Intrinsic value of Empire State Realty OP Un Series 60 - OGCP

Previous Close

$17.80

  Intrinsic Value

$44.43

stock screener

  Rating & Target

str. buy

+150%

Previous close

$17.80

 
Intrinsic value

$44.43

 
Up/down potential

+150%

 
Rating

str. buy

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

We calculate the intrinsic value of OGCP 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, %
  3.04
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
  5.09
  5.08
  5.08
  5.07
  5.06
Revenue, $m
  678
  721
  765
  811
  860
  910
  963
  1,017
  1,075
  1,134
  1,197
  1,262
  1,330
  1,402
  1,476
  1,555
  1,636
  1,722
  1,812
  1,906
  2,005
  2,108
  2,217
  2,330
  2,450
  2,575
  2,706
  2,843
  2,988
  3,139
  3,298
Variable operating expenses, $m
 
  550
  581
  614
  647
  682
  719
  757
  797
  838
  882
  878
  925
  975
  1,027
  1,081
  1,138
  1,198
  1,260
  1,326
  1,395
  1,466
  1,542
  1,621
  1,704
  1,791
  1,882
  1,978
  2,078
  2,183
  2,294
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
  493
  550
  581
  614
  647
  682
  719
  757
  797
  838
  882
  878
  925
  975
  1,027
  1,081
  1,138
  1,198
  1,260
  1,326
  1,395
  1,466
  1,542
  1,621
  1,704
  1,791
  1,882
  1,978
  2,078
  2,183
  2,294
Operating income, $m
  185
  170
  184
  198
  213
  228
  244
  261
  278
  296
  315
  384
  405
  427
  449
  473
  498
  524
  552
  580
  610
  642
  675
  709
  746
  784
  824
  866
  909
  956
  1,004
EBITDA, $m
  340
  354
  376
  399
  423
  448
  473
  500
  528
  558
  589
  621
  654
  689
  726
  765
  805
  847
  891
  937
  986
  1,037
  1,090
  1,146
  1,205
  1,266
  1,331
  1,398
  1,469
  1,544
  1,622
Interest expense (income), $m
  69
  69
  75
  84
  92
  102
  111
  121
  132
  143
  154
  166
  178
  191
  205
  219
  234
  250
  266
  283
  301
  320
  340
  360
  382
  405
  428
  453
  480
  507
  536
Earnings before tax, $m
  113
  101
  109
  114
  120
  126
  133
  139
  146
  154
  161
  218
  227
  235
  245
  254
  264
  275
  286
  297
  309
  322
  335
  349
  364
  379
  395
  412
  430
  448
  468
Tax expense, $m
  6
  27
  29
  31
  32
  34
  36
  38
  40
  41
  44
  59
  61
  64
  66
  69
  71
  74
  77
  80
  84
  87
  91
  94
  98
  102
  107
  111
  116
  121
  126
Net income, $m
  107
  74
  79
  84
  88
  92
  97
  102
  107
  112
  118
  159
  165
  172
  179
  186
  193
  200
  209
  217
  226
  235
  245
  255
  266
  277
  288
  301
  314
  327
  342

