Intrinsic value of PLDT ADR - PHI

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$36.25

  Intrinsic Value

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  Value-price divergence*

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

We calculate the intrinsic value of PHI 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 8.2

 

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, %
  -3.41
  19.00
  17.60
  16.34
  15.21
  14.19
  13.27
  12.44
  11.70
  11.03
  10.42
  9.88
  9.39
  8.95
  8.56
  8.20
  7.88
  7.59
  7.33
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.01
  5.90
  5.81
  5.73
  5.66
Revenue, $m
  3,281
  203,613
  239,448
  278,574
  320,934
  366,460
  415,078
  466,714
  521,302
  578,783
  639,115
  702,269
  768,236
  837,024
  908,661
  983,197
  1,060,697
  1,141,249
  1,224,957
  1,311,945
  1,402,354
  1,496,341
  1,594,080
  1,695,761
  1,801,590
  1,911,788
  2,026,592
  2,146,254
  2,271,039
  2,401,230
  2,537,126
Variable operating expenses, $m
 
  154,375
  180,446
  208,912
  239,730
  272,852
  308,223
  345,790
  385,505
  427,324
  471,218
  510,925
  558,918
  608,964
  661,083
  715,310
  771,694
  830,298
  891,199
  954,486
  1,020,261
  1,088,640
  1,159,748
  1,233,725
  1,310,719
  1,390,893
  1,474,417
  1,561,474
  1,652,260
  1,746,979
  1,845,848
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
  2,791
  154,375
  180,446
  208,912
  239,730
  272,852
  308,223
  345,790
  385,505
  427,324
  471,218
  510,925
  558,918
  608,964
  661,083
  715,310
  771,694
  830,298
  891,199
  954,486
  1,020,261
  1,088,640
  1,159,748
  1,233,725
  1,310,719
  1,390,893
  1,474,417
  1,561,474
  1,652,260
  1,746,979
  1,845,848
Operating income, $m
  490
  49,238
  59,002
  69,662
  81,204
  93,608
  106,855
  120,924
  135,797
  151,459
  167,897
  191,344
  209,318
  228,060
  247,579
  267,887
  289,003
  310,951
  333,758
  357,459
  382,093
  407,701
  434,331
  462,036
  490,871
  520,896
  552,176
  584,779
  618,779
  654,252
  691,278
EBITDA, $m
  1,192
  85,100
  100,078
  116,431
  134,135
  153,163
  173,483
  195,065
  217,880
  241,904
  267,120
  293,516
  321,086
  349,837
  379,778
  410,930
  443,321
  476,988
  511,974
  548,331
  586,118
  625,400
  666,250
  708,748
  752,980
  799,038
  847,020
  897,033
  949,187
  1,003,601
  1,060,399
Interest expense (income), $m
  141
  5,759
  8,231
  10,952
  13,921
  17,137
  20,592
  24,283
  28,202
  32,346
  36,709
  41,288
  46,082
  51,089
  56,310
  61,748
  67,406
  73,288
  79,402
  85,756
  92,359
  99,222
  106,356
  113,774
  121,493
  129,526
  137,890
  146,604
  155,687
  165,159
  175,041
Earnings before tax, $m
  438
  43,479
  50,771
  58,711
  67,283
  76,472
  86,263
  96,641
  107,595
  119,113
  131,189
  150,056
  163,236
  176,971
  191,268
  206,139
  221,597
  237,662
  254,356
  271,703
  289,733
  308,479
  327,976
  348,261
  369,378
  391,370
  414,286
  438,175
  463,092
  489,093
  516,237
Tax expense, $m
  38
  11,739
  13,708
  15,852
  18,166
  20,647
  23,291
  26,093
  29,051
  32,161
  35,421
  40,515
  44,074
  47,782
  51,642
  55,657
  59,831
  64,169
  68,676
  73,360
  78,228
  83,289
  88,553
  94,031
  99,732
  105,670
  111,857
  118,307
  125,035
  132,055
  139,384
Net income, $m
  397
  31,739
  37,063
  42,859
  49,116
  55,824
  62,972
  70,548
  78,545
  86,953
  95,768
  109,541
  119,162
  129,189
  139,626
  150,481
  161,766
  173,493
  185,680
  198,343
  211,505
  225,190
  239,422
  254,231
  269,646
  285,700
  302,429
  319,868
  338,057
  357,038
  376,853

