Intrinsic value of Plains GP Holdings - PAGP

Previous Close

$27.35

  Intrinsic Value

premium content

  Rating & Target

premium content

  Value-price divergence*

premium content

Previous close

$27.35

 
Intrinsic value

$474.62

 
Up/down potential

+999%

 
Rating

str. buy

 
Value-price divergence* premium content

Premium access subscription - $499/yr

please register and log in before paying

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

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 7.9

 

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
  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
  20,182
  32,291
  49,890
  74,610
  108,256
  152,733
  209,973
  281,845
  370,081
  476,204
  601,485
  746,907
  913,166
  1,100,672
  1,309,582
  1,539,836
  1,791,199
  2,063,311
  2,355,733
  2,667,990
  2,999,613
  3,350,169
  3,719,292
  4,106,703
  4,512,224
  4,935,793
  5,377,469
  5,837,436
  6,316,003
  6,813,604
  7,330,795
Variable operating expenses, $m
 
  29,244
  45,055
  67,263
  97,490
  137,448
  188,871
  253,440
  332,710
  428,049
  540,600
  671,011
  820,375
  988,828
  1,176,510
  1,383,367
  1,609,188
  1,853,649
  2,116,357
  2,396,884
  2,694,809
  3,009,744
  3,341,359
  3,689,403
  4,053,717
  4,434,246
  4,831,042
  5,244,269
  5,674,207
  6,121,244
  6,585,882
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
  30,117
  45,950
  68,181
  98,430
  138,412
  189,859
  254,453
  333,748
  429,113
  541,691
  672,129
  821,521
  990,002
  1,177,714
  1,384,601
  1,610,453
  1,854,945
  2,117,686
  2,398,246
  2,696,205
  3,011,175
  3,342,826
  3,690,906
  4,055,258
  4,435,826
  4,832,661
  5,245,929
  5,675,908
  6,122,988
  6,587,669
Operating income, $m
  990
  2,174
  3,940
  6,430
  9,825
  14,322
  20,114
  27,392
  36,333
  47,091
  59,794
  74,779
  91,645
  110,670
  131,868
  155,235
  180,747
  208,366
  238,047
  269,744
  303,407
  338,994
  376,467
  415,796
  456,965
  499,968
  544,809
  591,508
  640,095
  690,616
  743,127
EBITDA, $m
  1,485
  3,176
  5,362
  8,440
  12,636
  18,191
  25,346
  34,335
  45,375
  58,659
  74,344
  92,555
  113,378
  136,866
  163,036
  191,884
  223,377
  257,472
  294,114
  333,242
  374,798
  418,728
  464,986
  513,536
  564,356
  617,440
  672,793
  730,439
  790,416
  852,780
  917,600
Interest expense (income), $m
  462
  446
  955
  1,742
  2,848
  4,352
  6,341
  8,900
  12,114
  16,059
  20,804
  26,406
  32,908
  40,342
  48,726
  58,067
  68,363
  79,602
  91,769
  104,844
  118,806
  133,634
  149,309
  165,814
  183,136
  201,268
  220,207
  239,956
  260,523
  281,921
  304,171
Earnings before tax, $m
  738
  1,727
  2,985
  4,687
  6,978
  9,970
  13,773
  18,492
  24,219
  31,032
  38,990
  48,373
  58,737
  70,327
  83,142
  97,168
  112,384
  128,764
  146,278
  164,900
  184,601
  205,360
  227,158
  249,983
  273,829
  298,699
  324,601
  351,551
  379,572
  408,695
  438,956
Tax expense, $m
  78
  466
  806
  1,266
  1,884
  2,692
  3,719
  4,993
  6,539
  8,379
  10,527
  13,061
  15,859
  18,988
  22,448
  26,235
  30,344
  34,766
  39,495
  44,523
  49,842
  55,447
  61,333
  67,495
  73,934
  80,649
  87,642
  94,919
  102,485
  110,348
  118,518
Net income, $m
  94
  1,261
  2,179
  3,422
  5,094
  7,278
  10,054
  13,499
  17,680
  22,653
  28,463
  35,312
  42,878
  51,339
  60,694
  70,933
  82,040
  93,997
  106,783
  120,377
  134,759
  149,913
  165,825
  182,487
  199,896
  218,051
  236,959
  256,632
  277,088
  298,347
  320,438

