Intrinsic value of Cheniere Energy - LNG

Previous Close

$62.47

  Intrinsic Value

$53.19

stock screener

  Rating & Target

hold

-15%

Previous close

$62.47

 
Intrinsic value

$53.19

 
Up/down potential

-15%

 
Rating

hold

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

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, %
  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
  8,962
  13,846
  20,706
  30,044
  42,387
  58,273
  78,219
  102,707
  132,158
  166,927
  207,285
  253,426
  305,463
  363,441
  427,342
  497,102
  572,619
  653,774
  740,433
  832,466
  929,754
  1,032,195
  1,139,711
  1,252,253
  1,369,804
  1,492,380
  1,620,032
  1,752,846
  1,890,942
  2,034,476
Variable operating expenses, $m
 
  6,018
  9,293
  13,894
  20,156
  28,434
  39,087
  52,463
  68,885
  88,636
  111,953
  139,011
  169,954
  204,851
  243,733
  286,587
  333,369
  384,013
  438,437
  496,553
  558,273
  623,517
  692,216
  764,319
  839,792
  918,625
  1,000,827
  1,086,434
  1,175,503
  1,268,114
  1,364,371
Fixed operating expenses, $m
 
  471
  482
  492
  503
  514
  525
  537
  549
  561
  573
  586
  599
  612
  625
  639
  653
  667
  682
  697
  712
  728
  744
  760
  777
  794
  812
  830
  848
  867
  886
Total operating expenses, $m
  1,448
  6,489
  9,775
  14,386
  20,659
  28,948
  39,612
  53,000
  69,434
  89,197
  112,526
  139,597
  170,553
  205,463
  244,358
  287,226
  334,022
  384,680
  439,119
  497,250
  558,985
  624,245
  692,960
  765,079
  840,569
  919,419
  1,001,639
  1,087,264
  1,176,351
  1,268,981
  1,365,257
Operating income, $m
  -165
  2,473
  4,071
  6,320
  9,385
  13,440
  18,661
  25,219
  33,273
  42,961
  54,401
  67,689
  82,874
  100,000
  119,083
  140,117
  163,080
  187,939
  214,654
  243,183
  273,481
  305,509
  339,235
  374,631
  411,683
  450,384
  490,740
  532,768
  576,495
  621,962
  669,219
EBITDA, $m
  9
  6,062
  9,612
  14,602
  21,398
  30,385
  41,954
  56,483
  74,322
  95,779
  121,112
  150,520
  184,143
  222,063
  264,314
  310,883
  361,722
  416,758
  475,902
  539,060
  606,134
  677,039
  751,700
  830,060
  912,083
  997,758
  1,087,095
  1,180,133
  1,276,932
  1,377,583
  1,482,196
Interest expense (income), $m
  66
  1,368
  1,830
  2,955
  4,535
  6,686
  9,529
  13,188
  17,782
  23,423
  30,206
  38,214
  47,510
  58,138
  70,124
  83,478
  98,196
  114,264
  131,658
  150,351
  170,311
  191,509
  213,918
  237,513
  262,278
  288,200
  315,275
  343,508
  372,911
  403,502
  435,310
Earnings before tax, $m
  -663
  1,105
  2,241
  3,365
  4,850
  6,754
  9,131
  12,031
  15,490
  19,539
  24,194
  29,474
  35,363
  41,862
  48,959
  56,639
  64,883
  73,675
  82,996
  92,832
  103,170
  114,000
  125,317
  137,118
  149,406
  162,185
  175,465
  189,260
  203,585
  218,460
  233,909
Tax expense, $m
  2
  298
  605
  909
  1,309
  1,823
  2,465
  3,248
  4,182
  5,275
  6,533
  7,958
  9,548
  11,303
  13,219
  15,292
  17,518
  19,892
  22,409
  25,065
  27,856
  30,780
  33,836
  37,022
  40,340
  43,790
  47,376
  51,100
  54,968
  58,984
  63,156
Net income, $m
  -610
  806
  1,636
  2,457
  3,540
  4,930
  6,666
  8,782
  11,308
  14,263
  17,662
  21,516
  25,815
  30,559
  35,740
  41,346
  47,365
  53,783
  60,587
  67,767
  75,314
  83,220
  91,481
  100,096
  109,066
  118,395
  128,090
  138,159
  148,617
  159,476
  170,754

