Intrinsic value of Kenon Holdings - KEN

Previous Close

$13.05

  Intrinsic Value

$694.22

stock screener

  Rating & Target

str. buy

+999%

  Value-price divergence*

-49%

Previous close

$13.05

 
Intrinsic value

$694.22

 
Up/down potential

+999%

 
Rating

str. buy

 
Value-price divergence*

-49%

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

We calculate the intrinsic value of KEN 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 0.7

 

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, %
  45.38
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  0
  2,998
  4,633
  6,928
  10,052
  14,182
  19,497
  26,171
  34,364
  44,218
  55,851
  69,354
  84,792
  102,203
  121,601
  142,982
  166,322
  191,589
  218,742
  247,736
  278,529
  311,080
  345,355
  381,328
  418,983
  458,313
  499,325
  542,035
  586,473
  632,677
  680,701
Variable operating expenses, $m
 
  1,931
  2,978
  4,450
  6,452
  9,099
  12,505
  16,782
  22,033
  28,348
  35,803
  44,447
  54,341
  65,500
  77,931
  91,634
  106,592
  122,785
  140,187
  158,769
  178,503
  199,364
  221,330
  244,384
  268,516
  293,722
  320,006
  347,378
  375,857
  405,469
  436,246
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
  1,722
  1,931
  2,978
  4,450
  6,452
  9,099
  12,505
  16,782
  22,033
  28,348
  35,803
  44,447
  54,341
  65,500
  77,931
  91,634
  106,592
  122,785
  140,187
  158,769
  178,503
  199,364
  221,330
  244,384
  268,516
  293,722
  320,006
  347,378
  375,857
  405,469
  436,246
Operating income, $m
  152
  1,067
  1,654
  2,478
  3,600
  5,083
  6,992
  9,389
  12,331
  15,870
  20,048
  24,907
  30,451
  36,703
  43,670
  51,348
  59,730
  68,804
  78,555
  88,968
  100,026
  111,716
  124,025
  136,944
  150,466
  164,591
  179,319
  194,657
  210,616
  227,209
  244,455
EBITDA, $m
  324
  1,346
  2,080
  3,111
  4,514
  6,368
  8,755
  11,751
  15,430
  19,855
  25,078
  31,142
  38,074
  45,891
  54,602
  64,202
  74,682
  86,028
  98,220
  111,239
  125,066
  139,682
  155,072
  171,225
  188,133
  205,793
  224,208
  243,386
  263,339
  284,086
  305,650
Interest expense (income), $m
  151
  166
  299
  493
  766
  1,137
  1,627
  2,258
  3,051
  4,024
  5,194
  6,576
  8,180
  10,013
  12,081
  14,385
  16,924
  19,696
  22,697
  25,922
  29,366
  33,023
  36,889
  40,960
  45,232
  49,704
  54,375
  59,246
  64,319
  69,596
  75,084
Earnings before tax, $m
  -335
  902
  1,355
  1,985
  2,835
  3,947
  5,365
  7,131
  9,280
  11,846
  14,853
  18,331
  22,271
  26,690
  31,589
  36,963
  42,806
  49,108
  55,858
  63,046
  70,660
  78,693
  87,136
  95,984
  105,234
  114,887
  124,944
  135,411
  146,297
  157,612
  169,371
Tax expense, $m
  59
  243
  366
  536
  765
  1,066
  1,449
  1,925
  2,506
  3,198
  4,010
  4,949
  6,013
  7,206
  8,529
  9,980
  11,558
  13,259
  15,082
  17,022
  19,078
  21,247
  23,527
  25,916
  28,413
  31,019
  33,735
  36,561
  39,500
  42,555
  45,730
Net income, $m
  -412
  658
  989
  1,449
  2,069
  2,881
  3,917
  5,205
  6,775
  8,648
  10,843
  13,381
  16,258
  19,484
  23,060
  26,983
  31,248
  35,849
  40,776
  46,023
  51,582
  57,446
  63,609
  70,068
  76,821
  83,867
  91,209
  98,850
  106,797
  115,057
  123,641

