Intrinsic value of PLDT ADR - PHI

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$35.51

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$35.51

 
Intrinsic value

$110.11

 
Up/down potential

+210%

 
Rating

str. buy

 
Value-price divergence* premium content

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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 8.0

 

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
  19.10
  17.69
  16.42
  15.28
  14.25
  13.33
  12.49
  11.74
  11.07
  10.46
  9.92
  9.42
  8.98
  8.58
  8.23
  7.90
  7.61
  7.35
  7.12
  6.90
  6.71
  6.54
  6.39
  6.25
  6.12
  6.01
  5.91
  5.82
  5.74
  5.66
Revenue, $m
  3,281
  3,908
  4,599
  5,354
  6,172
  7,052
  7,991
  8,990
  10,046
  11,158
  12,325
  13,547
  14,824
  16,156
  17,542
  18,985
  20,486
  22,045
  23,666
  25,350
  27,100
  28,920
  30,812
  32,781
  34,829
  36,963
  39,185
  41,501
  43,916
  46,436
  49,067
Variable operating expenses, $m
 
  2,595
  3,054
  3,555
  4,098
  4,682
  5,306
  5,969
  6,670
  7,409
  8,184
  8,995
  9,843
  10,727
  11,648
  12,606
  13,603
  14,638
  15,714
  16,832
  17,995
  19,203
  20,459
  21,766
  23,127
  24,543
  26,019
  27,557
  29,161
  30,834
  32,580
Fixed operating expenses, $m
 
  644
  660
  676
  693
  711
  728
  746
  765
  784
  804
  824
  845
  866
  887
  910
  932
  956
  979
  1,004
  1,029
  1,055
  1,081
  1,108
  1,136
  1,164
  1,193
  1,223
  1,254
  1,285
  1,317
Total operating expenses, $m
  2,791
  3,239
  3,714
  4,231
  4,791
  5,393
  6,034
  6,715
  7,435
  8,193
  8,988
  9,819
  10,688
  11,593
  12,535
  13,516
  14,535
  15,594
  16,693
  17,836
  19,024
  20,258
  21,540
  22,874
  24,263
  25,707
  27,212
  28,780
  30,415
  32,119
  33,897
Operating income, $m
  490
  669
  885
  1,123
  1,381
  1,659
  1,957
  2,274
  2,610
  2,965
  3,337
  3,728
  4,136
  4,563
  5,007
  5,470
  5,951
  6,452
  6,972
  7,514
  8,077
  8,662
  9,272
  9,906
  10,567
  11,255
  11,973
  12,721
  13,502
  14,317
  15,169
EBITDA, $m
  1,192
  1,321
  1,653
  2,016
  2,410
  2,835
  3,290
  3,774
  4,286
  4,826
  5,393
  5,988
  6,609
  7,257
  7,933
  8,636
  9,368
  10,129
  10,920
  11,742
  12,597
  13,486
  14,411
  15,374
  16,376
  17,421
  18,509
  19,644
  20,827
  22,063
  23,353
Interest expense (income), $m
  141
  124
  176
  233
  296
  363
  436
  514
  597
  684
  776
  873
  974
  1,080
  1,191
  1,306
  1,425
  1,549
  1,679
  1,813
  1,952
  2,098
  2,248
  2,405
  2,568
  2,738
  2,915
  3,099
  3,291
  3,491
  3,700
Earnings before tax, $m
  438
  546
  710
  890
  1,085
  1,295
  1,521
  1,760
  2,013
  2,280
  2,561
  2,855
  3,162
  3,482
  3,816
  4,164
  4,526
  4,902
  5,294
  5,701
  6,124
  6,565
  7,023
  7,501
  7,999
  8,517
  9,058
  9,622
  10,211
  10,827
  11,469
Tax expense, $m
  38
  147
  192
  240
  293
  350
  411
  475
  544
  616
  691
  771
  854
  940
  1,030
  1,124
  1,222
  1,324
  1,429
  1,539
  1,654
  1,773
  1,896
  2,025
  2,160
  2,300
  2,446
  2,598
  2,757
  2,923
  3,097
Net income, $m
  397
  398
  518
  649
  792
  946
  1,110
  1,285
  1,470
  1,665
  1,869
  2,084
  2,308
  2,542
  2,786
  3,040
  3,304
  3,579
  3,864
  4,162
  4,471
  4,792
  5,127
  5,476
  5,839
  6,218
  6,612
  7,024
  7,454
  7,903
  8,373

