Intrinsic value of Cheniere Energy - LNG

Previous Close

$46.18

  Intrinsic Value

$0.68

stock screener

  Rating & Target

str. sell

-99%

Previous close

$46.18

 
Intrinsic value

$0.68

 
Up/down potential

-99%

 
Rating

str. sell

We calculate the intrinsic value of LNG 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 11.0

 

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, %
  373.43
  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
  1,283
  2,053
  3,172
  4,743
  6,882
  9,709
  13,348
  17,917
  23,527
  30,273
  38,237
  47,482
  58,051
  69,971
  83,252
  97,890
  113,869
  131,168
  149,757
  169,608
  190,690
  212,975
  236,441
  261,069
  286,849
  313,776
  341,854
  371,095
  401,518
  433,151
  466,030
Variable operating expenses, $m
 
  1,274
  1,965
  2,934
  4,254
  5,998
  8,244
  11,063
  14,524
  18,686
  23,600
  29,296
  35,818
  43,172
  51,366
  60,398
  70,257
  80,930
  92,400
  104,648
  117,655
  131,405
  145,884
  161,079
  176,985
  193,599
  210,923
  228,965
  247,736
  267,254
  287,540
Fixed operating expenses, $m
 
  709
  727
  745
  764
  783
  803
  823
  843
  864
  886
  908
  931
  954
  978
  1,002
  1,027
  1,053
  1,079
  1,106
  1,134
  1,162
  1,191
  1,221
  1,252
  1,283
  1,315
  1,348
  1,382
  1,416
  1,452
Total operating expenses, $m
  1,448
  1,983
  2,692
  3,679
  5,018
  6,781
  9,047
  11,886
  15,367
  19,550
  24,486
  30,204
  36,749
  44,126
  52,344
  61,400
  71,284
  81,983
  93,479
  105,754
  118,789
  132,567
  147,075
  162,300
  178,237
  194,882
  212,238
  230,313
  249,118
  268,670
  288,992
Operating income, $m
  -165
  69
  480
  1,064
  1,864
  2,928
  4,302
  6,032
  8,160
  10,723
  13,751
  17,278
  21,303
  25,845
  30,908
  36,490
  42,585
  49,185
  56,278
  63,854
  71,901
  80,408
  89,366
  98,769
  108,612
  118,894
  129,616
  140,782
  152,400
  164,481
  177,039
EBITDA, $m
  9
  1,059
  2,005
  3,341
  5,165
  7,581
  10,696
  14,612
  19,423
  25,214
  32,053
  39,995
  49,077
  59,322
  70,738
  83,323
  97,064
  111,940
  127,927
  145,000
  163,133
  182,302
  202,487
  223,673
  245,850
  269,014
  293,170
  318,326
  344,500
  371,715
  400,003
Interest expense (income), $m
  66
  759
  1,035
  1,665
  2,549
  3,752
  5,342
  7,389
  9,959
  13,114
  16,909
  21,389
  26,589
  32,534
  39,240
  46,710
  54,944
  63,932
  73,662
  84,119
  95,285
  107,144
  119,679
  132,879
  146,732
  161,233
  176,379
  192,173
  208,621
  225,734
  243,528
Earnings before tax, $m
  -663
  -690
  -555
  -601
  -684
  -824
  -1,040
  -1,357
  -1,799
  -2,392
  -3,158
  -4,111
  -5,286
  -6,689
  -8,332
  -10,220
  -12,359
  -14,748
  -17,384
  -20,265
  -23,385
  -26,736
  -30,313
  -34,110
  -38,120
  -42,339
  -46,764
  -51,391
  -56,221
  -61,253
  -66,489
Tax expense, $m
  2
  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
Net income, $m
  -610
  -690
  -555
  -601
  -684
  -824
  -1,040
  -1,357
  -1,799
  -2,392
  -3,158
  -4,111
  -5,286
  -6,689
  -8,332
  -10,220
  -12,359
  -14,748
  -17,384
  -20,265
  -23,385
  -26,736
  -30,313
  -34,110
  -38,120
  -42,339
  -46,764
  -51,391
  -56,221
  -61,253
  -66,489

