Intrinsic value of China Eastern Airlines ADR - CEA

Previous Close

$24.91

  Intrinsic Value

$19.50

stock screener

  Rating & Target

sell

-22%

  Value-price divergence*

-79%

Previous close

$24.91

 
Intrinsic value

$19.50

 
Up/down potential

-22%

 
Rating

sell

 
Value-price divergence*

-79%

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

We calculate the intrinsic value of CEA 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 11.9

 

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, %
  5.25
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
  5.09
  5.08
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
  5.04
  5.04
  5.03
  5.03
  5.03
  5.02
  5.02
  5.02
  5.02
  5.02
  5.01
Revenue, $m
  14,309
  15,067
  15,861
  16,693
  17,564
  18,477
  19,434
  20,436
  21,487
  22,589
  23,745
  24,957
  26,229
  27,562
  28,961
  30,429
  31,970
  33,586
  35,282
  37,062
  38,930
  40,891
  42,949
  45,109
  47,376
  49,757
  52,255
  54,878
  57,631
  60,522
  63,557
Variable operating expenses, $m
 
  13,040
  13,718
  14,429
  15,174
  15,954
  16,771
  17,628
  18,526
  19,468
  20,456
  21,329
  22,415
  23,555
  24,751
  26,005
  27,322
  28,703
  30,152
  31,674
  33,270
  34,946
  36,704
  38,550
  40,488
  42,522
  44,658
  46,899
  49,252
  51,723
  54,316
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
  12,502
  13,040
  13,718
  14,429
  15,174
  15,954
  16,771
  17,628
  18,526
  19,468
  20,456
  21,329
  22,415
  23,555
  24,751
  26,005
  27,322
  28,703
  30,152
  31,674
  33,270
  34,946
  36,704
  38,550
  40,488
  42,522
  44,658
  46,899
  49,252
  51,723
  54,316
Operating income, $m
  1,806
  2,028
  2,143
  2,264
  2,391
  2,523
  2,662
  2,808
  2,961
  3,121
  3,289
  3,629
  3,813
  4,007
  4,211
  4,424
  4,648
  4,883
  5,130
  5,388
  5,660
  5,945
  6,244
  6,558
  6,888
  7,234
  7,597
  7,979
  8,379
  8,799
  9,241
EBITDA, $m
  3,613
  3,961
  4,170
  4,388
  4,617
  4,857
  5,109
  5,373
  5,649
  5,939
  6,242
  6,561
  6,895
  7,246
  7,614
  8,000
  8,405
  8,829
  9,275
  9,743
  10,234
  10,750
  11,291
  11,859
  12,455
  13,081
  13,737
  14,427
  15,151
  15,911
  16,709
Interest expense (income), $m
  464
  588
  630
  675
  723
  772
  824
  879
  936
  996
  1,059
  1,124
  1,193
  1,266
  1,342
  1,422
  1,505
  1,593
  1,685
  1,782
  1,883
  1,989
  2,101
  2,218
  2,341
  2,471
  2,606
  2,748
  2,898
  3,055
  3,219
Earnings before tax, $m
  940
  1,440
  1,513
  1,589
  1,668
  1,751
  1,838
  1,930
  2,025
  2,126
  2,231
  2,504
  2,620
  2,742
  2,869
  3,003
  3,143
  3,290
  3,445
  3,607
  3,777
  3,956
  4,143
  4,340
  4,547
  4,764
  4,991
  5,230
  5,481
  5,745
  6,021
Tax expense, $m
  223
  389
  409
  429
  450
  473
  496
  521
  547
  574
  602
  676
  707
  740
  775
  811
  849
  888
  930
  974
  1,020
  1,068
  1,119
  1,172
  1,228
  1,286
  1,348
  1,412
  1,480
  1,551
  1,626
Net income, $m
  651
  1,051
  1,105
  1,160
  1,218
  1,278
  1,342
  1,409
  1,478
  1,552
  1,629
  1,828
  1,913
  2,001
  2,094
  2,192
  2,294
  2,402
  2,515
  2,633
  2,757
  2,888
  3,025
  3,168
  3,319
  3,477
  3,644
  3,818
  4,001
  4,194
  4,395