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
  41,135
  63,554
  95,045
  137,906
  194,565
  267,482
  359,039
  471,441
  606,629
  766,222
  951,474
  1,163,269
  1,402,130
  1,668,258
  1,961,575
  2,281,782
  2,628,422
  3,000,934
  3,398,713
  3,821,163
  4,267,731
  4,737,952
  5,231,468
  5,748,056
  6,287,634
  6,850,280
  7,436,225
  8,045,864
  8,679,750
  9,338,593
Adjusted assets (=assets-cash), $m
  25,709
  41,135
  63,554
  95,045
  137,906
  194,565
  267,482
  359,039
  471,441
  606,629
  766,222
  951,474
  1,163,269
  1,402,130
  1,668,258
  1,961,575
  2,281,782
  2,628,422
  3,000,934
  3,398,713
  3,821,163
  4,267,731
  4,737,952
  5,231,468
  5,748,056
  6,287,634
  6,850,280
  7,436,225
  8,045,864
  8,679,750
  9,338,593
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
  23,056
  35,621
  53,272
  77,295
  109,052
  149,921
  201,238
  264,238
  340,010
  429,460
  533,292
  652,000
  785,880
  935,042
  1,099,443
  1,278,916
  1,473,204
  1,681,993
  1,904,945
  2,141,724
  2,392,021
  2,655,575
  2,932,186
  3,221,728
  3,524,156
  3,839,513
  4,167,930
  4,509,626
  4,864,913
  5,234,188
Working capital, $m
  -391
  1,485
  2,295
  3,432
  4,980
  7,026
  9,659
  12,965
  17,024
  21,905
  27,668
  34,358
  42,006
  50,631
  60,241
  70,832
  82,395
  94,912
  108,364
  122,728
  137,982
  154,108
  171,087
  188,908
  207,562
  227,046
  247,364
  268,522
  290,536
  313,426
  337,217
Total debt, $m
  11,839
  24,495
  44,672
  73,014
  111,588
  162,581
  228,207
  310,608
  411,770
  533,440
  677,073
  843,800
  1,034,415
  1,249,390
  1,488,905
  1,752,890
  2,041,077
  2,353,053
  2,688,313
  3,046,315
  3,426,520
  3,828,431
  4,251,630
  4,695,794
  5,160,723
  5,646,344
  6,152,725
  6,680,075
  7,228,751
  7,799,248
  8,392,207
Total liabilities, $m
  24,366
  37,022
  57,199
  85,541
  124,115
  175,108
  240,734
  323,135
  424,297
  545,967
  689,600
  856,327
  1,046,942
  1,261,917
  1,501,432
  1,765,417
  2,053,604
  2,365,580
  2,700,840
  3,058,842
  3,439,047
  3,840,958
  4,264,157
  4,708,321
  5,173,250
  5,658,871
  6,165,252
  6,692,602
  7,241,278
  7,811,775
  8,404,734
Total equity, $m
  1,737
  4,114
  6,355
  9,505
  13,791
  19,456
  26,748
  35,904
  47,144
  60,663
  76,622
  95,147
  116,327
  140,213
  166,826
  196,157
  228,178
  262,842
  300,093
  339,871
  382,116
  426,773
  473,795
  523,147
  574,806
  628,763
  685,028
  743,622
  804,586
  867,975
  933,859
Total liabilities and equity, $m
  26,103
  41,136
  63,554
  95,046
  137,906
  194,564
  267,482
  359,039
  471,441
  606,630
  766,222
  951,474
  1,163,269
  1,402,130
  1,668,258
  1,961,574
  2,281,782
  2,628,422
  3,000,933
  3,398,713
  3,821,163
  4,267,731
  4,737,952
  5,231,468
  5,748,056
  6,287,634
  6,850,280
  7,436,224
  8,045,864
  8,679,750
  9,338,593
Debt-to-equity ratio
  6.816
  5.950
  7.030
  7.680
  8.090
  8.360
  8.530
  8.650
  8.730
  8.790
  8.840
  8.870
  8.890
  8.910
  8.920
  8.940
  8.950
  8.950
  8.960
  8.960
  8.970
  8.970
  8.970
  8.980
  8.980
  8.980
  8.980
  8.980
  8.980
  8.990
  8.990
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
  1,261
  2,179
  3,422
  5,094
  7,278
  10,054
  13,499
  17,680
  22,653
  28,463
  35,312
  42,878
  51,339
  60,694
  70,933
  82,040
  93,997
  106,783
  120,377
  134,759
  149,913
  165,825
  182,487
  199,896
  218,051
  236,959
  256,632
  277,088
  298,347
  320,438
Depreciation, amort., depletion, $m
  495
  1,003
  1,422
  2,010
  2,811
  3,869
  5,232
  6,942
  9,042
  11,568
  14,550
  17,776
  21,733
  26,196
  31,168
  36,648
  42,631
  49,107
  56,066
  63,498
  71,391
  79,734
  88,519
  97,740
  107,391
  117,472
  127,984
  138,931
  150,321
  162,164