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  554
  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
  3,891
  3,550
  3,769
  3,998
  4,235
  4,483
  4,742
  5,012
  5,293
  5,588
  5,895
  6,217
  6,553
  6,905
  7,273
  7,658
  8,061
  8,484
  8,926
  9,390
  9,876
  10,385
  10,919
  11,479
  12,067
  12,682
  13,328
  14,006
  14,717
  15,463
  16,245
Adjusted assets (=assets-cash), $m
  3,337
  3,550
  3,769
  3,998
  4,235
  4,483
  4,742
  5,012
  5,293
  5,588
  5,895
  6,217
  6,553
  6,905
  7,273
  7,658
  8,061
  8,484
  8,926
  9,390
  9,876
  10,385
  10,919
  11,479
  12,067
  12,682
  13,328
  14,006
  14,717
  15,463
  16,245
Revenue / Adjusted assets
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
Average production assets, $m
  2,236
  2,377
  2,524
  2,676
  2,836
  3,001
  3,175
  3,355
  3,544
  3,741
  3,947
  4,162
  4,387
  4,623
  4,869
  5,127
  5,397
  5,680
  5,976
  6,287
  6,612
  6,953
  7,311
  7,685
  8,079
  8,491
  8,923
  9,377
  9,853
  10,352
  10,876
Working capital, $m
  0
  -589
  -625
  -663
  -702
  -744
  -786
  -831
  -878
  -927
  -978
  -1,031
  -1,087
  -1,145
  -1,206
  -1,270
  -1,337
  -1,407
  -1,480
  -1,557
  -1,638
  -1,722
  -1,811
  -1,904
  -2,001
  -2,103
  -2,211
  -2,323
  -2,441
  -2,565
  -2,694
Total debt, $m
  1,612
  1,745
  1,942
  2,148
  2,362
  2,585
  2,818
  3,060
  3,314
  3,579
  3,856
  4,145
  4,448
  4,764
  5,095
  5,442
  5,805
  6,185
  6,584
  7,001
  7,438
  7,897
  8,377
  8,881
  9,410
  9,964
  10,546
  11,155
  11,795
  12,466
  13,171
Total liabilities, $m
  3,062
  3,195
  3,392
  3,598
  3,812
  4,035
  4,268
  4,510
  4,764
  5,029
  5,306
  5,595
  5,898
  6,214
  6,545
  6,892
  7,255
  7,635
  8,034
  8,451
  8,888
  9,347
  9,827
  10,331
  10,860
  11,414
  11,996
  12,605
  13,245
  13,916
  14,621
Total equity, $m
  829
  355
  377
  400
  424
  448
  474
  501
  529
  559
  590
  622
  655
  690
  727
  766
  806
  848
  893
  939
  988
  1,039
  1,092
  1,148
  1,207
  1,268
  1,333
  1,401
  1,472
  1,546
  1,625
Total liabilities and equity, $m
  3,891
  3,550
  3,769
  3,998
  4,236
  4,483
  4,742
  5,011
  5,293
  5,588
  5,896
  6,217
  6,553
  6,904
  7,272
  7,658
  8,061
  8,483
  8,927
  9,390
  9,876
  10,386
  10,919
  11,479
  12,067
  12,682
  13,329
  14,006
  14,717
  15,462
  16,246
Debt-to-equity ratio
  1.945
  4.920
  5.150
  5.370
  5.580
  5.770
  5.940
  6.110
  6.260
  6.400
  6.540
  6.670
  6.790
  6.900
  7.010
  7.110
  7.200
  7.290
  7.380
  7.460
  7.530
  7.600
  7.670
  7.740
  7.800
  7.860
  7.910
  7.960
  8.010
  8.060
  8.110
Adjusted equity ratio
  0.082
  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
  107
  74
  79
  84
  88
  92
  97
  102
  107
  112
  118
  159
  165
  172
  179
  186
  193
  200
  209
  217
  226
  235
  245
  255
  266
  277
  288
  301
  314
  327
  342
Depreciation, amort., depletion, $m
  155
  184
  192
  201
  210
  220
  229
  240
  250
  262
  273
  236
  249
  263
  277
  291
  307
  323
  340
  357
  376
  395
  415
  437
  459
  482
  507
  533
  560
  588
  618
Funds from operations, $m
  196
  258
  272
  285
  298
  312
  326
  342
  357
  374
  391
  396
  415
  435
  455
  477
  499
  523
  548
  574
  601
  630
  660
  692
  725
  759
  795
  834
  874
  915
  959
Change in working capital, $m
  -23
  -35
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -56
  -58
  -61
  -64
  -67
  -70
  -73
  -77
  -81
  -84
  -89
  -93
  -97
  -102
  -107
  -112
  -118
  -124
  -130
Cash from operations, $m
  219
  293
  308
  323
  337
  353
  369
  386
  404
  423
  442
  449
  471
  493
  516
  541
  566
  593
  621
  651
  682
  715
  749
  784
  822
  861
  903
  946
  991
  1,039
  1,089
Maintenance CAPEX, $m
  0
  -127
  -135
  -143
  -152
  -161
  -171
  -180
  -191
  -201
  -213
  -224
  -236
  -249
  -263
  -277
  -291
  -307
  -323
  -340
  -357
  -376
  -395
  -415
  -437
  -459
  -482
  -507
  -533
  -560
  -588
New CAPEX, $m
  -182
  -141
  -147
  -153
  -159
  -166
  -173
  -181
  -189
  -197
  -206
  -215
  -225
  -235
  -246
  -258
  -270
  -283
  -296
  -310
  -325
  -341
  -358
  -375
  -393
  -412
  -432
  -454
  -476
  -499
  -524
Cash from investing activities, $m
  -182
  -268
  -282
  -296
  -311
  -327
  -344
  -361
  -380
  -398
  -419
  -439
  -461
  -484
  -509
  -535
  -561
  -590
  -619
  -650
  -682
  -717
  -753
  -790
  -830
  -871
  -914
  -961
  -1,009
  -1,059
  -1,112
Free cash flow, $m
  37
  25
  27
  26
  26
  26
  26
  25
  25
  24
  24
  10
  9
  8
  7
  6
  5
  4
  2
  1
  -1
  -2
  -4
  -6
  -8
  -10
  -12
  -15
  -17
  -20
  -23
Issuance/(repayment) of debt, $m
  -22
  133
  197
  205
  214
  223
  233
  243
  254
  265
  277
  289
  303
  317
  331
  347
  363
  380
  398
  417
  437
  458
  481
  504
  528
  554
  581
  610
  640
  671
  704
Issuance/(repurchase) of shares, $m
  611
  6
  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  
  585
  139
  197
  205
  214
  223
  233
  243
  254
  265
  277
  289
  303
  317
  331
  347
  363
  380
  398
  417
  437
  458
  481
  504
  528
  554
  581
  610
  640
  671
  704
Total cash flow (excl. dividends), $m
  622
  164
  224
  232
  240
  249
  258
  268
  278
  289
  300
  299
  312
  325
  338
  353
  368
  384
  401
  418
  437
  456
  477
  498
  521
  544
  569
  595
  623
  651
  681
Retained Cash Flow (-), $m
  19
  -80
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -40
  -42
  -44
  -46
  -49
  -51
  -53
  -56
  -59
  -62
  -65
  -68
  -71
  -75
  -78
Prev. year cash balance distribution, $m
 
