Intrinsic value of Gener8 Maritime - GNRT

Previous Close

$6.61

  Intrinsic Value

$3.84

stock screener

  Rating & Target

sell

-42%

Previous close

$6.61

 
Intrinsic value

$3.84

 
Up/down potential

-42%

 
Rating

sell

We calculate the intrinsic value of GNRT 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  -5.81
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  405
  314
  321
  330
  339
  349
  360
  373
  386
  400
  416
  432
  450
  468
  488
  509
  532
  555
  580
  607
  634
  664
  695
  728
  762
  798
  836
  877
  919
  964
  1,010
Variable operating expenses, $m
 
  223
  229
  234
  241
  248
  256
  265
  274
  285
  296
  307
  320
  333
  347
  362
  378
  395
  413
  431
  451
  472
  494
  517
  542
  568
  595
  623
  653
  685
  718
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
  288
  223
  229
  234
  241
  248
  256
  265
  274
  285
  296
  307
  320
  333
  347
  362
  378
  395
  413
  431
  451
  472
  494
  517
  542
  568
  595
  623
  653
  685
  718
Operating income, $m
  116
  91
  93
  95
  98
  101
  104
  108
  112
  116
  120
  125
  130
  135
  141
  147
  154
  160
  168
  175
  183
  192
  201
  210
  220
  231
  242
  253
  266
  278
  292
EBITDA, $m
  203
  347
  355
  364
  374
  386
  398
  412
  426
  442
  459
  477
  496
  517
  539
  562
  587
  613
  641
  670
  700
  733
  767
  803
  841
  881
  923
  968
  1,015
  1,064
  1,115
Interest expense (income), $m
  30
  73
  75
  76
  78
  81
  83
  86
  89
  92
  96
  99
  103
  108
  112
  117
  122
  128
  133
  139
  146
  153
  160
  167
  175
  184
  193
  202
  212
  222
  233
Earnings before tax, $m
  67
  18
  18
  19
  20
  20
  21
  22
  23
  24
  24
  25
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  51
  54
  56
  59
Tax expense, $m
  0
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
Net income, $m
  67
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  38
  39
  41
  43