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  830
  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
  9,433
  484,792
  570,115
  663,272
  764,129
  872,524
  988,280
  1,111,224
  1,241,195
  1,378,056
  1,521,703
  1,672,070
  1,829,133
  1,992,914
  2,163,480
  2,340,944
  2,525,469
  2,717,259
  2,916,564
  3,123,679
  3,338,938
  3,562,716
  3,795,428
  4,037,526
  4,289,500
  4,551,877
  4,825,220
  5,110,128
  5,407,235
  5,717,215
  6,040,776
Adjusted assets (=assets-cash), $m
  8,603
  484,792
  570,115
  663,272
  764,129
  872,524
  988,280
  1,111,224
  1,241,195
  1,378,056
  1,521,703
  1,672,070
  1,829,133
  1,992,914
  2,163,480
  2,340,944
  2,525,469
  2,717,259
  2,916,564
  3,123,679
  3,338,938
  3,562,716
  3,795,428
  4,037,526
  4,289,500
  4,551,877
  4,825,220
  5,110,128
  5,407,235
  5,717,215
  6,040,776
Revenue / Adjusted assets
  0.381
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
Average production assets, $m
  4,146
  242,910
  285,662
  332,339
  382,875
  437,187
  495,188
  556,790
  621,913
  690,489
  762,464
  837,807
  916,505
  998,569
  1,084,033
  1,172,954
  1,265,411
  1,361,510
  1,461,374
  1,565,151
  1,673,008
  1,785,134
  1,901,737
  2,023,043
  2,149,297
  2,280,764
  2,417,725
  2,560,481
  2,709,349
  2,864,668
  3,026,791
Working capital, $m
  -1,907
  -116,874
  -137,443
  -159,902
  -184,216
  -210,348
  -238,255
  -267,894
  -299,227
  -332,222
  -366,852
  -403,103
  -440,967
  -480,452
  -521,572
  -564,355
  -608,840
  -655,077
  -703,125
  -753,057
  -804,951
  -858,900
  -915,002
  -973,367
  -1,034,113
  -1,097,367
  -1,163,264
  -1,231,950
  -1,303,576
  -1,378,306
  -1,456,310
Total debt, $m
  3,674
  205,785
  273,788
  348,034
  428,417
  514,808
  607,066
  705,052
  808,638
  917,716
  1,032,203
  1,152,046
  1,277,225
  1,407,758
  1,543,699
  1,685,139
  1,832,205
  1,985,061
  2,143,908
  2,308,978
  2,480,539
  2,658,890
  2,844,362
  3,037,314
  3,238,138
  3,447,252
  3,665,106
  3,892,178
  4,128,973
  4,376,027
  4,633,905
Total liabilities, $m
  7,286
  386,379
  454,382
  528,628
  609,011
  695,402
  787,660
  885,646
  989,232
  1,098,310
  1,212,797
  1,332,640
  1,457,819
  1,588,352
  1,724,293
  1,865,733
  2,012,799
  2,165,655
  2,324,502
  2,489,572
  2,661,133
  2,839,484
  3,024,956
  3,217,908
  3,418,732
  3,627,846
  3,845,700
  4,072,772
  4,309,567
  4,556,621
  4,814,499
Total equity, $m
  2,148
  98,413
  115,733
  134,644
  155,118
  177,122
  200,621
  225,579
  251,963
  279,745
  308,906
  339,430
  371,314
  404,561
  439,186
  475,212
  512,670
  551,604
  592,063
  634,107
  677,804
  723,231
  770,472
  819,618
  870,769
  924,031
  979,520
  1,037,356
  1,097,669
  1,160,595
  1,226,278
Total liabilities and equity, $m
  9,434
  484,792
  570,115
  663,272
  764,129
  872,524
  988,281
  1,111,225
  1,241,195
  1,378,055
  1,521,703
  1,672,070
  1,829,133
  1,992,913
  2,163,479
  2,340,945
  2,525,469
  2,717,259
  2,916,565
  3,123,679
  3,338,937
  3,562,715
  3,795,428
  4,037,526
  4,289,501
  4,551,877
  4,825,220
  5,110,128
  5,407,236
  5,717,216
  6,040,777
Debt-to-equity ratio
  1.710
  2.090
  2.370
  2.580
  2.760
  2.910
  3.030
  3.130
  3.210
  3.280
  3.340
  3.390
  3.440
  3.480
  3.510
  3.550
  3.570
  3.600
  3.620
  3.640
  3.660
  3.680
  3.690
  3.710
  3.720
  3.730
  3.740
  3.750
  3.760
  3.770
  3.780
Adjusted equity ratio
  0.153
  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

