Intrinsic value of Plains GP Holdings - PAGP

Previous Close

$20.48

  Intrinsic Value

$62.60

stock screener

  Rating & Target

str. buy

+206%

Previous close

$20.48

 
Intrinsic value

$62.60

 
Up/down potential

+206%

 
Rating

str. buy

We calculate the intrinsic value of PAGP 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 5.9

 

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, %
  -12.83
  22.80
  21.02
  19.42
  17.98
  16.68
  15.51
  14.46
  13.51
  12.66
  11.90
  11.21
  10.59
  10.03
  9.52
  9.07
  8.66
  8.30
  7.97
  7.67
  7.40
  7.16
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
  6.04
  5.93
  5.84
Revenue, $m
  20,182
  24,783
  29,993
  35,817
  42,256
  49,303
  56,950
  65,185
  73,994
  83,364
  93,281
  103,734
  114,715
  126,218
  138,240
  150,781
  163,846
  177,442
  191,582
  206,279
  221,553
  237,426
  253,921
  271,068
  288,898
  307,445
  326,746
  346,841
  367,773
  389,588
  412,333
Variable operating expenses, $m
 
  22,500
  27,180
  32,412
  38,196
  44,528
  51,398
  58,796
  66,710
  75,127
  84,036
  93,193
  103,059
  113,392
  124,193
  135,459
  147,197
  159,412
  172,114
  185,319
  199,040
  213,300
  228,119
  243,524
  259,542
  276,204
  293,544
  311,597
  330,402
  350,000
  370,434
Fixed operating expenses, $m
 
  873
  895
  918
  940
  964
  988
  1,013
  1,038
  1,064
  1,091
  1,118
  1,146
  1,174
  1,204
  1,234
  1,265
  1,296
  1,329
  1,362
  1,396
  1,431
  1,467
  1,503
  1,541
  1,580
  1,619
  1,660
  1,701
  1,744
  1,787
Total operating expenses, $m
  19,192
  23,373
  28,075
  33,330
  39,136
  45,492
  52,386
  59,809
  67,748
  76,191
  85,127
  94,311
  104,205
  114,566
  125,397
  136,693
  148,462
  160,708
  173,443
  186,681
  200,436
  214,731
  229,586
  245,027
  261,083
  277,784
  295,163
  313,257
  332,103
  351,744
  372,221
Operating income, $m
  990
  1,411
  1,918
  2,488
  3,119
  3,812
  4,565
  5,377
  6,246
  7,173
  8,154
  9,423
  10,511
  11,651
  12,843
  14,088
  15,384
  16,734
  18,139
  19,599
  21,117
  22,695
  24,335
  26,041
  27,815
  29,661
  31,583
  33,584
  35,670
  37,844
  40,112
EBITDA, $m
  1,485
  2,235
  2,866
  3,574
  4,359
  5,219
  6,154
  7,162
  8,242
  9,391
  10,608
  11,892
  13,241
  14,655
  16,133
  17,676
  19,284
  20,957
  22,698
  24,508
  26,390
  28,346
  30,379
  32,492
  34,691
  36,978
  39,360
  41,839
  44,423
  47,116
  49,925
Interest expense (income), $m
  462
  446
  620
  853
  1,113
  1,401
  1,716
  2,058
  2,426
  2,820
  3,239
  3,682
  4,150
  4,641
  5,155
  5,693
  6,253
  6,838
  7,445
  8,078
  8,735
  9,418
  10,128
  10,865
  11,632
  12,429
  13,258
  14,121
  15,020
  15,956
  16,931
Earnings before tax, $m
  738
  964
  1,299
  1,635
  2,006
  2,411
  2,849
  3,319
  3,820
  4,353
  4,915
  5,741
  6,361
  7,010
  7,688
  8,395
  9,131
  9,897
  10,693
  11,521
  12,382
  13,277
  14,208
  15,176
  16,183
  17,232
  18,325
  19,463
  20,650
  21,888
  23,181
Tax expense, $m
  78
  260
  351
  441
  542
  651
  769
  896
  1,031
  1,175
  1,327
  1,550
  1,718
  1,893
  2,076
  2,267
  2,465
  2,672
  2,887
  3,111
  3,343
  3,585
  3,836
  4,097
  4,369
  4,653
  4,948
  5,255
  5,576
  5,910
  6,259
Net income, $m
  94
  704
  948
  1,194
  1,464
  1,760
  2,079
  2,423
  2,789
  3,177
  3,588
  4,191
  4,644
  5,118
  5,612
  6,128
  6,666
  7,225
  7,806
  8,410
  9,039
  9,692
  10,372
  11,078
  11,814
  12,579
  13,377
  14,208
  15,075
  15,978
  16,922