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  95
  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
  2,993
  2,618
  2,678
  2,747
  2,824
  2,910
  3,004
  3,106
  3,217
  3,336
  3,464
  3,601
  3,747
  3,903
  4,068
  4,244
  4,430
  4,627
  4,835
  5,055
  5,287
  5,532
  5,791
  6,063
  6,350
  6,653
  6,971
  7,306
  7,658
  8,029
  8,419
Adjusted assets (=assets-cash), $m
  2,898
  2,618
  2,678
  2,747
  2,824
  2,910
  3,004
  3,106
  3,217
  3,336
  3,464
  3,601
  3,747
  3,903
  4,068
  4,244
  4,430
  4,627
  4,835
  5,055
  5,287
  5,532
  5,791
  6,063
  6,350
  6,653
  6,971
  7,306
  7,658
  8,029
  8,419
Revenue / Adjusted assets
  0.140
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
Average production assets, $m
  2,351
  2,560
  2,619
  2,687
  2,762
  2,846
  2,938
  3,038
  3,146
  3,263
  3,388
  3,522
  3,665
  3,817
  3,979
  4,151
  4,332
  4,525
  4,729
  4,944
  5,171
  5,411
  5,663
  5,930
  6,210
  6,506
  6,817
  7,145
  7,490
  7,853
  8,234
Working capital, $m
  -2
  -30
  -31
  -32
  -33
  -34
  -35
  -36
  -37
  -39
  -40
  -42
  -44
  -45
  -47
  -49
  -52
  -54
  -56
  -59
  -62
  -64
  -67
  -71
  -74
  -77
  -81
  -85
  -89
  -93
  -98
Total debt, $m
  1,519
  1,287
  1,318
  1,352
  1,391
  1,434
  1,482
  1,533
  1,589
  1,649
  1,714
  1,783
  1,857
  1,935
  2,018
  2,107
  2,200
  2,300
  2,405
  2,516
  2,633
  2,756
  2,886
  3,024
  3,168
  3,321
  3,481
  3,650
  3,828
  4,015
  4,211
Total liabilities, $m
  1,555
  1,319
  1,350
  1,385
  1,423
  1,467
  1,514
  1,566
  1,621
  1,681
  1,746
  1,815
  1,889
  1,967
  2,050
  2,139
  2,233
  2,332
  2,437
  2,548
  2,665
  2,788
  2,919
  3,056
  3,200
  3,353
  3,513
  3,682
  3,860
  4,047
  4,243
Total equity, $m
  1,437
  1,299
  1,328
  1,363
  1,401
  1,443
  1,490
  1,541
  1,596
  1,655
  1,718
  1,786
  1,859
  1,936
  2,018
  2,105
  2,197
  2,295
  2,398
  2,507
  2,622
  2,744
  2,872
  3,007
  3,150
  3,300
  3,458
  3,624
  3,799
  3,983
  4,176
Total liabilities and equity, $m
  2,992
  2,618
  2,678
  2,748
  2,824
  2,910
  3,004
  3,107
  3,217
  3,336
  3,464
  3,601
  3,748
  3,903
  4,068
  4,244
  4,430
  4,627
  4,835
  5,055
  5,287
  5,532
  5,791
  6,063
  6,350
  6,653
  6,971
  7,306
  7,659
  8,030
  8,419
Debt-to-equity ratio
  1.057
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.010
  1.010
  1.010
  1.010
  1.010
  1.010
  1.010
  1.010
Adjusted equity ratio
  0.463
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  67
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  38
  39
  41
  43
Depreciation, amort., depletion, $m
  87
  256
  262
  269
  276
  285
  294
  304
  315
  326
  339
  352
  366
  382
  398
  415
  433
  452
  473
  494
  517
  541
  566
  593
  621
  651
  682
  715
  749
  785
  823
Funds from operations, $m
  289
  269
  275
  282
  290
  299
  309
  320
  331
  343
  357
  371
  386
  402
  419
  437
  456
  476
  498
  521
  544
  570
  596
  624
  654
  685
  718
  752
  788
  826
  867
Change in working capital, $m
  30
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
Cash from operations, $m
  259
  269
  276
  283
  291
  300
  310
  321
  332
  345
  358
  372
  388
  404
  421
  439
  458
  479
  500
  523
  547
  573
  599
  627
  657
  688
  721
  756
  792
  831
  871
Maintenance CAPEX, $m
  0
  -251
  -256
  -262
  -269
  -276
  -285
  -294
  -304
  -315
  -326
  -339
  -352
  -366
  -382
  -398
  -415
  -433
  -452
  -473
  -494
  -517
  -541
  -566
  -593
  -621
  -651
  -682
  -715
  -749
  -785
New CAPEX, $m
  -973
  -52
  -59
  -67
  -76
  -84
  -92
  -100
  -108
  -117
  -125
  -134
  -143
  -152
  -162
  -172
  -182
  -193
  -204
  -215
  -227
  -240
  -253
  -266
  -281
  -296
  -311
  -328
  -345
  -363
  -382
Cash from investing activities, $m
  -903
  -303
  -315
  -329
  -345
  -360
  -377
  -394
  -412
  -432
  -451
  -473
  -495
  -518
  -544
  -570
  -597
  -626
  -656
  -688
  -721
  -757
  -794
  -832
  -874
  -917
  -962
  -1,010
  -1,060
  -1,112
  -1,167
Free cash flow, $m
  -644
  -33
  -39
  -46
  -53
  -60
  -66
  -73
  -80
  -86
  -93
  -100
  -108
  -115
  -123
  -130
  -139
  -147
  -156
  -165
  -174
  -184
  -195
  -205
  -217
  -228
  -241
  -253
  -267
  -281
  -296
Issuance/(repayment) of debt, $m
  607
  25
  30
  35
  39
  43
  47
  52
  56
  60
  65
  69
  74
  78
  83
  88
  94
  99
  105
  111
  117
  124
  130
  137
  145
  152
  160
  169
  178
  187
  197
Issuance/(repurchase) of shares, $m
  0
  12
  17
  20
  24
  28
  31
  35
  38
  42
  46
  49
  53
  57
  61
  65
  69
  74
  78
  83
  88
  93
  98
  104
  110
  116
  122
  129
  136
  143
  150
Cash from financing (excl. dividends), $m  
  581
  37
  47
  55
  63
  71
  78
  87
  94
  102
  111
  118
  127
  135
  144
  153
  163
  173
  183
  194
  205
  217
  228
  241
  255
  268
  282
  298
  314
  330
  347
Total cash flow (excl. dividends), $m
  -63
  3
  8
  9
  10
  11
  12
  13
  15
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
  49
  51
Retained Cash Flow (-), $m
  -89
  -25
  -30
  -34
  -38
  -42
  -47
  -51
  -55
  -59
  -64
  -68
  -72
  -77
  -82
  -87
  -92
  -98
  -103
  -109
  -115
  -122
  -128
  -135
  -142
  -150
  -158
  -166
  -175
  -184
  -193
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
 
