Intrinsic value of China Advanced Construction Materials Gr - CADC

Previous Close

$1.80

  Intrinsic Value

$1.15

stock screener

  Rating & Target

sell

-36%

Previous close

$1.80

 
Intrinsic value

$1.15

 
Up/down potential

-36%

 
Rating

sell

We calculate the intrinsic value of CADC 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 2017), $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
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -16.67
  28.60
  26.24
  24.12
  22.20
  20.48
  18.94
  17.54
  16.29
  15.16
  14.14
  13.23
  12.41
  11.67
  11.00
  10.40
  9.86
  9.37
  8.94
  8.54
  8.19
  7.87
  7.58
  7.32
  7.09
  6.88
  6.69
  6.52
  6.37
  6.24
  6.11
Revenue, $m
  45
  58
  73
  91
  111
  134
  159
  187
  217
  250
  285
  323
  363
  405
  450
  497
  546
  597
  650
  706
  764
  824
  886
  951
  1,019
  1,089
  1,162
  1,237
  1,316
  1,398
  1,484
Variable operating expenses, $m
 
  71
  89
  111
  135
  163
  194
  228
  265
  305
  349
  395
  444
  495
  550
  607
  667
  730
  795
  863
  933
  1,007
  1,083
  1,162
  1,245
  1,330
  1,419
  1,512
  1,608
  1,709
  1,813
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
  54
  71
  89
  111
  135
  163
  194
  228
  265
  305
  349
  395
  444
  495
  550
  607
  667
  730
  795
  863
  933
  1,007
  1,083
  1,162
  1,245
  1,330
  1,419
  1,512
  1,608
  1,709
  1,813
Operating income, $m
  -9
  -13
  -16
  -20
  -25
  -30
  -35
  -41
  -48
  -55
  -63
  -72
  -81
  -90
  -100
  -110
  -121
  -133
  -144
  -157
  -170
  -183
  -197
  -211
  -226
  -242
  -258
  -275
  -292
  -310
  -329
EBITDA, $m
  -8
  -13
  -16
  -20
  -25
  -30
  -35
  -41
  -48
  -55
  -63
  -72
  -81
  -90
  -100
  -110
  -121
  -133
  -144
  -157
  -170
  -183
  -197
  -211
  -226
  -242
  -258
  -275
  -292
  -310
  -329
Interest expense (income), $m
  0
  1
  2
  3
  4
  5
  6
  7
  9
  10
  12
  14
  16
  18
  20
  23
  25
  28
  31
  34
  37
  40
  43
  46
  50
  53
  57
  61
  65
  69
  74
Earnings before tax, $m
  -10
  -14
  -18
  -23
  -28
  -34
  -41
  -49
  -57
  -66
  -75
  -86
  -97
  -108
  -120
  -133
  -147
  -160
  -175
  -190
  -206
  -223
  -240
  -257
  -276
  -295
  -315
  -336
  -357
  -380
  -403
Tax expense, $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
Net income, $m
  -10
  -14
  -18
  -23
  -28
  -34
  -41
  -49
  -57
  -66
  -75
  -86
  -97
  -108
  -120
  -133
  -147
  -160
  -175
  -190
  -206
  -223
  -240
  -257
  -276
  -295
  -315
  -336
  -357
  -380
  -403