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  245
  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
  30,717
  32,058
  33,748
  35,517
  37,371
  39,313
  41,348
  43,481
  45,718
  48,063
  50,522
  53,101
  55,806
  58,643
  61,620
  64,743
  68,021
  71,459
  75,068
  78,855
  82,830
  87,002
  91,380
  95,976
  100,801
  105,865
  111,181
  116,762
  122,620
  128,770
  135,227
Adjusted assets (=assets-cash), $m
  30,472
  32,058
  33,748
  35,517
  37,371
  39,313
  41,348
  43,481
  45,718
  48,063
  50,522
  53,101
  55,806
  58,643
  61,620
  64,743
  68,021
  71,459
  75,068
  78,855
  82,830
  87,002
  91,380
  95,976
  100,801
  105,865
  111,181
  116,762
  122,620
  128,770
  135,227
Revenue / Adjusted assets
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
Average production assets, $m
  20,852
  21,953
  23,110
  24,322
  25,591
  26,921
  28,315
  29,776
  31,307
  32,913
  34,597
  36,363
  38,215
  40,158
  42,197
  44,336
  46,580
  48,935
  51,406
  53,999
  56,721
  59,578
  62,576
  65,724
  69,027
  72,495
  76,136
  79,957
  83,969
  88,181
  92,602
Working capital, $m
  -7,551
  -2,833
  -2,982
  -3,138
  -3,302
  -3,474
  -3,654
  -3,842
  -4,040
  -4,247
  -4,464
  -4,692
  -4,931
  -5,182
  -5,445
  -5,721
  -6,010
  -6,314
  -6,633
  -6,968
  -7,319
  -7,687
  -8,074
  -8,480
  -8,907
  -9,354
  -9,824
  -10,317
  -10,835
  -11,378
  -11,949
Total debt, $m
  17,038
  18,000
  19,292
  20,646
  22,064
  23,549
  25,106
  26,738
  28,449
  30,243
  32,124
  34,097
  36,166
  38,337
  40,614
  43,004
  45,511
  48,141
  50,902
  53,799
  56,840
  60,031
  63,381
  66,897
  70,588
  74,462
  78,528
  82,798
  87,279
  91,984
  96,924
Total liabilities, $m
  23,563
  24,525
  25,817
  27,171
  28,589
  30,074
  31,631
  33,263
  34,974
  36,768
  38,649
  40,622
  42,691
  44,862
  47,139
  49,529
  52,036
  54,666
  57,427
  60,324
  63,365
  66,556
  69,906
  73,422
  77,113
  80,987
  85,053
  89,323
  93,804
  98,509
  103,449
Total equity, $m
  7,154
  7,534
  7,931
  8,347
  8,782
  9,238
  9,717
  10,218
  10,744
  11,295
  11,873
  12,479
  13,114
  13,781
  14,481
  15,215
  15,985
  16,793
  17,641
  18,531
  19,465
  20,445
  21,474
  22,554
  23,688
  24,878
  26,128
  27,439
  28,816
  30,261
  31,778
Total liabilities and equity, $m
  30,717
  32,059
  33,748
  35,518
  37,371
  39,312
  41,348
  43,481
  45,718
  48,063
  50,522
  53,101
  55,805
  58,643
  61,620
  64,744
  68,021
  71,459
  75,068
  78,855
  82,830
  87,001
  91,380
  95,976
  100,801
  105,865
  111,181
  116,762
  122,620
  128,770
  135,227
Debt-to-equity ratio
  2.382
  2.390
  2.430
  2.470
  2.510
  2.550
  2.580
  2.620
  2.650
  2.680
  2.710
  2.730
  2.760
  2.780
  2.800
  2.830
  2.850
  2.870
  2.890
  2.900
  2.920
  2.940
  2.950
  2.970
  2.980
  2.990
  3.010
  3.020
  3.030
  3.040
  3.050
Adjusted equity ratio
  0.227
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  651
  1,051
  1,105
  1,160
  1,218
  1,278
  1,342
  1,409
  1,478
  1,552
  1,629
  1,828
  1,913
  2,001
  2,094
  2,192
  2,294
  2,402
  2,515
  2,633
  2,757
  2,888
  3,025
  3,168
  3,319
  3,477
  3,644
  3,818
  4,001
  4,194
  4,395
Depreciation, amort., depletion, $m
  1,807
  1,933
  2,027
  2,124
  2,227
  2,334
  2,446
  2,564
  2,688