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  394
  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
  26,103
  31,571
  38,208
  45,627
  53,829
  62,807
  72,548
  83,039
  94,260
  106,196
  118,829
  132,145
  146,134
  160,787
  176,101
  192,078
  208,721
  226,041
  244,053
  262,776
  282,234
  302,453
  323,467
  345,310
  368,023
  391,650
  416,237
  441,836
  468,501
  496,290
  525,265
Adjusted assets (=assets-cash), $m
  25,709
  31,571
  38,208
  45,627
  53,829
  62,807
  72,548
  83,039
  94,260
  106,196
  118,829
  132,145
  146,134
  160,787
  176,101
  192,078
  208,721
  226,041
  244,053
  262,776
  282,234
  302,453
  323,467
  345,310
  368,023
  391,650
  416,237
  441,836
  468,501
  496,290
  525,265
Revenue / Adjusted assets
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
Average production assets, $m
  14,402
  17,695
  21,415
  25,573
  30,170
  35,202
  40,663
  46,542
  52,832
  59,522
  66,602
  74,066
  81,907
  90,120
  98,703
  107,658
  116,986
  126,694
  136,790
  147,284
  158,189
  169,522
  181,300
  193,543
  206,273
  219,516
  233,297
  247,644
  262,590
  278,166
  294,406
Working capital, $m
  -391
  1,140
  1,380
  1,648
  1,944
  2,268
  2,620
  2,999
  3,404
  3,835
  4,291
  4,772
  5,277
  5,806
  6,359
  6,936
  7,537
  8,162
  8,813
  9,489
  10,191
  10,922
  11,680
  12,469
  13,289
  14,142
  15,030
  15,955
  16,918
  17,921
  18,967
Total debt, $m
  11,839
  15,887
  21,860
  28,537
  35,919
  43,999
  52,767
  62,208
  72,307
  83,049
  94,419
  106,404
  118,994
  132,182
  145,964
  160,343
  175,322
  190,910
  207,121
  223,972
  241,483
  259,681
  278,593
  298,252
  318,694
  339,958
  362,086
  385,125
  409,124
  434,134
  460,212
Total liabilities, $m
  24,366
  28,414
  34,387
  41,064
  48,446
  56,526
  65,294
  74,735
  84,834
  95,576
  106,946
  118,931
  131,521
  144,709
  158,491
  172,870
  187,849
  203,437
  219,648
  236,499
  254,010
  272,208
  291,120
  310,779
  331,221
  352,485
  374,613
  397,652
  421,651
  446,661
  472,739
Total equity, $m
  1,737
  3,157
  3,821
  4,563
  5,383
  6,281
  7,255
  8,304
  9,426
  10,620
  11,883
  13,215
  14,613
  16,079
  17,610
  19,208
  20,872
  22,604
  24,405
  26,278
  28,223
  30,245
  32,347
  34,531
  36,802
  39,165
  41,624
  44,184
  46,850
  49,629
  52,527
Total liabilities and equity, $m
  26,103
  31,571
  38,208
  45,627
  53,829
  62,807
  72,549
  83,039
  94,260
  106,196
  118,829
  132,146
  146,134
  160,788
  176,101
  192,078
  208,721
  226,041
  244,053
  262,777
  282,233
  302,453
  323,467
  345,310
  368,023
  391,650
  416,237
  441,836
  468,501
  496,290
  525,266
Debt-to-equity ratio
  6.816
  5.030
  5.720
  6.250
  6.670
  7.010
  7.270
  7.490
  7.670
  7.820
  7.950
  8.050
  8.140
  8.220
  8.290
  8.350
  8.400
  8.450
  8.490
  8.520
  8.560
  8.590
  8.610
  8.640
  8.660
  8.680
  8.700
  8.720
  8.730
  8.750
  8.760
Adjusted equity ratio
  0.068
  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
  94
  704
  948
  1,194
  1,464
  1,760
  2,079
  2,423
  2,789
  3,177
  3,588
  4,191
  4,644
  5,118
  5,612
  6,128
  6,666
  7,225
  7,806
  8,410
  9,039
  9,692
  10,372
  11,078
  11,814
  12,579
  13,377
  14,208
  15,075
  15,978
  16,922
Depreciation, amort., depletion, $m
  495
  824
  948
  1,087
  1,240
  1,408
  1,590
  1,786
  1,995
  2,218
  2,454
  2,469
  2,730
  3,004
  3,290
  3,589