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  416
  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
  5,138
  8,215
  12,692
  18,981
  27,540
  38,855
  53,417
  71,701
  94,148
  121,145
  153,016
  190,011
  232,307
  280,008
  333,154
  391,730
  455,676
  524,901
  599,292
  678,730
  763,093
  852,274
  946,178
  1,044,734
  1,147,898
  1,255,652
  1,368,014
  1,485,028
  1,606,774
  1,733,363
  1,864,935
Adjusted assets (=assets-cash), $m
  4,722
  8,215
  12,692
  18,981
  27,540
  38,855
  53,417
  71,701
  94,148
  121,145
  153,016
  190,011
  232,307
  280,008
  333,154
  391,730
  455,676
  524,901
  599,292
  678,730
  763,093
  852,274
  946,178
  1,044,734
  1,147,898
  1,255,652
  1,368,014
  1,485,028
  1,606,774
  1,733,363
  1,864,935
Revenue / Adjusted assets
  0.000
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
Average production assets, $m
  3,354
  5,364
  8,288
  12,394
  17,983
  25,372
  34,880
  46,819
  61,477
  79,106
  99,917
  124,074
  151,693
  182,841
  217,545
  255,794
  297,550
  342,752
  391,329
  443,200
  498,289
  556,522
  617,840
  682,196
  749,560
  819,922
  893,292
  969,701
  1,049,199
  1,131,860
  1,217,774
Working capital, $m
  -191
  -198
  -306
  -457
  -663
  -936
  -1,287
  -1,727
  -2,268
  -2,918
  -3,686
  -4,577
  -5,596
  -6,745
  -8,026
  -9,437
  -10,977
  -12,645
  -14,437
  -16,351
  -18,383
  -20,531
  -22,793
  -25,168
  -27,653
  -30,249
  -32,955
  -35,774
  -38,707
  -41,757
  -44,926
Total debt, $m
  3,312
  5,977
  9,859
  15,311
  22,732
  32,542
  45,167
  61,020
  80,481
  103,888
  131,520
  163,595
  200,265
  241,622
  287,700
  338,485
  393,926
  453,944
  518,441
  587,313
  660,457
  737,777
  819,191
  904,639
  994,082
  1,087,506
  1,184,923
  1,286,374
  1,391,928
  1,501,680
  1,615,753
Total liabilities, $m
  4,457
  7,122
  11,004
  16,456
  23,877
  33,687
  46,312
  62,165
  81,626
  105,033
  132,665
  164,740
  201,410
  242,767
  288,845
  339,630
  395,071
  455,089
  519,586
  588,458
  661,602
  738,922
  820,336
  905,784
  995,227
  1,088,651
  1,186,068
  1,287,519
  1,393,073
  1,502,825
  1,616,898
Total equity, $m
  681
  1,093
  1,688
  2,524
  3,663
  5,168
  7,104
  9,536
  12,522
  16,112
  20,351
  25,271
  30,897
  37,241
  44,310
  52,100
  60,605
  69,812
  79,706
  90,271
  101,491
  113,352
  125,842
  138,950
  152,670
  167,002
  181,946
  197,509
  213,701
  230,537
  248,036
Total liabilities and equity, $m
  5,138
  8,215
  12,692
  18,980
  27,540
  38,855
  53,416
  71,701
  94,148
  121,145
  153,016
  190,011
  232,307
  280,008
  333,155
  391,730
  455,676
  524,901
  599,292
  678,729
  763,093
  852,274
  946,178
  1,044,734
  1,147,897
  1,255,653
  1,368,014
  1,485,028
  1,606,774
  1,733,362
  1,864,934
Debt-to-equity ratio
  4.863
  5.470
  5.840
  6.070
  6.210
  6.300
  6.360
  6.400
  6.430
  6.450
  6.460
  6.470
  6.480
  6.490
  6.490
  6.500
  6.500
  6.500
  6.500
  6.510
  6.510
  6.510
  6.510
  6.510
  6.510
  6.510
  6.510
  6.510
  6.510
  6.510
  6.510
Adjusted equity ratio
  0.056
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -412
  658
  989
  1,449
  2,069
  2,881
  3,917
  5,205
  6,775
  8,648
  10,843
  13,381
  16,258
  19,484
  23,060
  26,983
  31,248
  35,849
  40,776
  46,023
  51,582
  57,446
  63,609
  70,068
  76,821
  83,867
  91,209
  98,850
  106,797
  115,057
  123,641
Depreciation, amort., depletion, $m
  172
  279
  426
  632
  913
  1,285
  1,762
  2,362
  3,099
  3,985
  5,031
  6,235
  7,623
  9,188
  10,932
  12,854
  14,952
  17,224
  19,665