  554
  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
 
  638
  202
  209
  216
  224
  232
  241
  250
  260
  270
  267
  278
  289
  302
  314
  328
  342
  357
  372
  388
  405
  423
  442
  462
  483
  504
  527
  551
  577
  603
Discount rate, %
 
  7.20
  7.56
  7.94
  8.33
  8.75
  9.19
  9.65
  10.13
  10.64
  11.17
  11.73
  12.31
  12.93
  13.58
  14.26
  14.97
  15.72
  16.50
  17.33
  18.19
  19.10
  20.06
  21.06
  22.11
  23.22
  24.38
  25.60
  26.88
  28.22
  29.64
PV of cash for distribution, $m
 
  595
  174
  166
  157
  147
  137
  127
  116
  105
  94
  79
  69
  60
  51
  43
  35
  29
  23
  18
  14
  10
  8
  5
  4
  3
  2
  1
  1
  0
  0
Current shareholders' claim on cash, %
  100
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9

Empire State Realty OP, L.P. is a self-administered and self-managed real estate investment trust. The Company owns, manages, operates, acquires and repositions office and retail properties in Manhattan and the greater New York metropolitan area, including the Empire State Building. Its segments include real estate segment and an observatory segment. The real estate segment includes all activities related to the ownership, management, operation, acquisition, repositioning and disposition of its real estate assets. The observatory segment operates the 86th and 102nd floor observatories at the Empire State Building. As of December 31, 2016, the Company's total portfolio included 10.1 million rentable square feet of office and retail space. As of December 31, 2016, the Company owned 14 office properties (including three long-term ground leasehold interests) encompassing approximately 9.4 million rentable square feet of office space.

FINANCIAL RATIOS  of  Empire State Realty OP Un Series 60 (OGCP)

Valuation Ratios
P/E Ratio 23.8
Price to Sales 3.8
Price to Book 3.1
Price to Tangible Book
Price to Cash Flow 11.6
Price to Free Cash Flow 68.9
Growth Rates
Sales Growth Rate 3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 28.2%
Cap. Spend. - 3 Yr. Gr. Rate 10%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 194.5%
Total Debt to Equity 194.5%
Interest Coverage 3
Management Effectiveness
Return On Assets 4.8%
Ret/ On Assets - 3 Yr. Avg. 4.5%
Return On Total Capital 4.3%
Ret/ On T. Cap. - 3 Yr. Avg. 3.6%
Return On Equity 12.8%
Return On Equity - 3 Yr. Avg. 10.3%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 57.4%
Gross Margin - 3 Yr. Avg. 54.7%
EBITDA Margin 49.7%
EBITDA Margin - 3 Yr. Avg. 47.5%
Operating Margin 27.3%
Oper. Margin - 3 Yr. Avg. 24.2%
Pre-Tax Margin 16.7%
Pre-Tax Margin - 3 Yr. Avg. 13.7%
Net Profit Margin 15.8%
Net Profit Margin - 3 Yr. Avg. 13%
Effective Tax Rate 5.3%
Eff/ Tax Rate - 3 Yr. Avg. 5.6%
Payout Ratio 106.5%

OGCP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the OGCP stock intrinsic value calculation we used $678 million for the last fiscal year's total revenue generated by Empire State Realty OP Un Series 60. The default revenue input number comes from 2016 income statement of Empire State Realty OP Un Series 60. 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 OGCP stock valuation model: a) initial revenue growth rate of 6.3% 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 7.2%, whose default value for OGCP is calculated based on our internal credit rating of Empire State Realty OP Un Series 60, 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 Empire State Realty OP Un Series 60.
    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 OGCP stock the variable cost ratio is equal to 76.8%.

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 OGCP 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 4.3% for Empire State Realty OP Un Series 60.

Corporate tax rate of 27% is the nominal tax rate for Empire State Realty OP Un Series 60. 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 OGCP 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 OGCP are equal to 329.8%.

Life of production assets of 17.6 years is the average useful life of capital assets used in Empire State Realty OP Un Series 60 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 OGCP is equal to -81.7%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $829 million for Empire State Realty OP Un Series 60 - 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 50.049 million for Empire State Realty OP Un Series 60 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 Empire State Realty OP Un Series 60 at the current share price and the inputted number of shares is $0.9 billion.

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Financial statements of OGCP
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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