Intrinsic value of Century Casinos - CNTY

Previous Close

$9.19

  Intrinsic Value

$4.46

stock screener

  Rating & Target

str. sell

-51%

Previous close

$9.19

 
Intrinsic value

$4.46

 
Up/down potential

-51%

 
Rating

str. sell

We calculate the intrinsic value of CNTY 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 0.2

 

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, %
  3.73
  3.70
  3.83
  3.95
  4.05
  4.15
  4.23
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.63
  4.67
  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
Revenue, $m
  139
  144
  150
  156
  162
  169
  176
  183
  191
  200
  209
  218
  228
  239
  250
  262
  274
  287
  301
  315
  331
  347
  364
  381
  400
  419
  440
  462
  484
  508
  533
Variable operating expenses, $m
 
  127
  131
  136
  142
  148
  154
  161
  167
  175
  183
  190
  198
  208
  217
  227
  238
  250
  261
  274
  287
  301
  316
  331
  347
  364
  382
  401
  421
  442
  463
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
  123
  127
  131
  136
  142
  148
  154
  161
  167
  175
  183
  190
  198
  208
  217
  227
  238
  250
  261
  274
  287
  301
  316
  331
  347
  364
  382
  401
  421
  442
  463
Operating income, $m
  16
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  29
  30
  31
  33
  34
  36
  38
  40
  41
  43
  46
  48
  50
  53
  55
  58
  61
  64
  67
  70
EBITDA, $m
  24
  27
  28
  29
  30
  31
  32
  34
  35
  37
  39
  40
  42
  44
  46
  48
  51
  53
  56
  58
  61
  64
  67
  70
  74
  77
  81
  85
  89
  94
  98
Interest expense (income), $m
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
Earnings before tax, $m
  16
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  51
  53
Tax expense, $m
  2
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
Net income, $m
  9
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  17
  17
  18
  19
  20
  21
  21
  22
  23
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  39

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  39
  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
  218
  186
  193
  200
  208
  217
  226
  236
  246
  257
  269
  281
  294
  307
  322
  337
  353
  370
  387
  406
  426
  446
  468
  491
  515
  540
  566
  594
  623
  654
  686
Adjusted assets (=assets-cash), $m
  179
  186
  193
  200
  208
  217
  226
  236
  246
  257
  269
  281
  294
  307
  322
  337
  353
  370
  387
  406
  426
  446
  468
  491
  515
  540
  566
  594
  623
  654
  686
Revenue / Adjusted assets
  0.777
  0.774
  0.777
  0.780
  0.779
  0.779
  0.779
  0.775
  0.776
  0.778
  0.777
  0.776
  0.776
  0.779
  0.776
  0.777
  0.776
  0.776
  0.778
  0.776
  0.777
  0.778
  0.778
  0.776
  0.777
  0.776
  0.777
  0.778
  0.777
  0.777
  0.777
Average production assets, $m
  145
  150
  156
  162
  169
  176
  183
  191
  200
  208
  218
  228
  238
  249
  261
  273
  286
  300
  314
  329
  345
  362
  379
  398
  417
  437
  459
  481
  505
  530
  556
Working capital, $m
  17
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -58
  -61
Total debt, $m
  56
  53
  56
  59
  63
  67
  71
  75
  80
  85
  90
  96
  101
  107
  114
  121
  128
  135
  143
  151
  160
  169
  179
  189
  200
  211
  223
  236
  249
  262
  277
Total liabilities, $m
  86
  83
  86
  89
  93
  97
  101
  105
  110
  115
  120
  126
  131
  137
  144
  151
  158
  165
  173
  181
  190
  199
  209
  219
  230
  241
  253
  266
  279
  292
  307
Total equity, $m
  132
  103
  107
  111
  115
  120
  125
  130
  136
  142
  149
  155
  162
  170
  178
  186
  195
  204
  214
  225
  235
  247
  259
  271
  285
  299
  313
  329
  345
  362
  380
Total liabilities and equity, $m
  218
  186
  193
  200
  208
  217
  226
  235
  246
  257
  269
  281
  293
  307
  322
  337
  353
  369
  387
  406
  425
  446
  468
  490
  515
  540
  566
  595
  624
  654
  687
Debt-to-equity ratio
  0.424
  0.520
  0.530
  0.540
  0.550
  0.560
  0.570
  0.580
  0.590
  0.600
  0.610
  0.620
  0.620
  0.630
  0.640
  0.650
  0.650
  0.660
  0.670
  0.670
  0.680
  0.690
  0.690
  0.700
  0.700
  0.710
  0.710
  0.720
  0.720
  0.730
  0.730
Adjusted equity ratio
  0.520
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  9
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  17
  17
  18
  19
  20
  21
  21
  22
  23
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  39
Depreciation, amort., depletion, $m
  8
  9
  9
  10
  10
  10
  11
  11
  11
  12
  12
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  25
  26
  27
  28
Funds from operations, $m
  21
  19
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  51
  53
  56
  58
  61
  64
  67
Change in working capital, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
Cash from operations, $m
  22
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  37
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
  61
  64
  67
  70
Maintenance CAPEX, $m
  0
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
New CAPEX, $m
  -7
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
Cash from investing activities, $m
  -27
  -12
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -25
  -27
  -29
  -29
  -31
  -33
  -35
  -36
  -37
  -39
  -41
  -43
  -46
  -49
  -51
  -53
Free cash flow, $m
  -5
  7
  7
  7
  8
  8
  8
  8
  8
  8
  8
  8
  9
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
Issuance/(repayment) of debt, $m
  18
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
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  
  16
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
Total cash flow (excl. dividends), $m
  9
  10
  11
  11
  11
  12
  12
  12
  13
  13
  14
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
Retained Cash Flow (-), $m
  -10
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
Prev. year cash balance distribution, $m
 