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  876
  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
  23,703
  36,657
  56,635
  84,698
  122,893
  173,384
  238,363
  319,952
  420,118
  540,589
  682,808
  847,893
  1,036,631
  1,249,489
  1,486,645
  1,748,030
  2,033,379
  2,342,282
  2,674,241
  3,028,717
  3,405,176
  3,803,130
  4,222,160
  4,661,951
  5,122,300
  5,603,139
  6,104,532
  6,626,689
  7,169,961
  7,734,840
  8,321,958
Adjusted assets (=assets-cash), $m
  22,827
  36,657
  56,635
  84,698
  122,893
  173,384
  238,363
  319,952
  420,118
  540,589
  682,808
  847,893
  1,036,631
  1,249,489
  1,486,645
  1,748,030
  2,033,379
  2,342,282
  2,674,241
  3,028,717
  3,405,176
  3,803,130
  4,222,160
  4,661,951
  5,122,300
  5,603,139
  6,104,532
  6,626,689
  7,169,961
  7,734,840
  8,321,958
Revenue / Adjusted assets
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
Average production assets, $m
  18,415
  29,464
  45,522
  68,078
  98,777
  139,360
  191,588
  257,168
  337,677
  434,509
  548,820
  681,509
  833,211
  1,004,299
  1,194,917
  1,405,011
  1,634,365
  1,882,651
  2,149,469
  2,434,385
  2,736,972
  3,056,834
  3,393,637
  3,747,127
  4,117,141
  4,503,624
  4,906,628
  5,326,321
  5,762,985
  6,217,017
  6,688,924
Working capital, $m
  1,161
  456
  704
  1,053
  1,528
  2,156
  2,963
  3,978
  5,223
  6,721
  8,489
  10,541
  12,887
  15,534
  18,482
  21,732
  25,279
  29,119
  33,246
  37,653
  42,333
  47,281
  52,490
  57,957
  63,680
  69,658
  75,892
  82,383
  89,137
  96,160
  103,459
Total debt, $m
  21,688
  29,580
  47,561
  72,817
  107,192
  152,634
  211,115
  284,546
  374,695
  483,120
  611,117
  759,693
  929,557
  1,121,129
  1,334,569
  1,569,816
  1,826,630
  2,104,643
  2,403,405
  2,722,434
  3,061,248
  3,419,406
  3,796,533
  4,192,345
  4,606,659
  5,039,414
  5,490,668
  5,960,609
  6,449,554
  6,957,945
  7,486,351
Total liabilities, $m
  25,099
  32,991
  50,972
  76,228
  110,603
  156,045
  214,526
  287,957
  378,106
  486,531
  614,528
  763,104
  932,968
  1,124,540
  1,337,980
  1,573,227
  1,830,041
  2,108,054
  2,406,816
  2,725,845
  3,064,659
  3,422,817
  3,799,944
  4,195,756
  4,610,070
  5,042,825
  5,494,079
  5,964,020
  6,452,965
  6,961,356
  7,489,762
Total equity, $m
  -1,396
  3,666
  5,664
  8,470
  12,289
  17,338
  23,836
  31,995
  42,012
  54,059
  68,281
  84,789
  103,663
  124,949
  148,664
  174,803
  203,338
  234,228
  267,424
  302,872
  340,518
  380,313
  422,216
  466,195
  512,230
  560,314
  610,453
  662,669
  716,996
  773,484
  832,196
Total liabilities and equity, $m
  23,703
  36,657
  56,636
  84,698
  122,892
  173,383
  238,362
  319,952
  420,118
  540,590
  682,809
  847,893
  1,036,631
  1,249,489
  1,486,644
  1,748,030
  2,033,379
  2,342,282
  2,674,240
  3,028,717
  3,405,177
  3,803,130
  4,222,160
  4,661,951
  5,122,300
  5,603,139
  6,104,532
  6,626,689
  7,169,961
  7,734,840
  8,321,958
Debt-to-equity ratio
  -15.536
  8.070
  8.400
  8.600
  8.720
  8.800
  8.860
  8.890
  8.920
  8.940
  8.950
  8.960
  8.970
  8.970
  8.980
  8.980
  8.980
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  9.000
  9.000
  9.000
Adjusted equity ratio
  -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
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -610
  -690
  -555
  -601
  -684
  -824
  -1,040
  -1,357
  -1,799
  -2,392
  -3,158
  -4,111
  -5,286
  -6,689
  -8,332
  -10,220
  -12,359
  -14,748
  -17,384
  -20,265
  -23,385
  -26,736
  -30,313
  -34,110
  -38,120
  -42,339
  -46,764
  -51,391
  -56,221
  -61,253
  -66,489
Depreciation, amort., depletion, $m
  174
  990
  1,525
  2,277
  3,300
  4,653
  6,394
  8,580
  11,264
  14,491
  18,302
  22,717
  27,774
  33,477
  39,831
  46,834
  54,479
  62,755
  71,649
  81,146
  91,232
  101,894
  113,121
  124,904
  137,238
  150,121
  163,554
  177,544
  192,099