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
  42,472
  65,619
  98,134
  142,387
  200,887
  276,174
  370,706
  486,761
  626,343
  791,122
  982,394
  1,201,071
  1,447,694
  1,722,470
  2,025,319
  2,355,932
  2,713,836
  3,098,453
  3,509,160
  3,945,337
  4,406,417
  4,891,918
  5,401,472
  5,934,847
  6,491,960
  7,072,889
  7,677,876
  8,307,326
  8,961,811
  9,642,064
Adjusted assets (=assets-cash), $m
  22,827
  42,472
  65,619
  98,134
  142,387
  200,887
  276,174
  370,706
  486,761
  626,343
  791,122
  982,394
  1,201,071
  1,447,694
  1,722,470
  2,025,319
  2,355,932
  2,713,836
  3,098,453
  3,509,160
  3,945,337
  4,406,417
  4,891,918
  5,401,472
  5,934,847
  6,491,960
  7,072,889
  7,677,876
  8,307,326
  8,961,811
  9,642,064
Revenue / Adjusted assets
  0.056
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
Average production assets, $m
  18,415
  35,811
  55,327
  82,742
  120,054
  169,379
  232,858
  312,563
  410,415
  528,105
  667,039
  828,311
  1,012,690
  1,220,632
  1,452,311
  1,707,660
  1,986,418
  2,288,187
  2,612,479
  2,958,769
  3,326,535
  3,715,297
  4,124,650
  4,554,284
  5,004,002
  5,473,735
  5,963,549
  6,473,647
  7,004,372
  7,556,205
  8,129,764
Working capital, $m
  1,161
  350
  540
  808
  1,172
  1,653
  2,273
  3,051
  4,006
  5,154
  6,510
  8,084
  9,884
  11,913
  14,174
  16,666
  19,387
  22,332
  25,497
  28,877
  32,466
  36,260
  40,256
  44,449
  48,838
  53,422
  58,203
  63,181
  68,361
  73,747
  79,345
Total debt, $m
  21,935
  33,891
  54,723
  83,986
  123,814
  176,465
  244,223
  329,302
  433,751
  559,375
  707,676
  879,820
  1,076,630
  1,298,591
  1,545,889
  1,818,453
  2,116,005
  2,438,119
  2,784,274
  3,153,910
  3,546,469
  3,961,442
  4,398,393
  4,856,991
  5,337,028
  5,838,430
  6,361,266
  6,905,754
  7,472,259
  8,061,296
  8,673,524
Total liabilities, $m
  25,099
  38,225
  59,057
  88,320
  128,148
  180,799
  248,557
  333,636
  438,085
  563,709
  712,010
  884,154
  1,080,964
  1,302,925
  1,550,223
  1,822,787
  2,120,339
  2,442,453
  2,788,608
  3,158,244
  3,550,803
  3,965,776
  4,402,727
  4,861,325
  5,341,362
  5,842,764
  6,365,600
  6,910,088
  7,476,593
  8,065,630
  8,677,858
Total equity, $m
  -1,396
  4,247
  6,562
  9,813
  14,239
  20,089
  27,617
  37,071
  48,676
  62,634
  79,112
  98,239
  120,107
  144,769
  172,247
  202,532
  235,593
  271,384
  309,845
  350,916
  394,534
  440,642
  489,192
  540,147
  593,485
  649,196
  707,289
  767,788
  830,733
  896,181
  964,206
Total liabilities and equity, $m
  23,703
  42,472
  65,619
  98,133
  142,387
  200,888
  276,174
  370,707
  486,761
  626,343
  791,122
  982,393
  1,201,071
  1,447,694
  1,722,470
  2,025,319
  2,355,932
  2,713,837
  3,098,453
  3,509,160
  3,945,337
  4,406,418
  4,891,919
  5,401,472
  5,934,847
  6,491,960
  7,072,889
  7,677,876
  8,307,326
  8,961,811
  9,642,064
Debt-to-equity ratio
  -15.713
  7.980
  8.340
  8.560
  8.700
  8.780
  8.840
  8.880
  8.910
  8.930
  8.950
  8.960
  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
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
  806
  1,636
  2,457
  3,540
  4,930
  6,666
  8,782
  11,308
  14,263
  17,662
  21,516
  25,815
  30,559
  35,740
  41,346
  47,365
  53,783
  60,587
  67,767
  75,314
  83,220
  91,481
  100,096
  109,066
  118,395
  128,090
  138,159
  148,617
  159,476
  170,754
Depreciation, amort., depletion, $m
  174
  3,589
  5,540
  8,282
  12,013
  16,946
  23,293
  31,264
  41,049
  52,818
  66,712
  82,831
  101,269
  122,063
  145,231
  170,766
  198,642
  228,819
  261,248
  295,877
  332,653
  371,530
  412,465
  455,428
  500,400
  547,374
  596,355
  647,365
  700,437
  755,621
  812,976
Funds from operations, $m