  4
  4
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
Cash available for distribution, $m
 
  -21
  -22
  -25
  -28
  -31
  -34
  -37
  -40
  -43
  -47
  -50
  -53
  -57
  -60
  -64
  -68
  -72
  -76
  -80
  -85
  -89
  -94
  -99
  -105
  -110
  -116
  -122
  -129
  -135
  -142
Discount rate, %
 
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.18
  10.69
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.20
  20.17
  21.17
  22.23
  23.34
  24.51
  25.74
  27.02
  28.37
  29.79
  31.28
PV of cash for distribution, $m
 
  -20
  -19
  -20
  -20
  -20
  -20
  -19
  -18
  -17
  -15
  -14
  -12
  -11
  -9
  -8
  -6
  -5
  -4
  -3
  -3
  -2
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  98.7
  96.9
  94.9
  92.5
  90.0
  87.3
  84.5
  81.6
  78.6
  75.6
  72.6
  69.7
  66.8
  63.9
  61.1
  58.3
  55.7
  53.1
  50.6
  48.2
  45.8
  43.6
  41.5
  39.4
  37.5
  35.6
  33.8
  32.1
  30.4
  28.9

Gener8 Maritime, Inc. is a provider of international seaborne crude oil transportation services. The Company operates through the transportation of international seaborne crude oil and petroleum products with its fleet of vessels segment. As of March 10, 2017, the Company owned a fleet of 40 tankers on the water, consisting of 24 Very Large Crude Carriers (VLCCs), 10 Suezmax vessels, four Aframax vessels and two Panamax vessels, with an aggregate carrying capacity of 9.4 million deadweight tons (DWT) and one eco VLCC newbuilding. As of March 10, 2017, approximately 77% of its total fleet carrying capacity based on DWT, including newbuildings, was focused on VLCC vessels. As of March 10, 2017, all of its VLCC vessels were deployed in Navig8 Group's VL8 Pool, all of its Suezmax vessels were deployed in Navig8 Group's Suez8 Pool and all of its Aframax vessels were deployed in the Navig8 Group's V8 Pool.

FINANCIAL RATIOS  of  Gener8 Maritime (GNRT)

Valuation Ratios
P/E Ratio 8.2
Price to Sales 1.4
Price to Book 0.4
Price to Tangible Book
Price to Cash Flow 2.1
Price to Free Cash Flow -0.8
Growth Rates
Sales Growth Rate -5.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 146.3%
Cap. Spend. - 3 Yr. Gr. Rate 217.8%
Financial Strength
Quick Ratio 1
Current Ratio 0.2
LT Debt to Equity 93.1%
Total Debt to Equity 105.7%
Interest Coverage 3
Management Effectiveness
Return On Assets 3.6%
Ret/ On Assets - 3 Yr. Avg. 3%
Return On Total Capital 2.5%
Ret/ On T. Cap. - 3 Yr. Avg. 1.9%
Return On Equity 4.8%
Return On Equity - 3 Yr. Avg. 2.7%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 69.6%
Gross Margin - 3 Yr. Avg. 47.4%
EBITDA Margin 45.4%
EBITDA Margin - 3 Yr. Avg. 31.6%
Operating Margin 28.9%
Oper. Margin - 3 Yr. Avg. 19.9%
Pre-Tax Margin 16.5%
Pre-Tax Margin - 3 Yr. Avg. 11.6%
Net Profit Margin 16.5%
Net Profit Margin - 3 Yr. Avg. 11.6%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

GNRT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GNRT stock intrinsic value calculation we used $308 million for the last fiscal year's total revenue generated by Gener8 Maritime. The default revenue input number comes from 2016 income statement of Gener8 Maritime. 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 GNRT stock valuation model: a) initial revenue growth rate of 2% 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 7.6%, whose default value for GNRT is calculated based on our internal credit rating of Gener8 Maritime, 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 Gener8 Maritime.
    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 GNRT stock the variable cost ratio is equal to 71.1%.

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 GNRT 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 5.8% for Gener8 Maritime.

Corporate tax rate of 27% is the nominal tax rate for Gener8 Maritime. 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 GNRT stock is equal to 1.4%.

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 GNRT are equal to 815%.

Life of production assets of 10 years is the average useful life of capital assets used in Gener8 Maritime 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 GNRT is equal to -9.7%. 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 - $1274 million for Gener8 Maritime - 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 83 million for Gener8 Maritime 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 Gener8 Maritime at the current share price and the inputted number of shares is $0.5 billion.

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Financial statements of GNRT
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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