  207,234
  222,964
Funds from operations, $m
  -635
  300
  970
  1,676
  2,616
  3,829
  5,354
  7,223
  9,464
  12,100
  15,144
  18,606
  22,488
  26,787
  31,499
  36,613
  42,120
  48,007
  54,265
  60,881
  67,848
  75,158
  82,808
  90,794
  99,118
  107,781
  116,790
  126,153
  135,879
  145,981
  156,475
Change in working capital, $m
  -231
  171
  248
  349
  475
  628
  808
  1,014
  1,245
  1,498
  1,768
  2,052
  2,346
  2,646
  2,948
  3,250
  3,547
  3,840
  4,127
  4,407
  4,680
  4,947
  5,209
  5,467
  5,723
  5,978
  6,233
  6,491
  6,754
  7,023
  7,299
Cash from operations, $m
  -404
  129
  721
  1,327
  2,141
  3,202
  4,546
  6,209
  8,219
  10,602
  13,376
  16,553
  20,141
  24,141
  28,551
  33,364
  38,573
  44,167
  50,138
  56,474
  63,168
  70,211
  77,599
  85,327
  93,395
  101,804
  110,557
  119,661
  129,125
  138,958
  149,176
Maintenance CAPEX, $m
  0
  -614
  -982
  -1,517
  -2,269
  -3,293
  -4,645
  -6,386
  -8,572
  -11,256
  -14,484
  -18,294
  -22,717
  -27,774
  -33,477
  -39,831
  -46,834
  -54,479
  -62,755
  -71,649
  -81,146
  -91,232
  -101,894
  -113,121
  -124,904
  -137,238
  -150,121
  -163,554
  -177,544
  -192,099
  -207,234
New CAPEX, $m
  -4,356
  -11,049
  -16,058
  -22,556
  -30,700
  -40,583
  -52,228
  -65,579
  -80,510
  -96,831
  -114,311
  -132,690
  -151,701
  -171,088
  -190,619
  -210,093
  -229,354
  -248,286
  -266,818
  -284,917
  -302,586
  -319,862
  -336,803
  -353,489
  -370,014
  -386,482
  -403,004
  -419,693
  -436,664
  -454,032
  -471,907
Cash from investing activities, $m
  -4,413
  -11,663
  -17,040
  -24,073
  -32,969
  -43,876
  -56,873
  -71,965
  -89,082
  -108,087
  -128,795
  -150,984
  -174,418
  -198,862
  -224,096
  -249,924
  -276,188
  -302,765
  -329,573
  -356,566
  -383,732
  -411,094
  -438,697
  -466,610
  -494,918
  -523,720
  -553,125
  -583,247
  -614,208
  -646,131
  -679,141
Free cash flow, $m
  -4,817
  -11,534
  -16,319
  -22,746
  -30,828
  -40,674
  -52,327
  -65,757
  -80,863
  -97,485
  -115,419
  -134,431
  -154,277
  -174,721
  -195,545
  -216,560
  -237,615
  -258,598
  -279,435
  -300,091
  -320,565
  -340,884
  -361,099
  -381,284
  -401,524
  -421,917
  -442,568
  -463,586
  -485,084
  -507,173
  -529,965
Issuance/(repayment) of debt, $m
  5,194
  7,892
  17,980
  25,257
  34,375
  45,442
  58,481
  73,431
  90,149
  108,425
  127,997
  148,576
  169,864
  191,572
  213,441
  235,247
  256,814
  278,013
  298,763
  319,028
  338,814
  358,158
  377,127
  395,811
  414,315
  432,754
  451,254
  469,941
  488,944
  508,391
  528,407
Issuance/(repurchase) of shares, $m
  0
  6,628
  2,553
  3,407
  4,504
  5,873
  7,538
  9,516
  11,816
  14,439
  17,380
  20,620
  24,160
  27,975
  32,047
  36,359
  40,894
  45,638
  50,580
  55,713
  61,031
  66,531
  72,216
  78,089
  84,155
  90,423
  96,903
  103,607
  110,548
  117,741
  125,201
Cash from financing (excl. dividends), $m  
  4,908
  14,520
  20,533
  28,664
  38,879
  51,315
  66,019
  82,947
  101,965
  122,864
  145,377
  169,196
  194,024
  219,547
  245,488
  271,606
  297,708
  323,651
  349,343
  374,741
  399,845
  424,689
  449,343
  473,900
  498,470
  523,177
  548,157
  573,548
  599,492
  626,132
  653,608
Total cash flow (excl. dividends), $m
  90
  2,986
  4,215
  5,918
  8,051
  10,641
  13,692
  17,190
  21,102
  25,378
  29,958
  34,766
  39,747
  44,826
  49,943
  55,046
  60,092
  65,053
  69,908
  74,650
  79,280
  83,806
  88,245
  92,616
  96,946
  101,261
  105,590
  109,962
  114,409
  118,959
  123,643
Retained Cash Flow (-), $m
  494
  -6,628
  -2,553
  -3,407
  -4,504
  -5,873
  -7,538
  -9,516
  -11,816
  -14,439
  -17,380
  -20,620
  -24,160
  -27,975
  -32,047
  -36,359
  -40,894
  -45,638
  -50,580
  -55,713
  -61,031
  -66,531
  -72,216
  -78,089
  -84,155
  -90,423
  -96,903
  -103,607
  -110,548
  -117,741
  -125,201
Prev. year cash balance distribution, $m
 