  22,271
  25,040
  27,966
  31,047
  34,281
  37,666
  41,202
  44,889
  48,729
  52,724
  56,877
  61,195
Funds from operations, $m
  150
  937
  1,415
  2,082
  2,983
  4,166
  5,679
  7,568
  9,873
  12,632
  15,873
  19,616
  23,881
  28,672
  33,992
  39,837
  46,200
  53,072
  60,441
  68,295
  76,622
  85,412
  94,657
  104,349
  114,487
  125,069
  136,098
  147,579
  159,520
  171,934
  184,836
Change in working capital, $m
  -12
  -74
  -108
  -151
  -206
  -273
  -351
  -440
  -541
  -650
  -768
  -891
  -1,019
  -1,149
  -1,280
  -1,411
  -1,540
  -1,668
  -1,792
  -1,914
  -2,032
  -2,148
  -2,262
  -2,374
  -2,485
  -2,596
  -2,707
  -2,819
  -2,933
  -3,050
  -3,170
Cash from operations, $m
  162
  1,012
  1,523
  2,233
  3,189
  4,438
  6,030
  8,008
  10,414
  13,283
  16,641
  20,507
  24,900
  29,821
  35,272
  41,248
  47,741
  54,740
  62,233
  70,208
  78,654
  87,560
  96,919
  106,724
  116,973
  127,665
  138,805
  150,398
  162,453
  174,984
  188,005
Maintenance CAPEX, $m
  0
  -169
  -270
  -416
  -623
  -904
  -1,275
  -1,753
  -2,353
  -3,089
  -3,975
  -5,021
  -6,235
  -7,623
  -9,188
  -10,932
  -12,854
  -14,952
  -17,224
  -19,665
  -22,271
  -25,040
  -27,966
  -31,047
  -34,281
  -37,666
  -41,202
  -44,889
  -48,729
  -52,724
  -56,877
New CAPEX, $m
  -291
  -2,011
  -2,923
  -4,107
  -5,589
  -7,388
  -9,509
  -11,939
  -14,657
  -17,629
  -20,811
  -24,157
  -27,618
  -31,148
  -34,704
  -38,249
  -41,756
  -45,203
  -48,576
  -51,871
  -55,088
  -58,234
  -61,318
  -64,356
  -67,364
  -70,362
  -73,370
  -76,409
  -79,498
  -82,660
  -85,915
Cash from investing activities, $m
  -400
  -2,180
  -3,193
  -4,523
  -6,212
  -8,292
  -10,784
  -13,692
  -17,010
  -20,718
  -24,786
  -29,178
  -33,853
  -38,771
  -43,892
  -49,181
  -54,610
  -60,155
  -65,800
  -71,536
  -77,359
  -83,274
  -89,284
  -95,403
  -101,645
  -108,028
  -114,572
  -121,298
  -128,227
  -135,384
  -142,792
Free cash flow, $m
  -238
  -1,168
  -1,670
  -2,290
  -3,023
  -3,854
  -4,754
  -5,684
  -6,596
  -7,436
  -8,145
  -8,671
  -8,954
  -8,950
  -8,620
  -7,933
  -6,869
  -5,415
  -3,567
  -1,328
  1,294
  4,287
  7,635
  11,321
  15,327
  19,636
  24,232
  29,100
  34,226
  39,600
  45,213
Issuance/(repayment) of debt, $m
  349
  2,665
  3,882
  5,452
  7,421
  9,810
  12,625
  15,852
  19,461
  23,407
  27,632
  32,075
  36,670
  41,357
  46,078
  50,785
  55,441
  60,018
  64,497
  68,872
  73,144
  77,320
  81,415
  85,448
  89,443
  93,424
  97,417
  101,451
  105,554
  109,752
  114,073
Issuance/(repurchase) of shares, $m
  9
  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  
  175
  2,665
  3,882
  5,452
  7,421
  9,810
  12,625
  15,852
  19,461
  23,407
  27,632
  32,075
  36,670
  41,357
  46,078
  50,785
  55,441
  60,018
  64,497
  68,872
  73,144
  77,320
  81,415
  85,448
  89,443
  93,424
  97,417
  101,451
  105,554
  109,752
  114,073
Total cash flow (excl. dividends), $m
  -57
  1,498
  2,212
  3,163
  4,398
  5,956
  7,871
  10,168
  12,865
  15,971
  19,487
  23,404
  27,717
  32,407
  37,458
  42,852
  48,572
  54,603
  60,930
  67,544
  74,438
  81,607
  89,050
  96,769
  104,770
  113,060
  121,650
  130,551
  139,780
  149,352
  159,286
Retained Cash Flow (-), $m
  380
  -412
  -595
  -836
  -1,138
  -1,505
  -1,937
  -2,432
  -2,985
  -3,591
  -4,239
  -4,920
  -5,625
  -6,344
  -7,068
  -7,791
  -8,505
  -9,207
  -9,894
  -10,565
  -11,220
  -11,861
  -12,489
  -13,108
  -13,721
  -14,331
  -14,944
  -15,563
  -16,192
  -16,836
  -17,499
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
 