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  80
  103
  130
  161
  197
  237
  282
  332
  386
  444
  507
  574
  645
  720
  799
  883
  970
  1,060
  1,155
  1,254
  1,356
  1,463
  1,574
  1,689
  1,809
  1,934
  2,063
  2,198
  2,338
  2,484
  2,636
Adjusted assets (=assets-cash), $m
  80
  103
  130
  161
  197
  237
  282
  332
  386
  444
  507
  574
  645
  720
  799
  883
  970
  1,060
  1,155
  1,254
  1,356
  1,463
  1,574
  1,689
  1,809
  1,934
  2,063
  2,198
  2,338
  2,484
  2,636
Revenue / Adjusted assets
  0.563
  0.563
  0.562
  0.565
  0.563
  0.565
  0.564
  0.563
  0.562
  0.563
  0.562
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
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
  8
  29
  37
  45
  55
  67
  79
  93
  109
  125
  143
  162
  182
  203
  225
  248
  273
  299
  325
  353
  382
  412
  443
  476
  509
  544
  581
  619
  658
  699
  742
Total debt, $m
  32
  52
  75
  102
  133
  167
  206
  249
  295
  346
  400
  458
  519
  584
  652
  724
  799
  877
  959
  1,044
  1,132
  1,224
  1,320
  1,419
  1,523
  1,630
  1,742
  1,858
  1,978
  2,104
  2,235
Total liabilities, $m
  69
  89
  112
  139
  170
  204
  243
  286
  332
  383
  437
  495
  556
  621
  689
  761
  836
  914
  996
  1,081
  1,169
  1,261
  1,357
  1,456
  1,560
  1,667
  1,779
  1,895
  2,015
  2,141
  2,272
Total equity, $m
  11
  14
  18
  22
  27
  33
  39
  46
  53
  61
  70
  79
  89
  99
  110
  122
  134
  146
  159
  173
  187
  202
  217
  233
  250
  267
  285
  303
  323
  343
  364
Total liabilities and equity, $m
  80
  103
  130
  161
  197
  237
  282
  332
  385
  444
  507
  574
  645
  720
  799
  883
  970
  1,060
  1,155
  1,254
  1,356
  1,463
  1,574
  1,689
  1,810
  1,934
  2,064
  2,198
  2,338
  2,484
  2,636
Debt-to-equity ratio
  2.909
  3.640
  4.180
  4.580
  4.880
  5.120
  5.300
  5.440
  5.550
  5.640
  5.720
  5.780
  5.830
  5.870
  5.910
  5.940
  5.970
  5.990
  6.010
  6.030
  6.050
  6.060
  6.080
  6.090
  6.100
  6.110
  6.120
  6.120
  6.130
  6.140
  6.140
Adjusted equity ratio
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138
  0.138

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -10
  -14
  -18
  -23
  -28
  -34
  -41
  -49
  -57
  -66
  -75
  -86
  -97
  -108
  -120
  -133
  -147
  -160
  -175
  -190
  -206
  -223
  -240
  -257
  -276
  -295
  -315
  -336
  -357
  -380
  -403
Depreciation, amort., depletion, $m
  1
  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
  9
  -14
  -18
  -23
  -28
  -34
  -41
  -49
  -57
  -66
  -75
  -86
  -97
  -108
  -120
  -133
  -147
  -160
  -175
  -190
  -206
  -223
  -240
  -257
  -276
  -295
  -315
  -336
  -357
  -380
  -403
Change in working capital, $m
  7
  6
  8
  9
  10
  11
  13
  14
  15
  16
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  29
  30
  31
  32
  34
  35
  36
  38
  39
  41
  43
Cash from operations, $m
  2
  -20
  -26
  -32
  -38
  -46
  -54
  -63
  -72
  -82
  -93
  -105
  -117
  -129
  -143
  -157
  -171
  -186
  -202
  -218
  -235
  -253
  -271
  -290
  -310
  -330
  -351
  -374
  -397
  -421
  -446
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
  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 investing activities, $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
Free cash flow, $m
  2
  -20
  -26
  -32
  -38
  -46
  -54
  -63
  -72
  -82
  -93
  -105
  -117
  -129
  -143
  -157
  -171
  -186
  -202
  -218
  -235
  -253
  -271
  -290
  -310
  -330
  -351
  -374
  -397
  -421
  -446
Issuance/(repayment) of debt, $m
  -2
  20
  23
  27
  31
  35
  39
  43
  47
  50
  54
  58
  61
  65
  68
  72
  75
  78
  82
  85
  88
  92
  96
  99
  103
  107
  112
  116
  121
  126
  131
Issuance/(repurchase) of shares, $m
  0
  17
  22
  27
  33
  40
  47
  55
  64
  74
  84
  95
  106
  119
  131
  145
  159
  173
  188
  204
  220
  237
  255
  273
  292
  312
  333
  354
  377
  400
  424
Cash from financing (excl. dividends), $m  
  -2
  37
  45
  54
  64
  75
  86
  98
  111
  124
  138
  153
  167
  184
  199
  217
  234
  251
  270
  289
  308
  329
  351
  372
  395
  419
  445
  470
  498
  526
  555
Total cash flow (excl. dividends), $m
  -1
  16
  19
  22
  26
  29
  32
  36
  39
  42
  45
  48
  51
  54
  57
  60
  63
  65
  68
  71
  74
  77
  80
  83
  86
  89
  93
  97
  101
  105
  109
Retained Cash Flow (-), $m
  10
  -17
  -22
  -27
  -33
  -40
  -47
  -55
  -64
  -74
  -84
  -95
  -106
  -119
  -131
  -145
  -159
  -173
  -188
  -204
  -220
  -237
  -255
  -273
  -292
  -312
  -333
  -354
  -377
  -400
  -424
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
 