  174,473
Funds from operations, $m
  440
  2,264
  3,601
  5,432
  7,905
  11,147
  15,286
  20,442
  26,722
  34,221
  43,013
  53,088
  64,611
  77,535
  91,862
  107,581
  124,671
  143,104
  162,850
  183,875
  206,150
  229,647
  254,344
  280,227
  307,286
  335,522
  364,943
  395,563
  427,409
  460,511
  494,911
Change in working capital, $m
  -271
  557
  810
  1,137
  1,548
  2,046
  2,633
  3,306
  4,059
  4,882
  5,763
  6,689
  7,648
  8,625
  9,610
  10,592
  11,563
  12,517
  13,451
  14,364
  15,255
  16,126
  16,980
  17,821
  18,654
  19,484
  20,317
  21,158
  22,014
  22,890
  23,791
Cash from operations, $m
  711
  2,333
  2,791
  4,295
  6,357
  9,101
  12,653
  17,136
  22,664
  29,340
  37,250
  46,399
  56,963
  68,910
  82,252
  96,989
  113,108
  130,587
  149,398
  169,511
  190,895
  213,521
  237,365
  262,406
  288,632
  316,038
  344,626
  374,405
  405,395
  437,621
  471,120
Maintenance CAPEX, $m
  0
  -480
  -769
  -1,187
  -1,776
  -2,576
  -3,635
  -4,997
  -6,708
  -8,808
  -11,334
  -14,315
  -17,776
  -21,733
  -26,196
  -31,168
  -36,648
  -42,631
  -49,107
  -56,066
  -63,498
  -71,391
  -79,734
  -88,519
  -97,740
  -107,391
  -117,472
  -127,984
  -138,931
  -150,321
  -162,164
New CAPEX, $m
  -1,334
  -8,654
  -12,565
  -17,650
  -24,023
  -31,757
  -40,869
  -51,317
  -63,000
  -75,772
  -89,450
  -103,832
  -118,709
  -133,879
  -149,162
  -164,401
  -179,473
  -194,288
  -208,789
  -222,952
  -236,779
  -250,297
  -263,554
  -276,611
  -289,542
  -302,429
  -315,357
  -328,416
  -341,697
  -355,287
  -369,275
Cash from investing activities, $m
  -1,273
  -9,134
  -13,334
  -18,837
  -25,799
  -34,333
  -44,504
  -56,314
  -69,708
  -84,580
  -100,784
  -118,147
  -136,485
  -155,612
  -175,358
  -195,569
  -216,121
  -236,919
  -257,896
  -279,018
  -300,277
  -321,688
  -343,288
  -365,130
  -387,282
  -409,820
  -432,829
  -456,400
  -480,628
  -505,608
  -531,439
Free cash flow, $m
  -562
  -6,801
  -10,543
  -14,543
  -19,442
  -25,232
  -31,851
  -39,179
  -47,044
  -55,240
  -63,534
  -71,748
  -79,522
  -86,703
  -93,106
  -98,580
  -103,013
  -106,331
  -108,498
  -109,507
  -109,382
  -108,167
  -105,923
  -102,724
  -98,649
  -93,781
  -88,203
  -81,995
  -75,233
  -67,986
  -60,319
Issuance/(repayment) of debt, $m
  -103
  13,050
  20,177
  28,342
  38,575
  50,993
  65,625
  82,401
  101,162
  121,670
  143,634
  166,727
  190,615
  214,975
  239,515
  263,985
  288,187
  311,976
  335,261
  358,002
  380,204
  401,912
  423,198
  444,165
  464,929
  485,621
  506,381
  527,351
  548,675
  570,498
  592,958
Issuance/(repurchase) of shares, $m
  2,365
  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 from financing (excl. dividends), $m  
  812
  13,050
  20,177
  28,342
  38,575
  50,993
  65,625
  82,401
  101,162
  121,670
  143,634
  166,727
  190,615
  214,975
  239,515
  263,985
  288,187
  311,976
  335,261
  358,002
  380,204
  401,912
  423,198
  444,165
  464,929
  485,621
  506,381
  527,351
  548,675
  570,498
  592,958
Total cash flow (excl. dividends), $m
  254
  6,249
  9,634
  13,799
  19,133
  25,761
  33,774
  43,223
  54,117
  66,430
  80,099
  94,979
  111,093
  128,272
  146,409
  165,405
  185,174
  205,644
  226,763
  248,495
  270,823
  293,745
  317,275
  341,441
  366,280
  391,840
  418,177
  445,355
  473,442
  502,511
  532,640
Retained Cash Flow (-), $m
  25
  -2,377
  -2,242
  -3,149
  -4,286
  -5,666
  -7,292
  -9,156
  -11,240
  -13,519
  -15,959
  -18,525
  -21,179
  -23,886
  -26,613
  -29,332
  -32,021
  -34,664
  -37,251
  -39,778
  -42,245
  -44,657
  -47,022
  -49,352
  -51,659
  -53,958
  -56,265
  -58,595
  -60,964
  -63,389
  -65,884
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
 
