Intrinsic value of New England Realty Associates Un - NEN

Previous Close

$69.80

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

  Value-price divergence*

-115%

Previous close

$69.80

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

 
Value-price divergence*

-115%

Our model is not good at valuating stocks of financial companies, such as NEN.

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

We calculate the intrinsic value of NEN stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  11.11
  8.30
  7.97
  7.67
  7.41
  7.17
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
  6.04
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.50
  5.45
  5.40
  5.36
  5.32
  5.29
  5.26
  5.24
  5.21
  5.19
  5.17
  5.16
Revenue, $m
  50
  54
  58
  63
  68
  72
  77
  83
  88
  94
  100
  106
  112
  119
  126
  133
  141
  149
  157
  165
  174
  184
  194
  204
  215
  226
  238
  250
  263
  277
  291
Variable operating expenses, $m
 
  32
  35
  38
  41
  43
  46
  50
  53
  56
  60
  64
  67
  71
  76
  80
  84
  89
  94
  99
  105
  110
  116
  122
  129
  136
  143
  150
  158
  166
  175
Fixed operating expenses, $m
 
  6
  6
  6
  7
  7
  7
  7
  7
  7
  8
  8
  8
  8
  8
  9
  9
  9
  9
  10
  10
  10
  10
  11
  11
  11
  11
  12
  12
  12
  13
Total operating expenses, $m
  36
  38
  41
  44
  48
  50
  53
  57
  60
  63
  68
  72
  75
  79
  84
  89
  93
  98
  103
  109
  115
  120
  126
  133
  140
  147
  154
  162
  170
  178
  188
Operating income, $m
  13
  16
  17
  19
  20
  22
  24
  26
  28
  30
  32
  34
  37
  39
  42
  45
  47
  50
  53
  57
  60
  63
  67
  71
  75
  79
  84
  88
  93
  99
  104
EBITDA, $m
  25
  29
  31
  34
  37
  40
  43
  46
  49
  53
  56
  60
  64
  68
  72
  77
  81
  86
  91
  96
  102
  108
  114
  120
  127
  134
  141
  149
  157
  165
  174
Interest expense (income), $m
  10
  10
  8
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  34
  36
  38
  40
  42
Earnings before tax, $m
  5
  6
  9
  10
  11
  12
  14
  15
  16
  17
  18
  20
  21
  23
  24
  26
  28
  29
  31
  33
  35
  37
  40
  42
  45
  47
  50
  53
  56
  59
  62
Tax expense, $m
  0
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
Net income, $m
  5
  4
  7
  8
  8
  9
  10
  11
  12
  13
  13
  14
  16
  17
  18
  19
  20
  21
  23
  24
  26
  27
  29
  31
  33
  34
  36
  39
  41
  43
  45