  -635
  4,395
  7,176
  10,739
  15,553
  21,876
  29,959
  40,047
  52,357
  67,081
  84,374
  104,347
  127,084
  152,623
  180,971
  212,112
  246,007
  282,601
  321,835
  363,644
  407,967
  454,750
  503,946
  555,525
  609,466
  665,769
  724,445
  785,524
  849,054
  915,096
  983,730
Change in working capital, $m
  -231
  131
  190
  268
  364
  481
  620
  778
  955
  1,149
  1,356
  1,574
  1,799
  2,029
  2,261
  2,492
  2,721
  2,945
  3,165
  3,380
  3,589
  3,794
  3,995
  4,193
  4,389
  4,584
  4,780
  4,978
  5,180
  5,386
  5,598
Cash from operations, $m
  -404
  4,264
  6,986
  10,471
  15,189
  21,394
  29,340
  39,269
  51,402
  65,933
  83,018
  102,773
  125,285
  150,593
  178,710
  209,620
  243,286
  279,656
  318,670
  360,265
  404,378
  450,956
  499,951
  551,332
  605,077
  661,184
  719,664
  780,546
  843,874
  909,711
  978,132
Maintenance CAPEX, $m
  0
  -2,238
  -3,581
  -5,533
  -8,274
  -12,005
  -16,938
  -23,286
  -31,256
  -41,042
  -52,810
  -66,704
  -82,831
  -101,269
  -122,063
  -145,231
  -170,766
  -198,642
  -228,819
  -261,248
  -295,877
  -332,653
  -371,530
  -412,465
  -455,428
  -500,400
  -547,374
  -596,355
  -647,365
  -700,437
  -755,621
New CAPEX, $m
  -4,356
  -13,427
  -19,517
  -27,415
  -37,312
  -49,325
  -63,478
  -79,705
  -97,852
  -117,689
  -138,934
  -161,272
  -184,379
  -207,942
  -231,679
  -255,349
  -278,759
  -301,769
  -324,292
  -346,290
  -367,766
  -388,763
  -409,353
  -429,633
  -449,718
  -469,733
  -489,814
  -510,098
  -530,725
  -551,833
  -573,559
Cash from investing activities, $m
  -4,413
  -15,665
  -23,098
  -32,948
  -45,586
  -61,330
  -80,416
  -102,991
  -129,108
  -158,731
  -191,744
  -227,976
  -267,210
  -309,211
  -353,742
  -400,580
  -449,525
  -500,411
  -553,111
  -607,538
  -663,643
  -721,416
  -780,883
  -842,098
  -905,146
  -970,133
  -1,037,188
  -1,106,453
  -1,178,090
  -1,252,270
  -1,329,180
Free cash flow, $m
  -4,817
  -11,401
  -16,112
  -22,476
  -30,397
  -39,936
  -51,076
  -63,723
  -77,706
  -92,798
  -108,727
  -125,203
  -141,925
  -158,618
  -175,032
  -190,960
  -206,239
  -220,755
  -234,441
  -247,273
  -259,264
  -270,461
  -280,932
  -290,767
  -300,069
  -308,950
  -317,523
  -325,907
  -334,215
  -342,560
  -351,047
Issuance/(repayment) of debt, $m
  5,194
  8,555
  20,833
  29,263
  39,828
  52,650
  67,758
  85,079
  104,449
  125,624
  148,301
  172,145
  196,809
  221,961
  247,299
  272,564
  297,552
  322,114
  346,155
  369,636
  392,560
  414,972
  436,951
  458,599
  480,037
  501,402
  522,836
  544,488
  566,505
  589,037
  612,227
Issuance/(repurchase) of shares, $m
  0
  6,613
  679
  795
  885
  920
  863
  671
  298
  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  
  4,908
  15,168
  21,512
  30,058
  40,713
  53,570
  68,621
  85,750
  104,747
  125,624
  148,301
  172,145
  196,809
  221,961
  247,299
  272,564
  297,552
  322,114
  346,155
  369,636
  392,560
  414,972
  436,951
  458,599
  480,037
  501,402
  522,836
  544,488
  566,505
  589,037
  612,227
Total cash flow (excl. dividends), $m
  90
  3,766
  5,399
  7,581
  10,316
  13,634
  17,544
  22,027
  27,040
  32,826
  39,574
  46,942
  54,884
  63,343
  72,266
  81,604
  91,313
  101,359
  111,715
  122,363
  133,295
  144,512
  156,019
  167,832
  179,968
  192,452
  205,313
  218,581
  232,290
  246,477
  261,180
Retained Cash Flow (-), $m
  494
  -7,419
  -2,315
  -3,251
  -4,425
  -5,850
  -7,529
  -9,453
  -11,605
  -13,958
  -16,478
  -19,127
  -21,868
  -24,662
  -27,478
  -30,285
  -33,061
  -35,790
  -38,462
  -41,071
  -43,618
  -46,108
  -48,550
  -50,955
  -53,337
  -55,711
  -58,093
  -60,499
  -62,945
  -65,449
  -68,025
Prev. year cash balance distribution, $m
 
