Intrinsic value of Central European Media Enterprises Cl A - CETV

Previous Close

$4.15

  Intrinsic Value

$6.99

stock screener

  Rating & Target

str. buy

+68%

  Value-price divergence*

+697%

Previous close

$4.15

 
Intrinsic value

$6.99

 
Up/down potential

+68%

 
Rating

str. buy

 
Value-price divergence*

+697%

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

We calculate the intrinsic value of CETV 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 0.6

 

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, %
  5.28
  4.70
  4.73
  4.76
  4.78
  4.80
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
  4.91
  4.92
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
  4.97
  4.97
  4.98
  4.98
  4.98
  4.98
  4.98
  4.99
Revenue, $m
  638
  668
  700
  733
  768
  805
  844
  884
  927
  973
  1,020
  1,070
  1,122
  1,178
  1,236
  1,297
  1,361
  1,428
  1,499
  1,573
  1,651
  1,733
  1,819
  1,909
  2,004
  2,104
  2,209
  2,319
  2,434
  2,556
  2,683
Variable operating expenses, $m
 
  560
  584
  609
  635
  663
  692
  722
  754
  788
  824
  801
  840
  882
  925
  971
  1,019
  1,069
  1,122
  1,177
  1,236
  1,297
  1,362
  1,429
  1,500
  1,575
  1,653
  1,736
  1,822
  1,913
  2,009
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
  677
  560
  584
  609
  635
  663
  692
  722
  754
  788
  824
  801
  840
  882
  925
  971
  1,019
  1,069
  1,122
  1,177
  1,236
  1,297
  1,362
  1,429
  1,500
  1,575
  1,653
  1,736
  1,822
  1,913
  2,009
Operating income, $m
  -39
  108
  116
  124
  133
  142
  152
  162
  173
  184
  196
  269
  282
  296
  311
  326
  342
  359
  377
  395
  415
  436
  457
  480
  504
  529
  555
  583
  612
  642
  674
EBITDA, $m
  328
  213
  223
  233
  245
  256
  269
  282
  295
  310
  325
  341
  357
  375
  393
  413
  433
  455
  477
  501
  526
  552
  579
  608
  638
  670
  703
  738
  775
  814
  854
Interest expense (income), $m
  54
  56
  59
  63
  66
  70
  74
  79
  83
  88
  93
  98
  103
  109
  115
  121
  128
  135
  142
  150
  158
  167
  176
  185
  195
  205
  216
  227
  239
  252
  265
Earnings before tax, $m
  -173
  51
  56
  61
  66
  72
  78
  84
  90
  97
  104
  171
  179
  187
  196
  205
  214
  224
  234
  245
  257
  269
  282
  295
  309
  324
  339
  355
  372
  390
  409
Tax expense, $m
  8
  14
  15
  17
  18
  19
  21
  23
  24
  26
  28
  46
  48
  50
  53
  55
  58
  60
  63
  66
  69
  73
  76
  80
  83
  87
  92
  96
  101
  105
  110
Net income, $m
  -180
  38
  41
  45
  48
  52
  57
  61
  66
  70
  76
  125
  131
  137
  143
  149
  156
  163
  171
  179
  187
  196
  206
  215
  226
  236
  248
  259
  272
  285
  299