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  7
  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
  191
  199
  215
  231
  249
  266
  285
  304
  324
  345
  367
  389
  413
  437
  463
  489
  517
  546
  576
  608
  641
  676
  712
  750
  790
  831
  875
  920
  968
  1,018
  1,071
Adjusted assets (=assets-cash), $m
  184
  199
  215
  231
  249
  266
  285
  304
  324
  345
  367
  389
  413
  437
  463
  489
  517
  546
  576
  608
  641
  676
  712
  750
  790
  831
  875
  920
  968
  1,018
  1,071
Revenue / Adjusted assets
  0.272
  0.271
  0.270
  0.273
  0.273
  0.271
  0.270
  0.273
  0.272
  0.272
  0.272
  0.272
  0.271
  0.272
  0.272
  0.272
  0.273
  0.273
  0.273
  0.271
  0.271
  0.272
  0.272
  0.272
  0.272
  0.272
  0.272
  0.272
  0.272
  0.272
  0.272
Average production assets, $m
  173
  187
  202
  218
  234
  251
  268
  286
  305
  325
  345
  366
  388
  411
  435
  460
  487
  514
  542
  572
  603
  636
  670
  706
  743
  782
  823
  866
  911
  958
  1,008
Working capital, $m
  0
  -8
  -8
  -9
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -41
Total debt, $m
  213
  167
  181
  196
  212
  228
  244
  262
  280
  298
  318
  338
  359
  381
  404
  428
  453
  479
  507
  535
  565
  596
  629
  663
  699
  736
  775
  816
  859
  904
  952
Total liabilities, $m
  225
  179
  193
  208
  224
  240
  256
  274
  292
  310
  330
  350
  371
  393
  416
  440
  465
  491
  519
  547
  577
  608
  641
  675
  711
  748
  787
  828
  871
  916
  964
Total equity, $m
  -34
  20
  21
  23
  25
  27
  28
  30
  32
  34
  37
  39
  41
  44
  46
  49
  52
  55
  58
  61
  64
  68
  71
  75
  79
  83
  87
  92
  97
  102
  107
Total liabilities and equity, $m
  191
  199
  214
  231
  249
  267
  284
  304
  324
  344
  367
  389
  412
  437
  462
  489
  517
  546
  577
  608
  641
  676
  712
  750
  790
  831
  874
  920
  968
  1,018
  1,071
Debt-to-equity ratio
  -6.265
  8.400
  8.440
  8.480
  8.520
  8.550
  8.580
  8.610
  8.630
  8.650
  8.670
  8.690
  8.710
  8.730
  8.740
  8.750
  8.770
  8.780
  8.790
  8.800
  8.810
  8.820
  8.830
  8.840
  8.850
  8.860
  8.860
  8.870
  8.880
  8.880
  8.890
Adjusted equity ratio
  -0.223
  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
  5
  4
  7
  8
  8
  9
  10
  11
  12
  13
  13
  14
  16
  17
  18
  19
  20
  21
  23
  24
  26
  27
  29
  31
  33
  34
  36
  39
  41
  43
  45
Depreciation, amort., depletion, $m
  12
  13
  14
  15
  16
  17
  19
  20
  21
  23
  24
  25
  27
  29
  30
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
  54
  57
  60
  63
  67
  70
Funds from operations, $m
  15
  17
  21
  23
  25
  27
  29
  31
  33
  35
  37
  40
  42
  45
  48
  51
  54
  57
  61
  64
  68
  72
  76
  80
  84
  89
  94
  99
  104
  110
  115
Change in working capital, $m
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
Cash from operations, $m
  15
  18
  22
  23
  25
  27
  29
  31
  34
  36
  38
  41
  43
  46
  49
  52
  55
  58
  62
  65
  69
  73
  77
  81
  86
  90
  95
  100
  106
  112
  117
Maintenance CAPEX, $m
  0
  -12
  -13
  -14
  -15
  -16
  -17
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -29
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -47
  -49
  -52
  -54
  -57
  -60
  -63
  -67
New CAPEX, $m
  -5
  -14
  -15
  -16
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -49
Cash from investing activities, $m
  -3
  -26
  -28
  -30
  -31
  -33
  -34
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -53
  -55
  -58
  -61
  -65
  -68
  -71
  -75
  -78
  -83
  -86
  -91
  -95
  -100
  -105
  -110
  -116
Free cash flow, $m
  12
  -9
  -6
  -6
  -6
  -6
  -6
  -5
  -5
  -5
  -5
  -4
  -4
  -4
  -4
  -3
  -3
  -3
  -3
  -2
  -2
  -2
  -1
  -1
  -1
  0
  0
  0
  1
  1
  2
Issuance/(repayment) of debt, $m
  -7
  -46
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
Issuance/(repurchase) of shares, $m
  -2
  57
  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  
  -8
  11
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
Total cash flow (excl. dividends), $m
  4
  2
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28
  30
  31
  33
  35
  37
  39
  41
  44
  46
  49
Retained Cash Flow (-), $m
  3
  -61
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
Prev. year cash balance distribution, $m
 
  7
  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
 
  -52
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  25
  26
  28
  29
  31
  33
  35
  37
  39
  41
  44
Discount rate, %
 