  2,817
  2,953
  2,932
  3,082
  3,239
  3,403
  3,575
  3,756
  3,946
  4,146
  4,355
  4,574
  4,805
  5,046
  5,300
  5,567
  5,846
  6,140
  6,448
  6,772
  7,111
  7,468
Funds from operations, $m
  3,663
  2,985
  3,131
  3,284
  3,444
  3,612
  3,788
  3,973
  4,166
  4,369
  4,582
  4,761
  4,994
  5,240
  5,497
  5,767
  6,051
  6,348
  6,660
  6,988
  7,332
  7,692
  8,071
  8,469
  8,886
  9,324
  9,784
  10,266
  10,773
  11,305
  11,863
Change in working capital, $m
  62
  -143
  -149
  -156
  -164
  -172
  -180
  -189
  -198
  -207
  -217
  -228
  -239
  -251
  -263
  -276
  -290
  -304
  -319
  -335
  -351
  -369
  -387
  -406
  -426
  -447
  -470
  -493
  -518
  -543
  -571
Cash from operations, $m
  3,601
  3,127
  3,281
  3,441
  3,608
  3,784
  3,968
  4,161
  4,364
  4,576
  4,799
  4,988
  5,234
  5,491
  5,760
  6,043
  6,340
  6,652
  6,979
  7,322
  7,683
  8,061
  8,458
  8,875
  9,312
  9,771
  10,253
  10,759
  11,291
  11,848
  12,434
Maintenance CAPEX, $m
  0
  -1,682
  -1,770
  -1,864
  -1,961
  -2,064
  -2,171
  -2,283
  -2,401
  -2,525
  -2,654
  -2,790
  -2,932
  -3,082
  -3,239
  -3,403
  -3,575
  -3,756
  -3,946
  -4,146
  -4,355
  -4,574
  -4,805
  -5,046
  -5,300
  -5,567
  -5,846
  -6,140
  -6,448
  -6,772
  -7,111
New CAPEX, $m
  -3,149
  -1,102
  -1,157
  -1,212
  -1,269
  -1,330
  -1,394
  -1,461
  -1,532
  -1,606
  -1,684
  -1,766
  -1,852
  -1,943
  -2,039
  -2,139
  -2,244
  -2,355
  -2,471
  -2,593
  -2,722
  -2,857
  -2,998
  -3,147
  -3,304
  -3,468
  -3,640
  -3,822
  -4,012
  -4,212
  -4,421
Cash from investing activities, $m
  -5,379
  -2,784
  -2,927
  -3,076
  -3,230
  -3,394
  -3,565
  -3,744
  -3,933
  -4,131
  -4,338
  -4,556
  -4,784
  -5,025
  -5,278
  -5,542
  -5,819
  -6,111
  -6,417
  -6,739
  -7,077
  -7,431
  -7,803
  -8,193
  -8,604
  -9,035
  -9,486
  -9,962
  -10,460
  -10,984
  -11,532
Free cash flow, $m
  -1,778
  344
  353
  365
  378
  390
  403
  417
  431
  446
  461
  432
  449
  466
  483
  502
  521
  541
  562
  583
  606
  630
  655
  681
  708
  737
  767
  798
  831
  865
  901
Issuance/(repayment) of debt, $m
  14
  1,207
  1,292
  1,354
  1,418
  1,486
  1,557
  1,632
  1,711
  1,794
  1,881
  1,973
  2,069
  2,171
  2,277
  2,389
  2,507
  2,631
  2,761
  2,897
  3,041
  3,191
  3,350
  3,516
  3,691
  3,874
  4,067
  4,269
  4,482
  4,705
  4,939
Issuance/(repurchase) of shares, $m
  1,236
  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  
  777
  1,207
  1,292
  1,354
  1,418
  1,486
  1,557
  1,632
  1,711
  1,794
  1,881
  1,973
  2,069
  2,171
  2,277
  2,389
  2,507
  2,631
  2,761
  2,897
  3,041
  3,191
  3,350
  3,516
  3,691
  3,874
  4,067
  4,269
  4,482
  4,705
  4,939
Total cash flow (excl. dividends), $m
  -961
  1,550
  1,646
  1,719
  1,796
  1,876
  1,960
  2,049
  2,142
  2,239
  2,342
  2,405
  2,518
  2,636
  2,761
  2,891
  3,028
  3,171
  3,322
  3,481
  3,647
  3,821
  4,005
  4,197
  4,399
  4,611
  4,833
  5,067
  5,312
  5,570
  5,840
Retained Cash Flow (-), $m
  -1,742
  -380
  -397
  -416
  -436
  -456
  -478
  -501
  -526
  -551
  -578
  -606
  -636
  -667
  -700
  -734
  -770
  -808
  -848
  -890
  -934
  -980
  -1,029
  -1,080
  -1,134
  -1,190
  -1,249
  -1,311
  -1,377
  -1,445
  -1,517
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
 