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
  10,256
  12,071
  14,053
  16,200
  18,509
  20,975
  23,596
  26,367
  29,285
  32,349
  35,557
  38,908
  42,403
  46,043
  49,830
  53,768
  57,862
  62,115
  66,536
  71,130
  75,906
  80,872
  86,039
  91,416
  97,015
  102,847
  108,927
  115,266
  121,880
  128,784
Adjusted assets (=assets-cash), $m
  8,603
  10,256
  12,071
  14,053
  16,200
  18,509
  20,975
  23,596
  26,367
  29,285
  32,349
  35,557
  38,908
  42,403
  46,043
  49,830
  53,768
  57,862
  62,115
  66,536
  71,130
  75,906
  80,872
  86,039
  91,416
  97,015
  102,847
  108,927
  115,266
  121,880
  128,784
Revenue / Adjusted assets
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
Average production assets, $m
  2,738
  3,259
  3,836
  4,465
  5,148
  5,881
  6,665
  7,498
  8,378
  9,306
  10,279
  11,298
  12,363
  13,474
  14,630
  15,834
  17,085
  18,386
  19,737
  21,142
  22,602
  24,119
  25,697
  27,339
  29,048
  30,827
  32,680
  34,612
  36,626
  38,728
  40,921
Working capital, $m
  -1,904
  -2,470
  -2,907
  -3,384
  -3,901
  -4,457
  -5,051
  -5,682
  -6,349
  -7,052
  -7,789
  -8,562
  -9,369
  -10,210
  -11,087
  -11,999
  -12,947
  -13,933
  -14,957
  -16,021
  -17,128
  -18,277
  -19,473
  -20,717
  -22,012
  -23,360
  -24,765
  -26,229
  -27,755
  -29,348
  -31,010
Total debt, $m
  3,674
  4,286
  5,683
  7,210
  8,863
  10,641
  12,540
  14,558
  16,691
  18,939
  21,298
  23,768
  26,348
  29,039
  31,842
  34,758
  37,791
  40,943
  44,218
  47,622
  51,159
  54,836
  58,661
  62,639
  66,779
  71,090
  75,582
  80,263
  85,144
  90,237
  95,552
Total liabilities, $m
  7,286
  7,897
  9,294
  10,821
  12,474
  14,252
  16,151
  18,169
  20,302
  22,550
  24,909
  27,379
  29,959
  32,650
  35,453
  38,369
  41,402
  44,554
  47,829
  51,233
  54,770
  58,447
  62,272
  66,250
  70,390
  74,701
  79,193
  83,874
  88,755
  93,848
  99,163
Total equity, $m
  2,148
  2,359
  2,776
  3,232
  3,726
  4,257
  4,824
  5,427
  6,064
  6,736
  7,440
  8,178
  8,949
  9,753
  10,590
  11,461
  12,367
  13,308
  14,287
  15,303
  16,360
  17,458
  18,601
  19,789
  21,026
  22,313
  23,655
  25,053
  26,511
  28,032
  29,620
Total liabilities and equity, $m
  9,434
  10,256
  12,070
  14,053
  16,200
  18,509
  20,975
  23,596
  26,366
  29,286
  32,349
  35,557
  38,908
  42,403
  46,043
  49,830
  53,769
  57,862
  62,116
  66,536
  71,130
  75,905
  80,873
  86,039
  91,416
  97,014
  102,848
  108,927
  115,266
  121,880
  128,783
Debt-to-equity ratio
  1.710
  1.820
  2.050
  2.230
  2.380
  2.500
  2.600
  2.680
  2.750
  2.810
  2.860
  2.910
  2.940
  2.980
  3.010
  3.030
  3.060
  3.080
  3.100
  3.110
  3.130
  3.140
  3.150
  3.170
  3.180
  3.190
  3.200
  3.200
  3.210
  3.220
  3.230
Adjusted equity ratio
  0.153
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  397
  398
  518
  649
  792
  946
  1,110
  1,285
  1,470
  1,665
  1,869
  2,084
  2,308
  2,542
  2,786
  3,040
  3,304
  3,579
  3,864
  4,162
  4,471
  4,792
  5,127
  5,476
  5,839
  6,218
  6,612
  7,024
  7,454
  7,903
  8,373
Depreciation, amort., depletion, $m
  702
  652
  767
  893
  1,030
  1,176
  1,333
  1,500
  1,676
  1,861
  2,056
  2,260
  2,473
  2,695
  2,926