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  43
  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
  1,391
  1,455
  1,524
  1,597
  1,673
  1,753
  1,838
  1,927
  2,020
  2,119
  2,222
  2,331
  2,445
  2,566
  2,692
  2,825
  2,964
  3,111
  3,265
  3,427
  3,597
  3,775
  3,963
  4,160
  4,366
  4,584
  4,812
  5,052
  5,303
  5,568
  5,845
Adjusted assets (=assets-cash), $m
  1,348
  1,455
  1,524
  1,597
  1,673
  1,753
  1,838
  1,927
  2,020
  2,119
  2,222
  2,331
  2,445
  2,566
  2,692
  2,825
  2,964
  3,111
  3,265
  3,427
  3,597
  3,775
  3,963
  4,160
  4,366
  4,584
  4,812
  5,052
  5,303
  5,568
  5,845
Revenue / Adjusted assets
  0.473
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
Average production assets, $m
  428
  448
  469
  492
  515
  540
  566
  593
  622
  653
  684
  718
  753
  790
  829
  870
  913
  958
  1,006
  1,055
  1,108
  1,163
  1,220
  1,281
  1,345
  1,412
  1,482
  1,556
  1,633
  1,715
  1,800
Working capital, $m
  168
  132
  138
  144
  151
  159
  166
  174
  183
  192
  201
  211
  221
  232
  243
  255
  268
  281
  295
  310
  325
  341
  358
  376
  395
  414
  435
  457
  480
  503
  529
Total debt, $m
  1,004
  1,061
  1,123
  1,187
  1,256
  1,327
  1,403
  1,483
  1,566
  1,654
  1,747
  1,844
  1,946
  2,054
  2,167
  2,285
  2,410
  2,541
  2,679
  2,823
  2,975
  3,135
  3,303
  3,479
  3,664
  3,858
  4,062
  4,276
  4,501
  4,737
  4,986
Total liabilities, $m
  1,244
  1,301
  1,363
  1,427
  1,496
  1,567
  1,643
  1,723
  1,806
  1,894
  1,987
  2,084
  2,186
  2,294
  2,407
  2,525
  2,650
  2,781
  2,919
  3,063
  3,215
  3,375
  3,543
  3,719
  3,904
  4,098
  4,302
  4,516
  4,741
  4,977
  5,226
Total equity, $m
  147
  154
  162
  169
  177
  186
  195
  204
  214
  225
  236
  247
  259
  272
  285
  299
  314
  330
  346
  363
  381
  400
  420
  441
  463
  486
  510
  535
  562
  590
  620
Total liabilities and equity, $m
  1,391
  1,455
  1,525
  1,596
  1,673
  1,753
  1,838
  1,927
  2,020
  2,119
  2,223
  2,331
  2,445
  2,566
  2,692
  2,824
  2,964
  3,111
  3,265
  3,426
  3,596
  3,775
  3,963
  4,160
  4,367
  4,584
  4,812
  5,051
  5,303
  5,567
  5,846
Debt-to-equity ratio
  6.830
  6.880
  6.950
  7.020
  7.080
  7.140
  7.200
  7.260
  7.310
  7.370
  7.420
  7.460
  7.510
  7.550
  7.590
  7.630
  7.670
  7.710
  7.740
  7.770
  7.800
  7.830
  7.860
  7.890
  7.920
  7.940
  7.960
  7.990
  8.010
  8.030
  8.050
Adjusted equity ratio
  0.077
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -180
  38
  41
  45
  48
  52
  57
  61
  66
  70
  76
  125
  131
  137
  143
  149
  156
  163
  171
  179
  187
  196
  206
  215
  226
  236
  248
  259
  272
  285
  299
Depreciation, amort., depletion, $m
  367
  105
  107
  109
  112
  114
  117
  120
  122
  125
  129
  72
  75
  79
  83
  87
  91
  96
  101
  106
  111
  116
  122
  128
  134
  141
  148
  156
  163
  171
  180
Funds from operations, $m
  -321
  143
  148
  154
  160
  167
  173
  181
  188
  196
  204
  197
  206
  216
  226
  236
  248
  259
  272
  285
  298
  313
  328
  343
  360
  377
  396
  415
  435
  456
  479
Change in working capital, $m
  -355
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
Cash from operations, $m
  34
  137
  142
  147
  153
  159
  166
  172
  180
  187
  195
  187
  196
  205
  214
  224
  235
  246
  258
  270
  283
  296
  311
  326
  341
  358
  375
  393
  412
  432
  454
Maintenance CAPEX, $m
  0
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -72
  -75
  -79
  -83
  -87
  -91
  -96
  -101
  -106
  -111
  -116
  -122
  -128
  -134
  -141
  -148
  -156
  -163
  -171
New CAPEX, $m
  -30
  -20
  -21
  -22
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -55
  -58
  -61
  -64
  -67
  -70
  -74
  -78
  -81
  -85
Cash from investing activities, $m
  -28
  -63
  -66
  -69
  -73
  -77
  -80
  -84
  -88
  -92
  -97
  -102
  -107
  -112
  -118
  -124
  -130
  -136
  -143
  -151
  -158
  -166
  -174
  -183
  -192
  -201
  -211
  -222
  -234
  -244
  -256
Free cash flow, $m
  6
  74
  76
  78
  81
  83
  86
  88
  91
  95
  98
  85
  89
  92
  96
  101
  105
  110
  114
  120
  125
  131
  137
  143
  149
  156
  164
  171
  179
  188
  197
Issuance/(repayment) of debt, $m
  -8
  57
  62
  65
  68
  72
  76
  80
  84
  88
  93
  97
  102
  107
  113
  119
  125
  131
  138
  145
  152
  160
  168
  176
  185
  194
  204
  214
  225
  236
  248
Issuance/(repurchase) of shares, $m
  7
  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  
  -23
  57
  62
  65
  68
  72
  76
  80
  84
  88
  93
  97
  102
  107
  113
  119
  125
  131
  138
  145
  152
  160
  168
  176
  185
  194
  204
  214
  225
  236
  248
Total cash flow (excl. dividends), $m
  -18
  131
  137
  143
  149
  155
  161
  168
  175
  182
  190
  182
  191
  200
  209
  219
  230
  241
  252
  264
  277
  290
  304
  319
  334
  351
  368
  386
  404
  424
  445
Retained Cash Flow (-), $m
  171
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
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
 