  1,408
  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
 
  90
  143
  222
  331
  481
  678
  932
  1,252
  1,643
  2,115
  2,671
  3,317
  4,055
  4,887
  5,815
  6,837
  7,954
  9,162
  10,460
  11,847
  13,319
  14,876
  16,515
  18,235
  20,036
  21,917
  23,878
  25,921
  28,046
  30,255
Cash available for distribution, $m
 
  -2,245
  3,085
  4,330
  5,890
  7,784
  10,016
  12,574
  15,435
  18,867
  23,096
  27,815
  33,016
  38,681
  44,789
  51,319
  58,252
  65,569
  73,253
  81,292
  89,678
  98,404
  107,469
  116,876
  126,631
  136,741
  147,220
  158,082
  169,345
  181,028
  193,155
Discount rate, %
 
  14.50
  15.23
  15.99
  16.79
  17.62
  18.51
  19.43
  20.40
  21.42
  22.49
  23.62
  24.80
  26.04
  27.34
  28.71
  30.14
  31.65
  33.23
  34.90
  36.64
  38.47
  40.40
  42.42
  44.54
  46.76
  49.10
  51.56
  54.14
  56.84
  59.68
PV of cash for distribution, $m
 
  -1,961
  2,323
  2,775
  3,167
  3,457
  3,616
  3,628
  3,495
  3,289
  3,037
  2,700
  2,313
  1,909
  1,519
  1,165
  860
  612
  419
  275
  174
  106
  62
  34
  18
  9
  5
  2
  1
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  43.1
  38.5
  35.3
  33.1
  31.8
  31.0
  30.8
  30.8
  30.8
  30.8
  30.8
  30.8
  30.8
  30.8
  30.8
  30.8
  30.8
  30.8
  30.8
  30.8
  30.8
  30.8
  30.8
  30.8
  30.8
  30.8
  30.8
  30.8
  30.8

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 -24.4
Price to Sales 11.6
Price to Book -10.7
Price to Tangible Book
Price to Cash Flow -36.8
Price to Free Cash Flow -3.1
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 4
Current Ratio 0.9
LT Debt to Equity -1553.6%
Total Debt to Equity -1571.3%
Interest Coverage -9
Management Effectiveness
Return On Assets -2.6%
Ret/ On Assets - 3 Yr. Avg. -4.3%
Return On Total Capital -3.5%
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 $5601 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 14.5%, 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 67.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $461 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 5.4% 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 1.6%.

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 399.6%.

Life of production assets of 10 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 3.9%. 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 - $-1764 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 233 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 $14.6 billion.

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COMPANY NEWS

▶ [$$] CME Group, Cheniere Energy Team Up to Launch LNG Futures Contract   [Jul-11-18 07:49PM  The Wall Street Journal]
▶ Taiwan Doubles Down On U.S. LNG   [Jul-03-18 01:00PM  Oilprice.com]
▶ /C O R R E C T I O N -- WeissLaw LLP/   [12:23PM  PR Newswire]
▶ 3 Potential Takeover Targets   [Jun-15-18 06:20AM  InvestorPlace]
▶ Baker Hughes GE wins contract for Chenieres Corpus Christi LNG facility   [Jun-14-18 02:11PM  American City Business Journals]
▶ Cheniere Energy (LNG) Jumps: Stock Rises 5.7%   [May-31-18 08:53AM  Zacks]
▶ Two Houston companies join Fortune 500 this year   [May-21-18 03:47PM  American City Business Journals]
▶ Apple Leads Five Hot Stocks Now In Buy Range   [May-07-18 04:03PM  Investor's Business Daily]
▶ Cheniere Energy: 1Q Earnings Snapshot   [May-04-18 08:17AM  Associated Press]
▶ Is Cheniere Energy, Inc. a Buy?   [Apr-20-18 08:36AM  Motley Fool]
▶ A Natural Gas Giant Like No Other   [Apr-17-18 07:00PM  Oilprice.com]
▶ Kinder Morgan Inc Is Slowly Recovering From the Oil Bust   [Apr-09-18 01:45PM  InvestorPlace]
▶ The Battle For Chinas Growing Gas Demand   [Mar-22-18 07:00PM  Oilprice.com]
▶ Huge Chinese Demand Fuels The Next U.S. Gas Boom   [Mar-11-18 05:00PM  Oilprice.com]
▶ Oil & Gas Industry Outlook - March 2018   [Mar-09-18 05:34PM  Zacks]
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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