  1,086
  1,616
  2,326
  3,259
  4,451
  5,934
  7,737
  9,880
  12,381
  15,248
  18,484
  22,091
  26,063
  30,390
  35,062
  40,067
  45,396
  51,036
  56,979
  63,217
  69,746
  76,560
  83,661
  91,049
  98,729
  106,706
  114,988
  123,588
  132,516
  141,787
Discount rate, %
 
  11.60
  12.18
  12.79
  13.43
  14.10
  14.80
  15.55
  16.32
  17.14
  18.00
  18.90
  19.84
  20.83
  21.87
  22.97
  24.12
  25.32
  26.59
  27.92
  29.31
  30.78
  32.32
  33.93
  35.63
  37.41
  39.28
  41.25
  43.31
  45.47
  47.75
PV of cash for distribution, $m
 
  973
  1,284
  1,621
  1,969
  2,302
  2,592
  2,814
  2,947
  2,982
  2,915
  2,754
  2,518
  2,227
  1,905
  1,578
  1,263
  979
  733
  530
  370
  249
  162
  101
  61
  35
  19
  10
  5
  3
  1
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

Kenon Holdings Ltd., through its subsidiaries, owns, develops, and operates power generation and distribution facilities primarily in Latin America, the Caribbean, and Israel markets. It also designs, manufactures, distributes, and services passenger vehicles through a network of independent authorized retail dealers in the People’s Republic of China. As of December 31, 2015, the company’s dealerships included 86 operational point of sales. In addition, it develops and owns a proprietary natural gas-to-liquid technology process. The company is based in Singapore.

FINANCIAL RATIOS  of  Kenon Holdings (KEN)

Valuation Ratios
P/E Ratio -1.7
Price to Sales 0.4
Price to Book 1
Price to Tangible Book
Price to Cash Flow 4.3
Price to Free Cash Flow -5.4
Growth Rates
Sales Growth Rate 45.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -45.4%
Cap. Spend. - 3 Yr. Gr. Rate -1.9%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 415.4%
Total Debt to Equity 486.3%
Interest Coverage -1
Management Effectiveness
Return On Assets -4.9%
Ret/ On Assets - 3 Yr. Avg. 2.5%
Return On Total Capital -10.6%
Ret/ On T. Cap. - 3 Yr. Avg. 1.7%
Return On Equity -47.3%
Return On Equity - 3 Yr. Avg. 2.7%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin -0.6%
EBITDA Margin - 3 Yr. Avg. 20.8%
Operating Margin 8.1%
Oper. Margin - 3 Yr. Avg. 23.6%
Pre-Tax Margin -17.9%
Pre-Tax Margin - 3 Yr. Avg. 0.8%
Net Profit Margin -22%
Net Profit Margin - 3 Yr. Avg. 6.1%
Effective Tax Rate -17.6%
Eff/ Tax Rate - 3 Yr. Avg. 38.7%
Payout Ratio 0%

KEN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KEN stock intrinsic value calculation we used $1874 million for the last fiscal year's total revenue generated by Kenon Holdings. The default revenue input number comes from 2016 income statement of Kenon Holdings. 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 KEN stock valuation model: a) initial revenue growth rate of 60% 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 11.6%, whose default value for KEN is calculated based on our internal credit rating of Kenon Holdings, 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 Kenon Holdings.
    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 KEN stock the variable cost ratio is equal to 64.6%.

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 KEN 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% for Kenon Holdings.

Corporate tax rate of 27% is the nominal tax rate for Kenon Holdings. 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 KEN 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 KEN are equal to 178.9%.

Life of production assets of 19.9 years is the average useful life of capital assets used in Kenon Holdings 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 KEN is equal to -6.6%. 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 - $681 million for Kenon Holdings - 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 54.596 million for Kenon Holdings 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 Kenon Holdings at the current share price and the inputted number of shares is $0.7 billion.

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COMPANY NEWS

▶ Kenon Announces Issuance of Bonds by ICPI   [May-17-17 05:42PM  PR Newswire]
▶ Kenon reports 4Q loss   [Mar-29-17 05:10PM  Associated Press]
▶ Kenon Holdings Publishes its Second Quarter 2016 Results   [Oct-08-16 04:50AM  PR Newswire]
Stock chart of KEN Financial statements of KEN Annual reports of KEN
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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