  876
  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
 
  -2,766
  1,662
  2,510
  3,547
  4,768
  6,154
  7,674
  9,286
  10,939
  12,578
  14,146
  15,587
  16,851
  17,896
  18,687
  19,199
  19,415
  19,328
  18,937
  18,249
  17,274
  16,028
  14,528
  12,791
  10,838
  8,686
  6,355
  3,861
  1,218
  -1,559
Discount rate, %
 
  16.10
  16.91
  17.75
  18.64
  19.57
  20.55
  21.58
  22.65
  23.79
  24.98
  26.23
  27.54
  28.91
  30.36
  31.88
  33.47
  35.14
  36.90
  38.75
  40.68
  42.72
  44.85
  47.10
  49.45
  51.92
  54.52
  57.25
  60.11
  63.11
  66.27
PV of cash for distribution, $m
 
  -2,382
  1,216
  1,538
  1,791
  1,951
  2,005
  1,955
  1,813
  1,603
  1,353
  1,091
  842
  621
  437
  294
  189
  116
  68
  38
  20
  10
  5
  2
  1
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  29.5
  18.4
  12.0
  8.1
  5.7
  4.0
  3.0
  2.2
  1.7
  1.3
  1.0
  0.8
  0.6
  0.5
  0.4
  0.3
  0.3
  0.2
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1
  0.1
  0.1
  0.1
  0.0
  0.0

Cheniere Energy, Inc. (Cheniere) is an energy company primarily engaged in liquefied natural gas (LNG)-related businesses. The Company operates through two segments: LNG terminal business, and LNG and natural gas marketing business. Its LNG terminal segment consists of the Sabine Pass and Corpus Christi LNG terminals. Its LNG and natural gas marketing segment consists of LNG and natural gas marketing activities by Cheniere Marketing. Cheniere Marketing is developing a portfolio of long- and medium-term SPAs with professional staff based in the United States, the United Kingdom, Singapore and Chile. The Company conducts its business through its subsidiaries, including the development, construction and operation of its LNG terminal business and the development and operation of its LNG and natural gas marketing business. The Company owns and operates the Sabine Pass LNG terminal in Louisiana through its ownership interest in and management agreements with Cheniere Partners.