  3,900
  4,223
  4,560
  4,909
  5,273
  5,651
  6,043
  6,451
  6,876
  7,317
  7,777
  8,255
  8,753
  9,272
  9,814
Funds from operations, $m
  440
  1,528
  1,896
  2,280
  2,704
  3,168
  3,669
  4,208
  4,784
  5,396
  6,042
  6,660
  7,374
  8,122
  8,902
  9,717
  10,565
  11,448
  12,366
  13,320
  14,312
  15,343
  16,415
  17,530
  18,690
  19,897
  21,154
  22,463
  23,828
  25,251
  26,735
Change in working capital, $m
  -271
  212
  240
  268
  296
  324
  352
  379
  405
  431
  456
  481
  505
  529
  553
  577
  601
  625
  650
  676
  703
  730
  759
  789
  820
  853
  888
  924
  963
  1,003
  1,046
Cash from operations, $m
  711
  1,317
  1,657
  2,013
  2,408
  2,843
  3,317
  3,830
  4,379
  4,965
  5,586
  6,179
  6,869
  7,592
  8,349
  9,140
  9,964
  10,822
  11,715
  12,644
  13,609
  14,613
  15,656
  16,741
  17,869
  19,044
  20,266
  21,539
  22,865
  24,247
  25,689
Maintenance CAPEX, $m
  0
  -480
  -590
  -714
  -852
  -1,006
  -1,173
  -1,355
  -1,551
  -1,761
  -1,984
  -2,220
  -2,469
  -2,730
  -3,004
  -3,290
  -3,589
  -3,900
  -4,223
  -4,560
  -4,909
  -5,273
  -5,651
  -6,043
  -6,451
  -6,876
  -7,317
  -7,777
  -8,255
  -8,753
  -9,272
New CAPEX, $m
  -1,334
  -3,293
  -3,720
  -4,158
  -4,597
  -5,032
  -5,460
  -5,880
  -6,290
  -6,690
  -7,081
  -7,464
  -7,841
  -8,213
  -8,583
  -8,954
  -9,328
  -9,708
  -10,096
  -10,494
  -10,906
  -11,333
  -11,778
  -12,243
  -12,730
  -13,242
  -13,781
  -14,348
  -14,946
  -15,576
  -16,240
Cash from investing activities, $m
  -1,273
  -3,773
  -4,310
  -4,872
  -5,449
  -6,038
  -6,633
  -7,235
  -7,841
  -8,451
  -9,065
  -9,684
  -10,310
  -10,943
  -11,587
  -12,244
  -12,917
  -13,608
  -14,319
  -15,054
  -15,815
  -16,606
  -17,429
  -18,286
  -19,181
  -20,118
  -21,098
  -22,125
  -23,201
  -24,329
  -25,512
Free cash flow, $m
  -562
  -2,457
  -2,653
  -2,860
  -3,041
  -3,194
  -3,316
  -3,405
  -3,462
  -3,486
  -3,479
  -3,505
  -3,441
  -3,351
  -3,238
  -3,105
  -2,953
  -2,785
  -2,604
  -2,410
  -2,206
  -1,993
  -1,772
  -1,545
  -1,312
  -1,075
  -832
  -586
  -336
  -81
  176
Issuance/(repayment) of debt, $m
  -103
  4,442
  5,973
  6,677
  7,382
  8,080
  8,768
  9,441
  10,099
  10,742
  11,370
  11,985
  12,590
  13,188
  13,783
  14,378
  14,979
  15,588
  16,211
  16,851
  17,512
  18,197
  18,912
  19,659
  20,442
  21,264
  22,128
  23,039
  23,999
  25,010
  26,078
Issuance/(repurchase) of shares, $m
  2,365
  716
  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  
  812
  5,158
  5,973
  6,677
  7,382
  8,080
  8,768
  9,441
  10,099
  10,742
  11,370
  11,985
  12,590
  13,188
  13,783
  14,378
  14,979
  15,588
  16,211
  16,851
  17,512
  18,197
  18,912
  19,659
  20,442
  21,264
  22,128
  23,039
  23,999
  25,010
  26,078
Total cash flow (excl. dividends), $m
  254
  2,701
  3,320
  3,818
  4,340
  4,886
  5,452
  6,036
  6,637
  7,256
  7,891
  8,480
  9,149
  9,837
  10,545
  11,274
  12,026
  12,803
  13,607
  14,441
  15,306
  16,205
  17,140
  18,114
  19,129
  20,189
  21,296
  22,453
  23,663
  24,929
  26,254
Retained Cash Flow (-), $m
  25
  -1,420
  -664
  -742
  -820
  -898
  -974
  -1,049
  -1,122
  -1,194
  -1,263
  -1,332
  -1,399
  -1,465
  -1,531
  -1,598
  -1,664
  -1,732
  -1,801
  -1,872
  -1,946
  -2,022
  -2,101
  -2,184
  -2,271
  -2,363
  -2,459
  -2,560
  -2,667
  -2,779
  -2,898
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
 