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  397
  31,739
  37,063
  42,859
  49,116
  55,824
  62,972
  70,548
  78,545
  86,953
  95,768
  109,541
  119,162
  129,189
  139,626
  150,481
  161,766
  173,493
  185,680
  198,343
  211,505
  225,190
  239,422
  254,231
  269,646
  285,700
  302,429
  319,868
  338,057
  357,038
  376,853
Depreciation, amort., depletion, $m
  702
  35,862
  41,076
  46,768
  52,931
  59,555
  66,628
  74,141
  82,082
  90,445
  99,223
  102,172
  111,769
  121,777
  132,199
  143,043
  154,318
  166,038
  178,216
  190,872
  204,025
  217,699
  231,919
  246,713
  262,109
  278,142
  294,844
  312,254
  330,408
  349,350
  369,121
Funds from operations, $m
  479
  67,602
  78,139
  89,627
  102,048
  115,379
  129,600
  144,689
  160,627
  177,398
  194,990
  211,712
  230,931
  250,965
  271,825
  293,524
  316,085
  339,531
  363,896
  389,215
  415,531
  442,889
  471,341
  500,943
  531,755
  563,842
  597,273
  632,122
  668,466
  706,387
  745,974
Change in working capital, $m
  -493
  -18,660
  -20,570
  -22,458
  -24,315
  -26,132
  -27,907
  -29,639
  -31,333
  -32,994
  -34,630
  -36,250
  -37,865
  -39,484
  -41,120
  -42,783
  -44,485
  -46,237
  -48,049
  -49,931
  -51,895
  -53,948
  -56,102
  -58,365
  -60,746
  -63,254
  -65,897
  -68,686
  -71,627
  -74,730
  -78,004
Cash from operations, $m
  972
  87,684
  98,708
  112,086
  126,362
  141,511
  157,506
  174,328
  191,960
  210,392
  229,621
  247,963
  268,796
  290,450
  312,945
  336,308
  360,570
  385,768
  411,945
  439,146
  467,425
  496,837
  527,443
  559,308
  592,501
  627,096
  663,171
  700,807
  740,092
  781,117
  823,978
Maintenance CAPEX, $m
  0
  -24,888
  -29,623
  -34,837
  -40,529
  -46,692
  -53,315
  -60,389
  -67,901
  -75,843
  -84,206
  -92,983
  -102,172
  -111,769
  -121,777
  -132,199
  -143,043
  -154,318
  -166,038
  -178,216
  -190,872
  -204,025
  -217,699
  -231,919
  -246,713
  -262,109
  -278,142
  -294,844
  -312,254
  -330,408
  -349,350
New CAPEX, $m
  -839
  -38,826
  -42,752
  -46,677
  -50,535
  -54,312
  -58,001
  -61,602
  -65,123
  -68,575
  -71,976
  -75,343
  -78,698
  -82,064
  -85,464
  -88,921
  -92,458
  -96,098
  -99,864
  -103,777
  -107,858
  -112,126
  -116,603
  -121,306
  -126,254
  -131,467
  -136,961
  -142,756
  -148,869
  -155,319
  -162,124
Cash from investing activities, $m
  -834
  -63,714
  -72,375
  -81,514
  -91,064
  -101,004
  -111,316
  -121,991
  -133,024
  -144,418
  -156,182
  -168,326
  -180,870
  -193,833
  -207,241
  -221,120
  -235,501
  -250,416
  -265,902
  -281,993
  -298,730
  -316,151
  -334,302
  -353,225
  -372,967
  -393,576
  -415,103
  -437,600
  -461,123
  -485,727
  -511,474
Free cash flow, $m
  138
  23,970
  26,333
  30,572
  35,298
  40,507
  46,190
  52,337
  58,936
  65,974
  73,439
  79,636
  87,926
  96,617
  105,705
  115,188
  125,069
  135,351
  146,043
  157,153
  168,696
  180,686
  193,142
  206,083
  219,534
  233,520
  248,068
  263,207
  278,970
  295,390
  312,505
Issuance/(repayment) of debt, $m
  295
  61,803
  68,003
  74,246
  80,383
  86,391
  92,258
  97,986
  103,587
  109,078
  114,487
  119,843
  125,179
  130,533
  135,941
  141,439
  147,066
  152,857
  158,847
  165,070
  171,561
  178,351
  185,471
  192,952
  200,824
  209,115
  217,854
  227,071
  236,795
  247,054
  257,878
Issuance/(repurchase) of shares, $m
  -11
  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  
  151
  61,803
  68,003
  74,246
  80,383
  86,391
  92,258
  97,986
  103,587
  109,078
  114,487
  119,843
  125,179
  130,533
  135,941
  141,439
  147,066
  152,857
  158,847
  165,070
  171,561
  178,351
  185,471
  192,952
  200,824
  209,115
  217,854
  227,071
  236,795
  247,054
  257,878
Total cash flow (excl. dividends), $m
  302
  85,773
  94,336
  104,818
  115,681
  126,897
  138,448
  150,323
  162,522
  175,052
  187,926
  199,479
  213,106
  227,150
  241,645
  256,628
  272,135
  288,208
  304,889
  322,224
  340,257
  359,037
  378,613
  399,036
  420,358
  442,635
  465,922
  490,278
  515,765
  542,444
  570,383
Retained Cash Flow (-), $m
  108
  -15,829
  -17,321
  -18,911
  -20,474
  -22,004
  -23,499
  -24,958
  -26,384
  -27,783
  -29,160
  -30,525
  -31,884
  -33,248
  -34,625
  -36,025
  -37,458
  -38,933
  -40,459
  -42,044
  -43,698
  -45,427
  -47,240
  -49,146
  -51,151
  -53,263
  -55,489
  -57,836
  -60,313
  -62,926
  -65,683
Prev. year cash balance distribution, $m
 