  33
  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
 
  40
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  8
  8
  8
  8
  9
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  13
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
 
  38
  6
  6
  5
  5
  5
  5
  4
  4
  4
  3
  3
  3
  3
  2
  2
  2
  2
  1
  1
  1
  1
  1
  1
  0
  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
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Century Casinos, Inc. is an international casino entertainment company. The Company develops and operates gaming establishments, as well as related lodging, restaurant and entertainment facilities around the world. Its segments include Canada, the United States, Poland, and Corporate and Other. The Canada segment consists of Century Casino & Hotel-Edmonton; Century Casino Calgary; Century Downs Racetrack and Casino, and Century Bets! Inc. (Century Bets). The United States segment comprises Century Casino & Hotel-Central City, and Century Casino & Hotel-Cripple Creek. The Poland segment consists of Casinos Poland. The Corporate and Other segment comprises Cruise Ships and other. The Company owns casino operations in North America; holds interest in casinos throughout Poland; holds a racetrack and entertainment center (REC) in Canada and the pari-mutuel off-track betting network in southern Alberta; manages a casino in Aruba, and provides gaming services in Argentina.

FINANCIAL RATIOS  of  Century Casinos (CNTY)

Valuation Ratios
P/E Ratio 25
Price to Sales 1.6
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 10.2
Price to Free Cash Flow 15
Growth Rates
Sales Growth Rate 3.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -63.2%
Cap. Spend. - 3 Yr. Gr. Rate 3.1%
Financial Strength
Quick Ratio 7
Current Ratio 0
LT Debt to Equity 37.9%
Total Debt to Equity 42.4%
Interest Coverage 6
Management Effectiveness
Return On Assets 5.8%
Ret/ On Assets - 3 Yr. Avg. 4.7%
Return On Total Capital 5.2%
Ret/ On T. Cap. - 3 Yr. Avg. 4.5%
Return On Equity 7.1%
Return On Equity - 3 Yr. Avg. 6%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 49.6%
Gross Margin - 3 Yr. Avg. 46.8%
EBITDA Margin 19.4%
EBITDA Margin - 3 Yr. Avg. 15.2%
Operating Margin 11.5%
Oper. Margin - 3 Yr. Avg. 8.7%
Pre-Tax Margin 11.5%
Pre-Tax Margin - 3 Yr. Avg. 7.6%
Net Profit Margin 6.5%
Net Profit Margin - 3 Yr. Avg. 5.4%
Effective Tax Rate 12.5%
Eff/ Tax Rate - 3 Yr. Avg. 8.6%
Payout Ratio 0%

CNTY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CNTY stock intrinsic value calculation we used $139 million for the last fiscal year's total revenue generated by Century Casinos. The default revenue input number comes from 2016 income statement of Century Casinos. 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 CNTY stock valuation model: a) initial revenue growth rate of 3.7% 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 4.3%, whose default value for CNTY is calculated based on our internal credit rating of Century Casinos, 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 Century Casinos.
    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 CNTY stock the variable cost ratio is equal to 87.8%.

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 CNTY 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 6.5% for Century Casinos.

Corporate tax rate of 27% is the nominal tax rate for Century Casinos. 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 CNTY 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 CNTY are equal to 104.3%.

Life of production assets of 19.6 years is the average useful life of capital assets used in Century Casinos 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 CNTY is equal to -11.5%. 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 - $132 million for Century Casinos - 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 24.469 million for Century Casinos 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 Century Casinos at the current share price and the inputted number of shares is $0.2 billion.

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COMPANY NEWS

▶ New Strong Buy Stocks for November 20th   [Nov-20-17 09:27AM  Zacks]
▶ Century Casinos posts 3Q profit   [06:31AM  Associated Press]
▶ Century Casinos posts 2Q profit   [Aug-07-17 11:55PM  Associated Press]
▶ Century Casinos posts 1Q profit   [06:19AM  Associated Press]
▶ 4 Reasons Century Casinos Shares Are A Buy   [Mar-10-17 02:25PM  Benzinga]
Financial statements of CNTY
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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