  1,281
  2,656
  3,076
  3,520
  3,988
  4,477
  4,987
  5,515
  6,062
  6,628
  7,148
  7,750
  8,372
  9,013
  9,676
  10,362
  11,071
  11,806
  12,569
  13,360
  14,183
  15,038
  15,929
  16,858
  17,827
  18,837
  19,893
  20,996
  22,150
  23,357
Discount rate, %
 
  12.80
  13.44
  14.11
  14.82
  15.56
  16.34
  17.15
  18.01
  18.91
  19.86
  20.85
  21.89
  22.99
  24.14
  25.34
  26.61
  27.94
  29.34
  30.80
  32.34
  33.96
  35.66
  37.44
  39.32
  41.28
  43.35
  45.51
  47.79
  50.18
  52.69
PV of cash for distribution, $m
 
  1,136
  2,064
  2,070
  2,026
  1,935
  1,806
  1,646
  1,466
  1,275
  1,083
  890
  720
  568
  437
  327
  238
  168
  115
  76
  49
  31
  18
  11
  6
  3
  2
  1
  0
  0
  0
Current shareholders' claim on cash, %
  100
  89.1
  89.1
  89.1
  89.1
  89.1
  89.1
  89.1
  89.1
  89.1
  89.1
  89.1
  89.1
  89.1
  89.1
  89.1
  89.1
  89.1
  89.1
  89.1
  89.1
  89.1
  89.1
  89.1
  89.1
  89.1
  89.1
  89.1
  89.1
  89.1
  89.1

Plains GP Holdings, L.P. owns and operates midstream energy infrastructure and provides logistics services for crude oil, natural gas liquids (NGL), natural gas and refined products. The Company operates through three segments: Transportation, Facilities, and Supply and Logistics. Through its three business segments, the Company is engaged in the transportation, storage, terminaling and marketing of crude oil, NGL and natural gas. The Transportation segment operations consist of fee-based activities associated with transporting crude oil and NGL on pipelines, gathering systems, trucks and barges. The Facilities segment operations consist of fee-based activities associated with providing storage, terminaling and throughput services for crude oil, refined products, NGL and natural gas, as well as NGL fractionation and isomerization services and natural gas and condensate processing services. The Supply and Logistics segment operations consist of the merchant-related activities.