  31,024
  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
 
  100,969
  77,015
  85,907
  95,207
  104,893
  114,949
  125,366
  136,138
  147,269
  158,766
  168,954
  181,222
  193,903
  207,021
  220,602
  234,676
  249,274
  264,430
  280,179
  296,559
  313,610
  331,372
  349,890
  369,207
  389,372
  410,433
  432,442
  455,452
  479,518
  504,700
Discount rate, %
 
  4.60
  4.83
  5.07
  5.33
  5.59
  5.87
  6.16
  6.47
  6.80
  7.14
  7.49
  7.87
  8.26
  8.67
  9.11
  9.56
  10.04
  10.54
  11.07
  11.62
  12.21
  12.82
  13.46
  14.13
  14.84
  15.58
  16.36
  17.17
  18.03
  18.93
PV of cash for distribution, $m
 
  96,528
  70,082
  74,058
  77,364
  79,911
  81,629
  82,476
  82,428
  81,490
  79,689
  76,312
  73,033
  69,096
  64,603
  59,673
  54,430
  49,004
  43,524
  38,112
  32,882
  27,933
  23,346
  19,181
  15,480
  12,259
  9,518
  7,238
  5,385
  3,915
  2,779
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

PLDT Inc. provides telecommunications services in the Philippines. The company operates in three segments: Wireless, Fixed Line, and Others. Its Wireless segment offers cellular mobile, Internet broadband distribution, operations support services, mobile applications and digital platforms development, mobile payment, solutions and systems integration, satellite communications, and satellite information and messaging services. This segment also engages in selling of WiFi access equipment, as well as operates as a content provider. As of December 31, 2015, it serves approximately 64,938,074 subscribers. The company’s Fixed Line segment provides fixed line telecommunication services such as local exchange, international long distance, national long distance, and data and other network and miscellaneous services to retail, corporate, and small medium enterprises. This segment also offers information and communications technology, infrastructure, and services for Internet applications; Internet protocol-based solutions and multimedia content delivery services; and business infrastructure and solutions, intelligent data processing and implementation services, and data analytics insight. In addition, this segment distributes Filipino channels and content services; and provides bills printing and other value-added services. Further, this segment provides data and network services; managed information technology (IT) outsourcing; Internet-based purchasing, IT consulting, and professional services; and gaming support services, as well as engages in air transportation business. As of December 31, 2015, this segment had 2,303,454 fixed line subscribers. PLDT Inc. has a strategic partnership with Rocket Internet AG to develop online and mobile payment solutions in emerging markets. The company was formerly known as Philippine Long Distance Telephone Company and changed its name to PLDT Inc. in July 2016. PLDT Inc. was founded in 1928 and is based in Makati City, the Philippines.

FINANCIAL RATIOS  of  PLDT ADR (PHI)