FINANCIAL RATIOS  of  Cheniere Energy (LNG)

Valuation Ratios
P/E Ratio -18
Price to Sales 8.6
Price to Book -7.9
Price to Tangible Book
Price to Cash Flow -27.2
Price to Free Cash Flow -2.3
Growth Rates
Sales Growth Rate 373.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -36.4%
Cap. Spend. - 3 Yr. Gr. Rate 6.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0.9
LT Debt to Equity -1553.6%
Total Debt to Equity -1553.6%
Interest Coverage -9
Management Effectiveness
Return On Assets -2.6%
Ret/ On Assets - 3 Yr. Avg. -4.3%
Return On Total Capital -3.6%
Ret/ On T. Cap. - 3 Yr. Avg. -6.2%
Return On Equity 53.1%
Return On Equity - 3 Yr. Avg. -2204.7%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 34.5%
Gross Margin - 3 Yr. Avg. 57.9%
EBITDA Margin -33%
EBITDA Margin - 3 Yr. Avg. -198.2%
Operating Margin -12.9%
Oper. Margin - 3 Yr. Avg. -122.8%
Pre-Tax Margin -51.7%
Pre-Tax Margin - 3 Yr. Avg. -237.7%
Net Profit Margin -47.5%
Net Profit Margin - 3 Yr. Avg. -203.9%
Effective Tax Rate -0.3%
Eff/ Tax Rate - 3 Yr. Avg. -0.3%
Payout Ratio 0%

LNG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LNG stock intrinsic value calculation we used $1283 million for the last fiscal year's total revenue generated by Cheniere Energy. The default revenue input number comes from 2016 income statement of Cheniere Energy. 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 LNG 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 16.1%, whose default value for LNG is calculated based on our internal credit rating of Cheniere Energy, 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 Cheniere Energy.
    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 LNG stock the variable cost ratio is equal to 62.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $692 million in the base year in the intrinsic value calculation for LNG 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 Cheniere Energy.

Corporate tax rate of 27% is the nominal tax rate for Cheniere Energy. 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 LNG 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 LNG are equal to 1435.3%.

Life of production assets of 106.3 years is the average useful life of capital assets used in Cheniere Energy 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 LNG is equal to 22.2%. 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 - $-1396 million for Cheniere Energy - 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 237.765 million for Cheniere Energy 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 Cheniere Energy at the current share price and the inputted number of shares is $11.0 billion.

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COMPANY NEWS

▶ CQP Ranks 10th in Terms of Total Returns among MLPs   [Oct-18-17 09:14AM  Market Realist]
▶ MLP Rating Updates during the Week Ended September 29   [Oct-03-17 05:06PM  Market Realist]
▶ [$$] Jera's Kakimi warns over 'golden age' for LNG in Asia   [Sep-26-17 06:17PM  Financial Times]
▶ Mid-Cap ETFs Rise With Cheniere Energy   [10:36AM  Barrons.com]
▶ Where Cheniere Energy Could Trade This Week   [07:42AM  Market Realist]
▶ What Do Cheniere Energys Technical Indicators Suggest?   [Sep-25-17 06:06PM  Market Realist]
▶ Why Cheniere Energy Is a Lot Riskier than You Think   [Sep-15-17 07:12AM  InvestorPlace]
▶ North Korean Sanctions May Hurt Chinas Oil Giants   [Sep-06-17 07:00PM  Oilprice.com]
▶ Are Wall Street Analysts Still Bullish on Cheniere Energy?   [Aug-30-17 02:05PM  Market Realist]
▶ Now's the Time to Buy These Stocks   [Aug-19-17 11:32AM  Motley Fool]
▶ Here's what the biggest hedge funds bought and sold   [Aug-14-17 05:13PM  Yahoo Finance]
▶ Tellurian's Souki on Natural Gas, Cheniere Legal Action   [Aug-09-17 02:04PM  Bloomberg Video]
▶ Why Cheniere Energy Is Weak ahead of 2Q17 Earnings   [Aug-04-17 05:35PM  Market Realist]
▶ 3 Value Stocks for Wise Investors   [Jul-27-17 07:32PM  Motley Fool]
▶ The Next Big Catalyst In The U.S. Oil Export Boom   [Jul-26-17 03:00PM  Oilprice.com]
▶ Oil & Gas Industry Outlook - July 2017   [Jul-20-17 03:10PM  Zacks]
▶ 79% of Analysts Call Cheniere Energy a Buy   [10:35AM  Market Realist]
▶ What Does Cheniere Energys Current Valuation Indicate?   [Jul-19-17 10:37AM  Market Realist]
▶ Poland Seeks To Become EUs Gas Hub   [Jul-12-17 02:00PM  Oilprice.com]
▶ Could Qatars LNG Gamble Increase Tensions In The Region?   [Jul-08-17 12:00PM  Oilprice.com]
▶ Putin And Trump Set To Face Off Over NatGas Market Share   [Jul-04-17 04:00PM  Oilprice.com]
Financial statements of LNG
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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