Intrinsic value of Pingtan Marine Enterprise - PME

Previous Close

$2.93

  Intrinsic Value

$0.41

stock screener

  Rating & Target

str. sell

-86%

  Value-price divergence*

0%

Previous close

$2.93

 
Intrinsic value

$0.41

 
Up/down potential

-86%

 
Rating

str. sell

 
Value-price divergence*

0%

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

We calculate the intrinsic value of PME 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 0.2

 

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, %
  -65.57
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  21
  21
  22
  22
  23
  24
  25
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
  38
  40
  41
  43
  45
  47
  50
  52
  54
  57
  60
  63
  66
  69
Variable operating expenses, $m
 
  17
  18
  18
  19
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  51
  53
  56
Fixed operating expenses, $m
 
  18
  19
  19
  20
  20
  21
  21
  22
  22
  23
  24
  24
  25
  25
  26
  27
  27
  28
  29
  29
  30
  31
  32
  33
  33
  34
  35
  36
  37
  38
Total operating expenses, $m
  35
  35
  37
  37
  39
  39
  41
  42
  43
  44
  46
  48
  49
  51
  52
  54
  56
  58
  60
  63
  64
  67
  69
  72
  75
  77
  80
  83
  87
  90
  94
Operating income, $m
  -14
  -14
  -15
  -15
  -15
  -16
  -16
  -17
  -17
  -17
  -18
  -18
  -18
  -19
  -19
  -19
  -20
  -20
  -21
  -21
  -21
  -22
  -22
  -22
  -23
  -23
  -23
  -24
  -24
  -24
  -25
EBITDA, $m
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -7
  -7
  -7
  -7
  -6
  -6
  -5
  -5
  -4
  -4
  -3
  -2
  -2
Interest expense (income), $m
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
Earnings before tax, $m
  -15
  -17
  -18
  -18
  -19
  -19
  -20
  -21
  -21
  -22
  -22
  -23
  -24
  -24
  -25
  -26
  -26
  -27
  -28
  -29
  -29
  -30
  -31
  -32
  -33
  -34
  -35
  -36
  -37
  -38
  -39
Tax expense, $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
  0
Net income, $m
  -14
  -17
  -18
  -18
  -19
  -19
  -20
  -21
  -21
  -22
  -22
  -23
  -24
  -24
  -25
  -26
  -26
  -27
  -28
  -29
  -29
  -30
  -31
  -32
  -33
  -34
  -35
  -36
  -37
  -38
  -39