  3,872
  7,392
  10,650
  14,847
  20,095
  26,482
  34,067
  42,877
  52,911
  64,140
  76,453
  89,914
  104,386
  119,796
  136,073
  153,153
  170,980
  189,512
  208,717
  228,578
  249,088
  270,253
  292,089
  314,621
  337,882
  361,913
  386,761
  412,478
  439,123
  466,756
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
 
  3,433
  5,744
  7,167
  8,543
  9,752
  10,682
  11,247
  11,399
  11,131
  10,483
  9,521
  8,358
  7,087
  5,806
  4,595
  3,513
  2,593
  1,847
  1,270
  841
  537
  329
  194
  110
  60
  31
  15
  7
  3
  1
Current shareholders' claim on cash, %
  100
  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

Plains GP Holdings, L.P. together with its subsidiaries, owns and operates midstream energy infrastructure in the United States and Canada. It operates through three segments: Transportation, Facilities, and Supply and Logistics. The Transportation segment engages in the transportation of crude oil and NGL on pipelines, gathering systems, trucks, and barges. As of December 31, 2015, this segment owned and leased assets comprising 18,100 miles of active crude oil and NGL pipelines and gathering systems; 30 million barrels of active, above-ground tank capacity; 830 trailers; 142 transport and storage barges; and 64 transport tugs. The Facilities segment is involved in the provision of storage, terminalling, and throughput services for crude oil, refined products, NGL, and natural gas; NGL fractionation and isomerization services; and natural gas and condensate processing services. As of December 31, 2015, this segment owned and operated approximately 80 million barrels of crude oil and refined products storage capacity; 25 million barrels of NGL storage capacity; 97 billion cubic feet of natural gas storage working capacity; 31 billion cubic feet of base gas; 10 natural gas processing plants; a condensate processing facility; 7 fractionation plants; 23 crude oil and NGL rail terminals; 6 marine facilities; and 1,100 miles of active pipelines. The Supply and Logistics segment engages in merchant-related activities, including purchase of crude oil, cargos, and NGL; storage of inventory, and NGL and natural gas; and resale or exchange, and transport of crude oil and NGL. As of December 31, 2015, it owned 13 million barrels of crude oil and NGL line fill; 990 trucks and 1,100 trailers; and 10,100 crude oil and NGL railcars. The company offers logistics services for crude oil, natural gas liquids, natural gas, and refined products. PAA GP Holdings LLC operates as a general partner of the company. Plains GP Holdings, L.P. was founded in 2013 and is based in Houston, Texas.

FINANCIAL RATIOS  of  Plains GP Holdings (PAGP)

Valuation Ratios
P/E Ratio 29.4
Price to Sales 0.1
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 3.9
Price to Free Cash Flow -4.4
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 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 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 287.179 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 $7.9 billion.


Premium access subscription - $499/yr

please register and log in before paying
RELATED COMPANIES Price Int.Val. Rating
PAA Plains All Ame 26.92 prem.  prem.
MMP Magellan Midst 73.55 prem.  prem.
DKL Delek Logistic 30.70 prem.  prem.
SEMG Semgroup Cl A 32.75 prem.  prem.
SHLX Shell Midstrea 30.57 prem.  prem.
TEGP Tallgrass Ener 27.01 prem.  prem.
BKEP Blueknight Ene 6.80 prem.  prem.
MPC Marathon Petro 52.82 prem.  prem.
HEP Holly Energy P 34.52 prem.  prem.

COMPANY NEWS

▶ 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]
▶ Alerian Index Series December 2016 Index Review   [Dec-09-16 08:30AM  PR Newswire]
▶ 3 Cheap Growth Stocks You Can Buy Right Now   [Oct-14-16 01:01PM  at Motley Fool]
Stock chart of PAGP Financial statements of PAGP Annual reports 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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.