Valuation Ratios
P/E Ratio 19.7
Price to Sales 2.4
Price to Book 3.6
Price to Tangible Book
Price to Cash Flow 8.1
Price to Free Cash Flow 58.9
Growth Rates
Sales Growth Rate -3.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -1.3%
Cap. Spend. - 3 Yr. Gr. Rate 8.3%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 140.3%
Total Debt to Equity 171%
Interest Coverage 4
Management Effectiveness
Return On Assets 5.7%
Ret/ On Assets - 3 Yr. Avg. 6.9%
Return On Total Capital 7%
Ret/ On T. Cap. - 3 Yr. Avg. 9.6%
Return On Equity 18%
Return On Equity - 3 Yr. Avg. 20.3%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 89.9%
Gross Margin - 3 Yr. Avg. 90.8%
EBITDA Margin 39%
EBITDA Margin - 3 Yr. Avg. 41.7%
Operating Margin 14.9%
Oper. Margin - 3 Yr. Avg. 18.1%
Pre-Tax Margin 13.3%
Pre-Tax Margin - 3 Yr. Avg. 18.3%
Net Profit Margin 12.1%
Net Profit Margin - 3 Yr. Avg. 15%
Effective Tax Rate 8.7%
Eff/ Tax Rate - 3 Yr. Avg. 16.2%
Payout Ratio 114.9%

PHI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PHI stock intrinsic value calculation we used $171103 million for the last fiscal year's total revenue generated by PLDT ADR. The default revenue input number comes from 2016 income statement of PLDT ADR. 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 PHI stock valuation model: a) initial revenue growth rate of 19% 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 4.6%, whose default value for PHI is calculated based on our internal credit rating of PLDT ADR, 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 PLDT ADR.
    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 PHI stock the variable cost ratio is equal to 76.4%.

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 PHI 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% for PLDT ADR.

Corporate tax rate of 27% is the nominal tax rate for PLDT ADR. 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 PHI 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 PHI are equal to 119.3%.

Life of production assets of 8.2 years is the average useful life of capital assets used in PLDT ADR 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 PHI is equal to -57.4%. 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 - $113608 million for PLDT ADR - 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 226.001 million for PLDT ADR 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 PLDT ADR at the current share price and the inputted number of shares is $8.2 billion.


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COMPANY NEWS

▶ ETFs with exposure to PLDT, Inc. : June 19, 2017   [Jun-19-17 03:56PM  Capital Cube]
▶ ETFs with exposure to PLDT, Inc. : June 2, 2017   [Jun-02-17 02:24PM  Capital Cube]
▶ ETFs with exposure to PLDT, Inc. : May 19, 2017   [May-19-17 02:05PM  Capital Cube]
▶ Is PLDT Inc. a Great Stock for Value Investors?   [Apr-12-17 09:55AM  Zacks]
▶ ETFs with exposure to PLDT, Inc. : April 5, 2017   [Apr-05-17 05:17PM  Capital Cube]
▶ ETFs with exposure to PLDT, Inc. : January 11, 2017   [Jan-11-17 01:09PM  Capital Cube]
▶ 14 Emerging Market Stock Losers Of 2016   [Jan-03-17 05:17PM  at Barrons.com]
▶ ETFs with exposure to PLDT, Inc. : December 29, 2016   [Dec-29-16 02:22PM  Capital Cube]
▶ ETFs with exposure to PLDT, Inc. : September 14, 2016   [Sep-14-16 10:26AM  Capital Cube]
▶ 3 Ways to Get Exposure to Philippines Stocks in the U.S.   [Aug-22-16 12:51PM  Investopedia]
▶ ETFs with exposure to PLDT Inc. : August 9, 2016   [Aug-09-16 01:59PM  Capital Cube]
▶ Filipinos fume over snail-pace internet   [Jul-26-16 11:01PM  AAP]
▶ [$$] Telecoms company's typhoon reaction   [Jul-11-16 07:29PM  at Financial Times]
▶ Philippine Telecoms Giant PLDT's Profit Falls 34%   [May-03-16 12:28AM  at Bloomberg]
▶ PHI raises 4.8 million USD   [Mar-23-16 06:37AM  at noodls]
▶ PHI raises 5 million USD   [06:14AM  at noodls]
▶ PLDT, Globe Shares Rally as San Miguel, Telstra Talks End   [Mar-13-16 09:55PM  at Bloomberg]
▶ These 5 Stocks Still Look Toxic in 2016   [06:34AM  at TheStreet]
▶ Mobile app maker raises chunk of $50M funding   [Dec-29  11:55AM  at bizjournals.com]
▶ Should You Avoid Autodesk, Inc. (ADSK)?   [Dec-01  09:44AM  at Insider Monkey]
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▶ Public Homebuilding Companies Poised For Gains   [Jul-21  04:01PM  at Investopedia]
▶ GMA Network Owners End Stake Sale Talks With Ramon Ang   [Jun-23  01:33AM  at Bloomberg]
▶ 5 Telco Stocks to Trade for Gains   [May-27  07:00AM  at TheStreet]
▶ PHI Exports to China Continue to Rise   [Apr-03  12:28PM  at noodls]
Stock chart of PHI Financial statements of PHI Annual reports of PHI
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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