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1
  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
  226
  230
  236
  242
  248
  256
  264
  273
  283
  294
  305
  317
  330
  343
  358
  373
  390
  407
  425
  445
  465
  487
  509
  533
  559
  585
  613
  643
  674
  706
  741
Adjusted assets (=assets-cash), $m
  225
  230
  236
  242
  248
  256
  264
  273
  283
  294
  305
  317
  330
  343
  358
  373
  390
  407
  425
  445
  465
  487
  509
  533
  559
  585
  613
  643
  674
  706
  741
Revenue / Adjusted assets
  0.093
  0.091
  0.093
  0.091
  0.093
  0.094
  0.095
  0.092
  0.092
  0.092
  0.092
  0.091
  0.094
  0.093
  0.092
  0.094
  0.092
  0.093
  0.094
  0.092
  0.092
  0.092
  0.092
  0.094
  0.093
  0.092
  0.093
  0.093
  0.093
  0.093
  0.093
Average production assets, $m
  109
  111
  113
  116
  119
  123
  127
  131
  136
  141
  146
  152
  158
  165
  172
  179
  187
  196
  204
  214
  224
  234
  245
  256
  268
  281
  295
  309
  324
  339
  356
Working capital, $m
  -4
  11
  11
  11
  12
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
Total debt, $m
  61
  62
  65
  67
  70
  74
  77
  81
  86
  90
  95
  101
  106
  112
  119
  126
  133
  141
  149
  157
  167
  176
  186
  197
  208
  220
  232
  245
  259
  274
  289
Total liabilities, $m
  101
  102
  105
  107
  110
  114
  117
  121
  126
  130
  135
  141
  146
  152
  159
  166
  173
  181
  189
  197
  207
  216
  226
  237
  248
  260
  272
  285
  299
  314
  329
Total equity, $m
  125
  128
  131
  134
  138
  142
  147
  152
  157
  163
  169
  176
  183
  191
  199
  208
  217
  226
  237
  247
  259
  271
  283
  297
  311
  325
  341
  357
  375
  393
  412
Total liabilities and equity, $m
  226
  230
  236
  241
  248
  256
  264
  273
  283
  293
  304
  317
  329
  343
  358
  374
  390
  407
  426
  444
  466
  487
  509
  534
  559
  585
  613
  642
  674
  707
  741
Debt-to-equity ratio
  0.488
  0.490
  0.490
  0.500
  0.510
  0.520
  0.530
  0.540
  0.540
  0.550
  0.560
  0.570
  0.580
  0.590
  0.600
  0.610
  0.610
  0.620
  0.630
  0.640
  0.640
  0.650
  0.660
  0.660
  0.670
  0.680
  0.680
  0.690
  0.690
  0.700
  0.700
Adjusted equity ratio
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -14
  -17
  -18
  -18
  -19
  -19
  -20
  -21
  -21
  -22
  -22
  -23
  -24
  -24
  -25
  -26
  -26
  -27
  -28
  -29
  -29
  -30
  -31
  -32
  -33
  -34
  -35
  -36
  -37
  -38
  -39
Depreciation, amort., depletion, $m
  7
  7
  7
  7
  8
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
Funds from operations, $m
  -2
  -10
  -11
  -11
  -11
  -11
  -12
  -12
  -12
  -13
  -13
  -13
  -13
  -14
  -14
  -14
  -14
  -14
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -16
  -16
  -16
  -16
  -16
Change in working capital, $m
  3
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
Cash from operations, $m
  -5
  -11
  -11
  -11
  -12
  -12
  -12
  -12
  -13
  -13
  -13
  -14
  -14
  -14
  -14
  -15
  -15
  -15
  -15
  -16
  -16
  -16
  -16
  -16
  -17
  -17
  -17
  -17
  -17
  -17
  -17
Maintenance CAPEX, $m
  0
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
New CAPEX, $m
  -1
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -16
  -16
Cash from investing activities, $m
  -13
  -9
  -10
  -10
  -10
  -12
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -18
  -20
  -20
  -22
  -22
  -24
  -24
  -26
  -28
  -29
  -30
  -31
  -33
  -35
  -37
  -38
Free cash flow, $m
  -18
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -33
  -34
  -36
  -37
  -38
  -39
  -41
  -42
  -44
  -45
  -47
  -48
  -50
  -52
  -54
  -56
Issuance/(repayment) of debt, $m
  7
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
Issuance/(repurchase) of shares, $m
  0
  20
  21
  22
  23
  24
  25
  26
  26
  27
  29
  30
  31
  32
  33
  34
  35
  37
  38
  39
  41
  42
  44
  45
  47
  48
  50
  52
  54
  56
  58
Cash from financing (excl. dividends), $m  
  11
  22
  23
  25
  26
  27
  29
  30
  30
  32
  34
  35
  37
  38
  39
  41
  42
  45
  46
  48
  50
  52
  54
  56
  58
  60
  62
  65
  68
  70
  73
Total cash flow (excl. dividends), $m
  -8
  3
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
Retained Cash Flow (-), $m
  25
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -26
  -27
  -29
  -30
  -31
  -32
  -33
  -34
  -35
  -37
  -38
  -39
  -41
  -42
  -44
  -45
  -47
  -48
  -50
  -52
  -54
  -56
  -58
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
 
  -17
  -18
  -19
  -19
  -20
  -20
  -21
  -22
  -22
  -23
  -24
  -24
  -25
  -26
  -26
  -27
  -28
  -29
  -30
  -30
  -31
  -32
  -33
  -34
  -35
  -36
  -37
  -38
  -39
  -40
Discount rate, %
 
  8.20
  8.61
  9.04
  9.49
  9.97
  10.47
  10.99
  11.54
  12.12
  12.72
  13.36
  14.02
  14.73
  15.46
  16.24
  17.05
  17.90
  18.79
  19.73
  20.72
  21.76
  22.84
  23.99
  25.19
  26.45
  27.77
  29.16
  30.61
  32.15
  33.75
PV of cash for distribution, $m
 