FINANCIAL RATIOS  of  Plains GP Holdings (PAGP)

Valuation Ratios
P/E Ratio 22.1
Price to Sales 0.1
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 2.9
Price to Free Cash Flow -3.3
Growth Rates
Sales Growth Rate -12.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -35.8%
Cap. Spend. - 3 Yr. Gr. Rate -3.7%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 582.8%
Total Debt to Equity 681.6%
Interest Coverage 3
Management Effectiveness
Return On Assets 2%
Ret/ On Assets - 3 Yr. Avg. 1.8%
Return On Total Capital 0.7%
Ret/ On T. Cap. - 3 Yr. Avg. 0.8%
Return On Equity 5.4%
Return On Equity - 3 Yr. Avg. 5.8%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 14.6%
Gross Margin - 3 Yr. Avg. 12.8%
EBITDA Margin 8.4%
EBITDA Margin - 3 Yr. Avg. 7.2%
Operating Margin 4.9%
Oper. Margin - 3 Yr. Avg. 4.8%
Pre-Tax Margin 3.7%
Pre-Tax Margin - 3 Yr. Avg. 3.8%
Net Profit Margin 0.5%
Net Profit Margin - 3 Yr. Avg. 0.4%
Effective Tax Rate 10.6%
Eff/ Tax Rate - 3 Yr. Avg. 14.2%
Payout Ratio 248.9%

PAGP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PAGP stock intrinsic value calculation we used $20182 million for the last fiscal year's total revenue generated by Plains GP Holdings. The default revenue input number comes from 2016 income statement of Plains GP 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 PAGP stock valuation model: a) initial revenue growth rate of 22.8% 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 12.8%, whose default value for PAGP is calculated based on our internal credit rating of Plains GP 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 Plains GP 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 PAGP stock the variable cost ratio is equal to 91%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $852 million in the base year in the intrinsic value calculation for PAGP 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 3.9% for Plains GP Holdings.

Corporate tax rate of 27% is the nominal tax rate for Plains GP 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 PAGP 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 PAGP are equal to 71.4%.

Life of production assets of 33.9 years is the average useful life of capital assets used in Plains GP 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 PAGP is equal to 4.6%. 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 - $1737 million for Plains GP 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 287.229 million for Plains GP 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 Plains GP Holdings at the current share price and the inputted number of shares is $5.9 billion.

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COMPANY NEWS

▶ Plains GP misses 3Q profit forecasts   [Nov-06-17 04:58PM  Associated Press]
▶ A Look at Plains GP Holdings Correlation with Crude Oil   [Oct-12-17 07:40AM  Market Realist]
▶ The 10 MLPs Most Correlated with Crude Oil   [Oct-11-17 05:48PM  Market Realist]
▶ Why Williams Companies Is Outperforming Peers in 2017   [Sep-20-17 01:37PM  Market Realist]
▶ Plains GP misses 2Q profit forecasts   [12:01AM  Associated Press]
▶ ETE, PAGP, WGP, and ENLC: How Do Their Valuations Compare?   [May-31-17 07:37AM  Market Realist]
▶ Why PAGP Has the Highest Distribution Yield among Its Peers   [May-30-17 09:06AM  Market Realist]
▶ ETE, PAGP, WGP, and ENLC: Analyzing MLPs General Partners   [May-29-17 02:47PM  Market Realist]
▶ Plains GP misses 1Q profit forecasts   [May-08-17 05:48PM  Associated Press]
▶ [$$] Tortoise Wins the Race   [Mar-04-17 12:01AM  at Barrons.com]
▶ MLPs Issue Equity; Tailwind or Headwind for Sector?   [Mar-03-17 04:13PM  at Barrons.com]
▶ Insider Invests in Plains GP Holdings   [10:43AM  GuruFocus.com]
▶ PAGP Completes Public Offering of Class A Shares   [Mar-01-17 04:06PM  Business Wire]
▶ PAGP Prices Upsized Public Offering of Class A Shares   [Feb-23-17 09:55PM  Business Wire]
▶ 4 Cheap Stocks Among Recent Economic Moat Changes   [Jan-10-17 06:00AM  at Morningstar]
▶ Breakouts Expected in Oil & Gas Pipeline Stocks (TRP, WPZ)   [Dec-19-16 01:00PM  at Investopedia]
Financial statements of PAGP
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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