  1,171
  1,249
  1,303
  1,360
  1,420
  1,482
  1,548
  1,616
  1,688
  1,764
  1,799
  1,882
  1,970
  2,061
  2,157
  2,258
  2,363
  2,474
  2,591
  2,713
  2,841
  2,976
  3,117
  3,265
  3,421
  3,584
  3,756
  3,936
  4,125
  4,323
Discount rate, %
 
  9.70
  10.19
  10.69
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.21
  20.17
  21.17
  22.23
  23.34
  24.51
  25.74
  27.02
  28.38
  29.79
  31.28
  32.85
  34.49
  36.21
  38.03
  39.93
PV of cash for distribution, $m
 
  1,067
  1,028
  961
  888
  813
  736
  658
  581
  506
  434
  358
  298
  244
  196
  155
  119
  90
  67
  48
  34
  23
  15
  10
  6
  4
  2
  1
  1
  0
  0
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

China Eastern Airlines Corporation Limited is a China-based company principally engaged in the provision of airline transportation and extended services. The Company is primarily engaged in the operation of airline passenger, cargo, mail delivery, tour operations and other extended transportation services. The Company also involves in general aviation transportation, aircraft maintenance, aviation equipment manufacturing and maintenance, air transport agency for domestic and foreign airlines, other related business, part-time insurance agent services, e-commerce, airline supermarket, as well as commodity wholesale and retail business. The Company operates its business in domestic market and to overseas markets.

FINANCIAL RATIOS  of  China Eastern Airlines ADR (CEA)

Valuation Ratios
P/E Ratio 553.6
Price to Sales 25.2
Price to Book 50.4
Price to Tangible Book
Price to Cash Flow 100.1
Price to Free Cash Flow 797.3
Growth Rates
Sales Growth Rate 5.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 149.7%
Cap. Spend. - 3 Yr. Gr. Rate 64.2%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 166.8%
Total Debt to Equity 238.2%
Interest Coverage 3
Management Effectiveness
Return On Assets 3.4%
Ret/ On Assets - 3 Yr. Avg. 3.6%
Return On Total Capital 2.8%
Ret/ On T. Cap. - 3 Yr. Avg. 3%
Return On Equity 10.4%
Return On Equity - 3 Yr. Avg. 11.9%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 24.1%
Gross Margin - 3 Yr. Avg. 23.2%
EBITDA Margin 22.4%
EBITDA Margin - 3 Yr. Avg. 20%
Operating Margin 12.6%
Oper. Margin - 3 Yr. Avg. 10.9%
Pre-Tax Margin 6.6%
Pre-Tax Margin - 3 Yr. Avg. 5.7%
Net Profit Margin 4.5%
Net Profit Margin - 3 Yr. Avg. 4.4%
Effective Tax Rate 23.7%
Eff/ Tax Rate - 3 Yr. Avg. 16.2%
Payout Ratio 16.4%

CEA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CEA stock intrinsic value calculation we used $14309 million for the last fiscal year's total revenue generated by China Eastern Airlines ADR. The default revenue input number comes from 2016 income statement of China Eastern Airlines 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 CEA stock valuation model: a) initial revenue growth rate of 5.3% 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 9.7%, whose default value for CEA is calculated based on our internal credit rating of China Eastern Airlines 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 China Eastern Airlines 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 CEA stock the variable cost ratio is equal to 86.6%.