  3,167
  3,417
  3,677
  3,947
  4,228
  4,520
  4,824
  5,139
  5,468
  5,810
  6,165
  6,536
  6,922
  7,325
  7,746
  8,184
Funds from operations, $m
  479
  1,050
  1,285
  1,543
  1,822
  2,122
  2,443
  2,784
  3,145
  3,526
  3,925
  4,344
  4,781
  5,237
  5,712
  6,206
  6,721
  7,256
  7,812
  8,390
  8,991
  9,616
  10,267
  10,944
  11,649
  12,383
  13,148
  13,947
  14,780
  15,649
  16,557
Change in working capital, $m
  -493
  -396
  -437
  -477
  -517
  -556
  -594
  -631
  -667
  -703
  -738
  -772
  -807
  -842
  -876
  -912
  -948
  -986
  -1,024
  -1,064
  -1,106
  -1,150
  -1,196
  -1,244
  -1,295
  -1,348
  -1,404
  -1,464
  -1,526
  -1,593
  -1,662
Cash from operations, $m
  972
  104
  1,722
  2,020
  2,339
  2,678
  3,037
  3,415
  3,813
  4,229
  4,663
  5,116
  5,588
  6,078
  6,588
  7,118
  7,669
  8,241
  8,836
  9,454
  10,097
  10,766
  11,462
  12,188
  12,943
  13,731
  14,553
  15,411
  16,306
  17,242
  18,219
Maintenance CAPEX, $m
  0
  -548
  -652
  -767
  -893
  -1,030
  -1,176
  -1,333
  -1,500
  -1,676
  -1,861
  -2,056
  -2,260
  -2,473
  -2,695
  -2,926
  -3,167
  -3,417
  -3,677
  -3,947
  -4,228
  -4,520
  -4,824
  -5,139
  -5,468
  -5,810
  -6,165
  -6,536
  -6,922
  -7,325
  -7,746
New CAPEX, $m
  -842
  -521
  -577
  -630
  -682
  -734
  -784
  -833
  -881
  -927
  -974
  -1,019
  -1,065
  -1,111
  -1,157
  -1,203
  -1,251
  -1,301
  -1,352
  -1,405
  -1,460
  -1,518
  -1,578
  -1,642
  -1,709
  -1,779
  -1,853
  -1,932
  -2,014
  -2,102
  -2,194
Cash from investing activities, $m
  -834
  -1,069
  -1,229
  -1,397
  -1,575
  -1,764
  -1,960
  -2,166
  -2,381
  -2,603
  -2,835
  -3,075
  -3,325
  -3,584
  -3,852
  -4,129
  -4,418
  -4,718
  -5,029
  -5,352
  -5,688
  -6,038
  -6,402
  -6,781
  -7,177
  -7,589
  -8,018
  -8,468
  -8,936
  -9,427
  -9,940
Free cash flow, $m
  138
  -965
  494
  623
  763
  915
  1,077
  1,250
  1,433
  1,626
  1,828
  2,041
  2,263
  2,495
  2,737
  2,989
  3,251
  3,524
  3,807
  4,102
  4,409
  4,728
  5,061
  5,406
  5,767
  6,142
  6,534
  6,943
  7,369
  7,815
  8,280
Issuance/(repayment) of debt, $m
  415
  1,273
  1,397
  1,526
  1,653
  1,778
  1,899
  2,018
  2,134
  2,247
  2,359
  2,470
  2,580
  2,691
  2,803
  2,916
  3,032
  3,152
  3,275
  3,404
  3,537
  3,677
  3,824
  3,978
  4,140
  4,311
  4,491
  4,681
  4,881
  5,093
  5,316
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
  1,273
  1,397
  1,526
  1,653
  1,778
  1,899
  2,018
  2,134
  2,247
  2,359
  2,470
  2,580
  2,691
  2,803
  2,916
  3,032
  3,152
  3,275
  3,404
  3,537
  3,677
  3,824
  3,978
  4,140
  4,311
  4,491
  4,681
  4,881
  5,093
  5,316
Total cash flow (excl. dividends), $m
  302
  308
  1,891
  2,149
  2,417
  2,692
  2,976
  3,267
  3,566
  3,873
  4,188
  4,511
  4,844
  5,186
  5,540
  5,905
  6,283
  6,676
  7,083
  7,506
  7,947
  8,406
  8,885
  9,385
  9,907
  10,454
  11,025
  11,624
  12,251
  12,907
  13,596
Retained Cash Flow (-), $m
  108
  -380
  -417
  -456
  -494
  -531
  -567
  -603
  -637
  -671
  -705
  -738
  -771
  -804
  -837
  -871
  -906
  -941
  -978
  -1,017
  -1,057
  -1,098
  -1,142
  -1,188
  -1,237
  -1,288
  -1,342
  -1,398
  -1,458
  -1,521
  -1,588
Prev. year cash balance distribution, $m
 