  123
  130
  135
  141
  146
  152
  159
  165
  172
  179
  171
  179
  187
  196
  205
  215
  225
  236
  247
  259
  271
  284
  298
  313
  328
  343
  360
  378
  396
  415
Discount rate, %
 
  9.10
  9.56
  10.03
  10.53
  11.06
  11.61
  12.19
  12.80
  13.44
  14.12
  14.82
  15.56
  16.34
  17.16
  18.02
  18.92
  19.86
  20.86
  21.90
  23.00
  24.15
  25.35
  26.62
  27.95
  29.35
  30.82
  32.36
  33.97
  35.67
  37.46
PV of cash for distribution, $m
 
  113
  108
  102
  94
  87
  79
  71
  63
  55
  48
  37
  31
  26
  21
  17
  13
  10
  8
  6
  4
  3
  2
  1
  1
  1
  0
  0
  0
  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

Central European Media Enterprises Ltd. operates as a media and entertainment company in Central and Eastern Europe. The company operates in six segments: Bulgaria, Croatia, the Czech Republic, Romania, the Slovak Republic, and Slovenia. It broadcasts a total of 36 television channels, including general entertainment and other channels. The company also develops and produces content for their television channels; and provides premium television content through a series of portals, including through Voyo, a subscription based video-on-demand service, and advertising supported catch-up services on its Websites, as well as offers advertising services on its television channels for advertising agencies and sponsors. Central European Media Enterprises Ltd. was founded in 1994 and is based in Hamilton, Bermuda.

FINANCIAL RATIOS  of  Central European Media Enterprises Cl A (CETV)

Valuation Ratios
P/E Ratio -3.3
Price to Sales 0.9
Price to Book 4
Price to Tangible Book
Price to Cash Flow 17.5
Price to Free Cash Flow 148.8
Growth Rates
Sales Growth Rate 5.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -11.8%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio 43
Current Ratio 0.5
LT Debt to Equity 682.3%
Total Debt to Equity 683%
Interest Coverage -2
Management Effectiveness
Return On Assets -8.7%
Ret/ On Assets - 3 Yr. Avg. -7.9%
Return On Total Capital -15.1%
Ret/ On T. Cap. - 3 Yr. Avg. -13%
Return On Equity -77.4%
Return On Equity - 3 Yr. Avg. -48.3%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 35.1%
Gross Margin - 3 Yr. Avg. 32.3%
EBITDA Margin 38.9%
EBITDA Margin - 3 Yr. Avg. 47.2%
Operating Margin -6.1%
Oper. Margin - 3 Yr. Avg. 3.1%
Pre-Tax Margin -27.1%
Pre-Tax Margin - 3 Yr. Avg. -22.2%
Net Profit Margin -28.2%
Net Profit Margin - 3 Yr. Avg. -26.8%
Effective Tax Rate -4.6%
Eff/ Tax Rate - 3 Yr. Avg. -0.8%
Payout Ratio 0%

CETV stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CETV stock intrinsic value calculation we used $638 million for the last fiscal year's total revenue generated by Central European Media Enterprises Cl A. The default revenue input number comes from 2016 income statement of Central European Media Enterprises Cl A. 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 CETV stock valuation model: a) initial revenue growth rate of 4.7% 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 9.1%, whose default value for CETV is calculated based on our internal credit rating of Central European Media Enterprises Cl A, 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 Central European Media Enterprises Cl A.
    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 CETV stock the variable cost ratio is equal to 84.3%.

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 CETV 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 5.6% for Central European Media Enterprises Cl A.

Corporate tax rate of 27% is the nominal tax rate for Central European Media Enterprises Cl A. 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 CETV 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 CETV are equal to 67.1%.

Life of production assets of 10 years is the average useful life of capital assets used in Central European Media Enterprises Cl A 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 CETV is equal to 19.7%. 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 - $147 million for Central European Media Enterprises Cl A - 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 143.452 million for Central European Media Enterprises Cl A 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 Central European Media Enterprises Cl A at the current share price and the inputted number of shares is $0.6 billion.

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COMPANY NEWS

▶ Central European Media posts 2Q profit   [Jul-26-17 12:39AM  Associated Press]
▶ Company News for July 11, 2017   [10:19AM  Zacks]
▶ [$$] KKR-Backed Media Group Makes 230 Million Add-On Deal   [Jul-10-17 11:24AM  The Wall Street Journal]
▶ Central European Media reports 1Q loss   [05:01AM  Associated Press]
▶ Central European Media posts 4Q profit   [06:05AM  Associated Press]
Stock chart of CETV Financial statements of CETV
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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