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 CEA 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 Eastern Airlines ADR.

Corporate tax rate of 27% is the nominal tax rate for China Eastern Airlines 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 CEA 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 CEA are equal to 145.7%.

Life of production assets of 12.4 years is the average useful life of capital assets used in China Eastern Airlines 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 CEA is equal to -18.8%. 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 - $7154 million for China Eastern Airlines 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 479.411 million for China Eastern Airlines 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 China Eastern Airlines ADR at the current share price and the inputted number of shares is $11.9 billion.

RELATED COMPANIES Price Int.Val. Rating
ZNH China Southern 34.67 25.77  sell
DAL Delta Air Line 52.27 159.50  str.buy

COMPANY NEWS

▶ China Airlines: Why Jefferies Is Bearish   [Sep-07-17 01:06AM  Barrons.com]
▶ [$$] Air France-KLM Shareholders Back Delta, China Eastern Minority Stakes   [Sep-04-17 05:09AM  The Wall Street Journal]
▶ Korean peninsula tensions are affecting Chinese airlines   [Aug-29-17 09:57PM  CNBC Videos]
▶ [$$] Delta Air Lines: Ready for Takeoff   [Aug-05-17 12:14AM  Barrons.com]
▶ [$$] Air France Says Delta, China Eastern Each Acquiring 10% of Its Shares   [Jul-28-17 02:03AM  The Wall Street Journal]
▶ China Eastern Engine-Cover Trouble Forces Emergency Landing   [Jun-12-17 06:18AM  The Wall Street Journal]
▶ Hawaiian Airlines tries to grow number of Chinese travelers, boosts marketing efforts   [May-12-17 07:00PM  American City Business Journals]
▶ Time to Dump Chinese Airline Stocks?   [Mar-31-17 03:09AM  Barrons.com]
▶ Time to Dump Chinese Airline Stocks?   [03:09AM  at Barrons.com]
▶ China Eastern's Promise Fades   [Mar-30-17 09:43PM  Bloomberg]
▶ Delta, Korean Air to form joint venture   [12:35PM  at bizjournals.com]
▶ Delta, Korean Air to form joint venture   [12:35PM  American City Business Journals]
▶ [$$] American Airlines to Invest $200 Million in China Southern   [04:43AM  at The Wall Street Journal]
▶ Report: Delta Air Lines, Korean Air in joint venture talks   [Feb-27-17 07:32AM  at bizjournals.com]
▶ Can Chinese Airline Stocks Soar Higher in 2017?   [Jan-25-17 01:40AM  at Barrons.com]
▶ Hang Seng Gains As China Pushes For Mixed Ownership Reform   [Dec-20-16 10:44PM  at Barrons.com]
▶ Why buying China bonds and stocks is looking dicey   [Dec-16-16 01:23AM  at CNBC]
▶ China's Ctrip Goes Overseas With Skyscanner Deal   [Nov-24-16 05:36AM  at MarketWatch]
▶ [$$] Two Chinese Passenger Jets Nearly Collide at Shanghai Airport   [Oct-13-16 01:05AM  at The Wall Street Journal]
▶ 2 Chinese Airline Stocks Set to Gain Altitude   [12:01AM  at Barrons.com]
▶ [$$] Emerging market multinationals eclipse competitors   [Jun-27-16 04:15PM  at Financial Times]
▶ Who's the Mystery Buyer Behind Boeing's 787?   [May-07-16 08:13AM  at Motley Fool]
▶ [$$] Business Watch: News Digest   [May-01-16 01:12PM  at The Wall Street Journal]
▶ CHINA EASTERN AIRLINES CORP LTD Financials   [01:04PM  EDGAR Online Financials]
▶ Why Did the SSE Composite Index Fall?   [Apr-25-16 12:50PM  Market Realist]
▶ Ctrip Takes a Ride on China Eastern   [Apr-22-16 06:02AM  at The Wall Street Journal]
Financial statements of CEA
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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