  169
  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
 
  97
  1,474
  1,693
  1,923
  2,161
  2,409
  2,665
  2,929
  3,202
  3,483
  3,773
  4,073
  4,382
  4,703
  5,034
  5,378
  5,734
  6,104
  6,489
  6,890
  7,307
  7,742
  8,196
  8,671
  9,166
  9,684
  10,226
  10,793
  11,386
  12,008
Discount rate, %
 
  5.70
  5.99
  6.28
  6.60
  6.93
  7.27
  7.64
  8.02
  8.42
  8.84
  9.28
  9.75
  10.24
  10.75
  11.29
  11.85
  12.44
  13.06
  13.72
  14.40
  15.12
  15.88
  16.67
  17.51
  18.38
  19.30
  20.27
  21.28
  22.34
  23.46
PV of cash for distribution, $m
 
  92
  1,312
  1,410
  1,489
  1,546
  1,581
  1,592
  1,580
  1,546
  1,493
  1,421
  1,334
  1,234
  1,126
  1,012
  896
  781
  670
  564
  467
  380
  302
  236
  180
  135
  98
  70
  49
  33
  22
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 19.3
Price to Sales 2.3
Price to Book 3.6
Price to Tangible Book
Price to Cash Flow 7.9
Price to Free Cash Flow 59
Growth Rates
Sales Growth Rate -3.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -1.6%
Cap. Spend. - 3 Yr. Gr. Rate 8.1%
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 $3281 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 19.1% 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 5.7%, 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 66.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $628 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 4.1% 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 83.4%.

Life of production assets of 4.8 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 -63.2%. 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 - $2148 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 224.192 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 $8.0 billion.


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COMPANY NEWS

▶ 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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▶ What Hedge Funds Think About H&R Block, Inc. (HRB)?   [Nov-23  06:13PM  at Insider Monkey]
▶ 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
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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