  -1
  -2
  -5
  -7
  -11
  -15
  -20
  -26
  -32
  -39
  -47
  -55
  -65
  -74
  -85
  -96
  -108
  -120
  -133
  -146
  -161
  -175
  -190
  -206
  -223
  -240
  -258
  -276
  -295
  -315
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
 
  -1
  -2
  -3
  -4
  -5
  -6
  -7
  -7
  -7
  -7
  -6
  -5
  -5
  -4
  -3
  -2
  -2
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  31.0
  9.7
  3.1
  1.0
  0.3
  0.1
  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
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

China Advanced Construction Materials, Group, Inc. is a holding company. The Company's primary business operations are conducted through its subsidiaries and its variable interest entities, and its subsidiaries. The Company engages in the production of construction materials for infrastructure, commercial and residential developments. It is primarily focused on engineering, producing, servicing, delivering and pumping a range of ready-mix concrete materials for construction projects. Its ready-mixed concrete products consist of proportioned mixes it prepares and delivers in an unhardened plastic state for placement and shaping into designed forms at the worksite. The Company's products include ready-mixed concrete blends; controlled low-strength material (CLSM); concrete with customized fibers; soil cement, foundation concrete; compound admixture concrete; aggregate concrete; energy-saving phase change thermostat concrete, and C100 high performance concrete.

FINANCIAL RATIOS  of  China Advanced Construction Materials Gr (CADC)

Valuation Ratios
P/E Ratio -0.4
Price to Sales 0.1
Price to Book 0.4
Price to Tangible Book
Price to Cash Flow 2.2
Price to Free Cash Flow 2.2
Growth Rates
Sales Growth Rate -16.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 290.9%
Interest Coverage 0
Management Effectiveness
Return On Assets -11.4%
Ret/ On Assets - 3 Yr. Avg. -9.5%
Return On Total Capital -20.2%
Ret/ On T. Cap. - 3 Yr. Avg. -14.9%
Return On Equity -62.5%
Return On Equity - 3 Yr. Avg. -41.7%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 2.2%
Gross Margin - 3 Yr. Avg. 5%
EBITDA Margin -20%
EBITDA Margin - 3 Yr. Avg. -14.7%
Operating Margin -20%
Oper. Margin - 3 Yr. Avg. -16.5%
Pre-Tax Margin -22.2%
Pre-Tax Margin - 3 Yr. Avg. -17.9%
Net Profit Margin -22.2%
Net Profit Margin - 3 Yr. Avg. -19.7%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. -15.9%
Payout Ratio 0%

CADC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CADC stock intrinsic value calculation we used $45 million for the last fiscal year's total revenue generated by China Advanced Construction Materials Gr. The default revenue input number comes from 2017 income statement of China Advanced Construction Materials Gr. 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 CADC stock valuation model: a) initial revenue growth rate of 28.6% 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 CADC is calculated based on our internal credit rating of China Advanced Construction Materials Gr, 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 China Advanced Construction Materials Gr.
    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 CADC stock the variable cost ratio is equal to 122.2%.

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 CADC 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 China Advanced Construction Materials Gr.

Corporate tax rate of 27% is the nominal tax rate for China Advanced Construction Materials Gr. 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 CADC 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 CADC are equal to 0%.

Life of production assets of 0 years is the average useful life of capital assets used in China Advanced Construction Materials Gr 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 CADC is equal to 50%. 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 - $11 million for China Advanced Construction Materials Gr - 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 2.389 million for China Advanced Construction Materials Gr 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 China Advanced Construction Materials Gr at the current share price and the inputted number of shares is $0.0 billion.

RELATED COMPANIES Price Int.Val. Rating
SUM Summit Materia 31.77 45.95  buy

COMPANY NEWS

▶ China ACM Announced Business Progress in Key Project   [Feb-26  07:39AM  GlobeNewswire]
▶ Form 10 K for China Advanced Construction Materials Group, Inc.   [Oct-02  03:00AM  Company Spotlight]
▶ WSP Holdings Will Reward Short Sellers Soon   [Aug-07  02:45PM  at Seeking Alpha]
▶ CHINA ADVANCED CONSTRUCTION MATERIALS GROUP, INC Financials   [01:04PM  EDGAR Online Financials]
▶ Beware Of 'Analysts' Assisting Pump & Dump Schemes   [Mar-06  02:32PM  at Seeking Alpha]
Financial statements of CADC
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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