -3
  3
  9
  18
  30
  46
  65
  89
  118
  152
  191
  236
  287
  344
  406
  474
  548
  627
  712
  801
  896
  996
  1,101
  1,211
  1,325
  1,445
  1,569
  1,699
  1,833
  1,973
Change in working capital, $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
Cash from operations, $m
  2
  -3
  3
  9
  18
  30
  46
  65
  89
  118
  152
  191
  236
  287
  344
  406
  474
  548
  627
  712
  801
  896
  996
  1,101
  1,211
  1,325
  1,445
  1,569
  1,699
  1,833
  1,973
Maintenance CAPEX, $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
New CAPEX, $m
  -2
  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 investing activities, $m
  9
  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
Free cash flow, $m
  11
  -3
  3
  9
  18
  30
  46
  65
  89
  118
  152
  191
  236
  287
  344
  406
  474
  548
  627
  712
  801
  896
  996
  1,101
  1,211
  1,325
  1,445
  1,569
  1,699
  1,833
  1,973
Issuance/(repayment) of debt, $m
  -3
  4
  13
  18
  24
  32
  41
  51
  63
  76
  89
  104
  119
  134
  149
  164
  179
  194
  209
  223
  236
  250
  263
  276
  289
  302
  315
  328
  341
  355
  369
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  
  -4
  4
  13
  18
  24
  32
  41
  51
  63
  76
  89
  104
  119
  134
  149
  164
  179
  194
  209
  223
  236
  250
  263
  276
  289
  302
  315
  328
  341
  355
  369
Total cash flow (excl. dividends), $m
  7
  1
  15
  27
  42
  62
  87
  116
  152
  193
  241
  295
  355
  421
  493
  570
  653
  742
  836
  934
  1,038
  1,146
  1,259
  1,377
  1,500
  1,627
  1,760
  1,897
  2,040
  2,188
  2,342
Retained Cash Flow (-), $m
  6
  -6
  -1
  -2
  -3
  -4
  -5
  -6
  -7
  -8
  -10
  -12
  -13
  -15
  -17
  -18
  -20
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -35
  -36
  -38
  -39
  -41
Prev. year cash balance distribution, $m
 
  16
  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
 
  12
  14
  25
  40
  58
  82
  111
  145
  185
  231
  283
  342
  406
  476
  552
  633
  720
  812
  910
  1,012
  1,118
  1,230
  1,347
  1,468
  1,594
  1,725
  1,861
  2,002
  2,149
  2,301
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
 
  11
  13
  22
  33
  45
  60
  75
  91
  106
  121
  135
  146
  154
  160
  162
  161
  157
  150
  140
  129
  116
  102
  88
  75
  62
  50
  40
  31
  23
  17
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

Barnwell Industries, Inc., through its subsidiaries, acquires, develops, produces, and sells oil and natural gas in Canada. The company operates through four segments: Oil and Natural Gas, Land Investment, Contract Drilling, and Residential Real Estate. It holds working interests in oil and natural gas properties located in the Progress area of Alberta, Canada; and investments in non-producing holdings in the provinces of Saskatchewan and British Columbia. The company also invests in land interests in Hawaii. In addition, it owns and operates four water well drilling rigs, two pump rigs, and other ancillary drilling and pump equipment; drills water and water monitoring wells of various depths; installs and repairs water pumping systems; and distributes Floway pumps and equipment in Hawaii. Further, the company develops luxury residences for sale in Hawaii. Barnwell Industries, Inc. was founded in 1956 and is headquartered in Honolulu, Hawaii.

FINANCIAL RATIOS  of  Barnwell Industries (BRN)

Valuation Ratios
P/E Ratio -4.1
Price to Sales 1.3
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 8.3
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -27.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -33.3%
Cap. Spend. - 3 Yr. Gr. Rate -12.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0.8
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -10.8%
Ret/ On Assets - 3 Yr. Avg. -2.4%
Return On Total Capital -22.9%
Ret/ On T. Cap. - 3 Yr. Avg. -5.4%
Return On Equity -25%
Return On Equity - 3 Yr. Avg. -5%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 23.1%
Gross Margin - 3 Yr. Avg. 37.3%
EBITDA Margin -15.4%
EBITDA Margin - 3 Yr. Avg. 15.5%
Operating Margin -53.8%
Oper. Margin - 3 Yr. Avg. -25.4%
Pre-Tax Margin -30.8%
Pre-Tax Margin - 3 Yr. Avg. -2.3%
Net Profit Margin -30.8%
Net Profit Margin - 3 Yr. Avg. -7.2%
Effective Tax Rate 25%
Eff/ Tax Rate - 3 Yr. Avg. 36.1%
Payout Ratio 0%

BRN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BRN stock intrinsic value calculation we used $13 million for the last fiscal year's total revenue generated by Barnwell Industries. The default revenue input number comes from 2016 income statement of Barnwell Industries. 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 BRN stock valuation model: a) initial revenue growth rate of 60% 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 BRN is calculated based on our internal credit rating of Barnwell Industries, 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 Barnwell Industries.
    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 BRN stock the variable cost ratio is equal to 38.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $15 million in the base year in the intrinsic value calculation for BRN 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 Barnwell Industries.

Corporate tax rate of 27% is the nominal tax rate for Barnwell Industries. 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 BRN 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 BRN are equal to 0%.

Life of production assets of 0 years is the average useful life of capital assets used in Barnwell Industries 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 BRN is equal to 0%. 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 - $13 million for Barnwell Industries - 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 8.109 million for Barnwell Industries 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 Barnwell Industries at the current share price and the inputted number of shares is $0.0 billion.


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COMPANY NEWS

▶ Honolulu-based Barnwell Industries reports net earnings of $1.6M   [Feb-09-17 05:25PM  at bizjournals.com]
▶ Barnwell Industries, Inc. Reports Receipt of Distributions   [Jan-05-17 08:30PM  GlobeNewswire]
▶ Buffalo planners approve new Residence Inn on Delaware Avenue   [Nov-22-16 08:20AM  at bizjournals.com]
▶ 10-Q for Barnwell Industries, Inc.   [Aug-14  08:10PM  at Company Spotlight]
▶ 10-Q for Barnwell Industries, Inc.   [May-15  08:09PM  at Company Spotlight]
▶ 10-Q for Barnwell Industries, Inc.   [Feb-15  07:07PM  at Company Spotlight]
▶ 10-K for Barnwell Industries, Inc.   [Dec-20  07:07PM  Company Spotlight]
▶ Pitney Bowes Executive VP Buys 10K Shares and 4 Insider Trades to Note   [May-20  11:52AM  at Wall St. Cheat Sheet]
▶ Most Hawaii stocks close lower despite gains on Wall Street   [Apr-02  06:33PM  at bizjournals.com]
▶ Most Hawaii stocks post gains on record day for Wall Street   [Mar-14  08:23PM  at bizjournals.com]
▶ Matson gains 2% in Monday trading, but Hawaii stocks are mixed   [Mar-11  08:51PM  at bizjournals.com]
Stock chart of BRN Financial statements of BRN
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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