  -16
  -15
  -14
  -13
  -12
  -11
  -10
  -9
  -8
  -7
  -6
  -5
  -4
  -3
  -3
  -2
  -2
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  91.6
  84.0
  76.9
  70.3
  64.2
  58.6
  53.4
  48.7
  44.4
  40.5
  36.9
  33.6
  30.7
  28.0
  25.6
  23.4
  21.4
  19.5
  17.9
  16.4
  15.0
  13.8
  12.7
  11.6
  10.7
  9.9
  9.1
  8.4
  7.8
  7.2

Pingtan Marine Enterprise Ltd. is a marine enterprises company. The Company is primarily engaging in ocean fishing through its operating subsidiary, Fujian Provincial Pingtan County Ocean Fishing Group Co., Ltd. (Pingtan Fishing). The Company harvests a range of fish species with its owned and licensed vessels operating within the Indian Exclusive Economic Zone, Indo-Pacific waters, the Arafura Sea of Indonesia, and international waters of Atlantic and Pacific Oceans. As of December 31, 2016, the Company owned 91 trawlers, 15 drifters, three light luring seine vessels, two squid jigging vessels and had exclusive operating license rights to 20 drifters. As of December 31, 2016, the Company caught approximately 20 different species of fish, including ribbon fish, croaker fish, pomfret, Spanish mackerel, conger eel, squid and red snapper. The Company's fishing vessels transport frozen catch to cold storage warehouses at nearby onshore fishing bases.

FINANCIAL RATIOS  of  Pingtan Marine Enterprise (PME)

Valuation Ratios
P/E Ratio -16.5
Price to Sales 11
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow -46.3
Price to Free Cash Flow -38.6
Growth Rates
Sales Growth Rate -65.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -98.2%
Cap. Spend. - 3 Yr. Gr. Rate -67.1%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 17.6%
Total Debt to Equity 48.8%
Interest Coverage -4
Management Effectiveness
Return On Assets -4.8%
Ret/ On Assets - 3 Yr. Avg. 16.1%
Return On Total Capital -7.1%
Ret/ On T. Cap. - 3 Yr. Avg. 15.2%
Return On Equity -10.2%
Return On Equity - 3 Yr. Avg. 27.4%
Asset Turnover 0.1
Profitability Ratios
Gross Margin -42.9%
Gross Margin - 3 Yr. Avg. -4.8%
EBITDA Margin -23.8%
EBITDA Margin - 3 Yr. Avg. 22.5%
Operating Margin -66.7%
Oper. Margin - 3 Yr. Avg. -16%
Pre-Tax Margin -71.4%
Pre-Tax Margin - 3 Yr. Avg. -0.6%
Net Profit Margin -66.7%
Net Profit Margin - 3 Yr. Avg. -0.1%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio -21.4%

PME stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PME stock intrinsic value calculation we used $21 million for the last fiscal year's total revenue generated by Pingtan Marine Enterprise. The default revenue input number comes from 2016 income statement of Pingtan Marine Enterprise. 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 PME stock valuation model: a) initial revenue growth rate of 2% 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 8.2%, whose default value for PME is calculated based on our internal credit rating of Pingtan Marine Enterprise, 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 Pingtan Marine Enterprise.
    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 PME stock the variable cost ratio is equal to 81%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $18 million in the base year in the intrinsic value calculation for PME 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 5.1% for Pingtan Marine Enterprise.

Corporate tax rate of 27% is the nominal tax rate for Pingtan Marine Enterprise. 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 PME 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 PME are equal to 516.7%.

Life of production assets of 15.5 years is the average useful life of capital assets used in Pingtan Marine Enterprise 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 PME is equal to 50%. 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 - $125 million for Pingtan Marine Enterprise - 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 76.764 million for Pingtan Marine Enterprise 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 Pingtan Marine Enterprise at the current share price and the inputted number of shares is $0.2 billion.

RELATED COMPANIES Price Int.Val. Rating

COMPANY NEWS

▶ Pingtan Marine posts 2Q profit   [12:33AM  Associated Press]
▶ Pingtan Marine posts 1Q profit   [10:04AM  Associated Press]
▶ Why Pingtan Marine Enterprise Exploded 20% Higher Today   [May-12-17 02:20PM  Motley Fool]
▶ Why Pingtan Marine Enterprise Tumbled Another 3.4% Today   [May-11-17 05:54PM  Motley Fool]
▶ Pingtan Marine Enterprise Provides Update   [03:25PM  PR Newswire]
Financial statements of PME
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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