  15.00
  15.75
  16.54
  17.36
  18.23
  19.14
  20.10
  21.11
  22.16
  23.27
  24.43
  25.66
  26.94
  28.28
  29.70
  31.18
  32.74
  34.38
  36.10
  37.90
  39.80
  41.79
  43.88
  46.07
  48.38
  50.80
  53.34
  56.00
  58.80
  61.74
PV of cash for distribution, $m
 
  -45
  5
  4
  4
  4
  3
  3
  2
  2
  2
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  50.0
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New England Realty Associates Limited Partnership is engaged in the business of acquiring, developing, holding for investment, operating and selling real estate. The Company, directly or through approximately 30 subsidiary limited partnerships or limited liability companies, owns and operates various residential apartment buildings, condominium units and commercial properties located in Massachusetts and New Hampshire. The Company and its subsidiary limited partnerships and limited liabilities companies (Subsidiary Partnerships) owned approximately 2,510 residential apartment units in approximately 20 residential and mixed-use complexes (collectively, the Apartment Complexes). The Company also owns approximately 20 condominium units in a residential condominium complex, all of which are leased to residential tenants. The Apartment Complexes, the condominium units and the investment properties are located in the metropolitan Boston area of Massachusetts.

FINANCIAL RATIOS  of  New England Realty Associates Un (NEN)

Valuation Ratios
P/E Ratio 1.7
Price to Sales 0.2
Price to Book -0.2
Price to Tangible Book
Price to Cash Flow 0.6
Price to Free Cash Flow 0.8
Growth Rates
Sales Growth Rate 11.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -61.5%
Cap. Spend. - 3 Yr. Gr. Rate -28.6%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity -626.5%
Total Debt to Equity -626.5%
Interest Coverage 2
Management Effectiveness
Return On Assets 7.7%
Ret/ On Assets - 3 Yr. Avg. 6.9%
Return On Total Capital 2.7%
Ret/ On T. Cap. - 3 Yr. Avg. 1.8%
Return On Equity -15.4%
Return On Equity - 3 Yr. Avg. -11.1%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 60%
Gross Margin - 3 Yr. Avg. 59.4%
EBITDA Margin 54%
EBITDA Margin - 3 Yr. Avg. 52%
Operating Margin 28%
Oper. Margin - 3 Yr. Avg. 26.7%
Pre-Tax Margin 10%
Pre-Tax Margin - 3 Yr. Avg. 7.1%
Net Profit Margin 10%
Net Profit Margin - 3 Yr. Avg. 7.1%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 140%

NEN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NEN stock intrinsic value calculation we used $50 million for the last fiscal year's total revenue generated by New England Realty Associates Un. The default revenue input number comes from 2016 income statement of New England Realty Associates Un. 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 NEN stock valuation model: a) initial revenue growth rate of 8.3% 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 15%, whose default value for NEN is calculated based on our internal credit rating of New England Realty Associates Un, 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 New England Realty Associates Un.
    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 NEN stock the variable cost ratio is equal to 60%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $6 million in the base year in the intrinsic value calculation for NEN 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 4.6% for New England Realty Associates Un.

Corporate tax rate of 27% is the nominal tax rate for New England Realty Associates Un. 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 NEN 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 NEN are equal to 346%.

Life of production assets of 14.4 years is the average useful life of capital assets used in New England Realty Associates Un 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 NEN is equal to -14%. 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 - $-34 million for New England Realty Associates Un - 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 2.985 million for New England Realty Associates Un 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 New England Realty Associates Un at the current share price and the inputted number of shares is $0.2 billion.

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COMPANY NEWS

▶ New England Realty Associates LP Earnings Q2, 2015   [Sep-11  09:22AM  Capital Cube]
▶ New England Realty Associates Declares Distribution   [Sep-01-11 12:21PM  PR Newswire]
▶ UPDATE 1-Freescale Semiconductor backs Q2 outlook   [Jun-21-11 08:24AM  at Reuters]
Financial statements of NEN
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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