Intrinsic value of Sibanye Gold ADR - SBGL

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$8.01

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$8.01

 
Intrinsic value

$277.98

 
Up/down potential

+999%

 
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 SBGL 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 1.8

 

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, %
  37.51
  37.50
  34.25
  31.33
  28.69
  26.32
  24.19
  22.27
  20.54
  18.99
  17.59
  16.33
  15.20
  14.18
  13.26
  12.43
  11.69
  11.02
  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
Revenue, $m
  2,357
  3,241
  4,351
  5,714
  7,353
  9,289
  11,536
  14,105
  17,003
  20,232
  23,791
  27,676
  31,883
  36,404
  41,231
  46,358
  51,778
  57,485
  63,475
  69,745
  76,295
  83,124
  90,236
  97,636
  105,330
  113,327
  121,638
  130,274
  139,250
  148,580
  158,284
Variable operating expenses, $m
 
  1,611
  2,161
  2,835
  3,647
  4,605
  5,717
  6,989
  8,423
  10,022
  11,783
  13,699
  15,782
  18,019
  20,409
  22,947
  25,630
  28,454
  31,419
  34,523
  37,765
  41,145
  44,666
  48,329
  52,137
  56,096
  60,209
  64,484
  68,927
  73,546
  78,349
Fixed operating expenses, $m
 
  756
  775
  795
  815
  835
  856
  877
  899
  922
  945
  968
  993
  1,017
  1,043
  1,069
  1,096
  1,123
  1,151
  1,180
  1,209
  1,240
  1,271
  1,302
  1,335
  1,368
  1,402
  1,437
  1,473
  1,510
  1,548
Total operating expenses, $m
  1,893
  2,367
  2,936
  3,630
  4,462
  5,440
  6,573
  7,866
  9,322
  10,944
  12,728
  14,667
  16,775
  19,036
  21,452
  24,016
  26,726
  29,577
  32,570
  35,703
  38,974
  42,385
  45,937
  49,631
  53,472
  57,464
  61,611
  65,921
  70,400
  75,056
  79,897
Operating income, $m
  464
  873
  1,415
  2,084
  2,892
  3,849
  4,963
  6,239
  7,680
  9,289
  11,063
  13,009
  15,109
  17,367
  19,779
  22,343
  25,053
  27,908
  30,905
  34,042
  37,320
  40,739
  44,300
  48,005
  51,858
  55,863
  60,026
  64,352
  68,849
  73,525
  78,387
EBITDA, $m
  769
  1,287
  1,967
  2,807
  3,821
  5,021
  6,416
  8,015
  9,820
  11,833
  14,053
  16,479
  19,107
  21,932
  24,950
  28,156
  31,546
  35,116
  38,864
  42,788
  46,888
  51,163
  55,615
  60,248
  65,066
  70,074
  75,279
  80,688
  86,311
  92,156
  98,236
Interest expense (income), $m
  33
  42
  89
  147
  219
  306
  408
  527
  663
  816
  987
  1,175
  1,380
  1,602
  1,841
  2,096
  2,367
  2,653
  2,955
  3,272
  3,603
  3,949
  4,310
  4,686
  5,077
  5,483
  5,906
  6,345
  6,801
  7,275
  7,768
Earnings before tax, $m
  341
  831
  1,326
  1,936
  2,672
  3,543
  4,554
  5,712
  7,018
  8,473
  10,076
  11,834
  13,729
  15,765
  17,938
  20,246
  22,686
  25,254
  27,950
  30,771
  33,718
  36,790
  39,990
  43,320
  46,782
  50,380
  54,120
  58,008
  62,048
  66,249
  70,619
Tax expense, $m
  94
  224
  358
  523
  722
  957
  1,230
  1,542
  1,895
  2,288
  2,721
  3,195
  3,707
  4,256
  4,843
  5,467
  6,125
  6,819
  7,546
  8,308
  9,104
  9,933
  10,797
  11,696
  12,631
  13,603
  14,613
  15,662
  16,753
  17,887
  19,067
Net income, $m
  279
  607
  968
  1,413
  1,951
  2,586
  3,325
  4,170
  5,123
  6,185
  7,356
  8,639
  10,022
  11,508
  13,095
  14,780
  16,561
  18,436
  20,403
  22,463
  24,614
  26,857
  29,193
  31,623
  34,151
  36,778
  39,508
  42,346
  45,295
  48,362
  51,552

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  73
  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
  3,148
  4,225
  5,673
  7,450
  9,587
  12,111
  15,040
  18,390
  22,168
  26,378
  31,018
  36,084
  41,568
  47,462
  53,756
  60,441
  67,507
  74,948
  82,758
  90,933
  99,472
  108,375
  117,648
  127,296
  137,327
  147,754
  158,589
  169,849
  181,551
  193,716
  206,368
Adjusted assets (=assets-cash), $m
  3,075
  4,225
  5,673
  7,450
  9,587
  12,111
  15,040
  18,390
  22,168
  26,378
  31,018
  36,084
  41,568
  47,462
  53,756
  60,441
  67,507
  74,948
  82,758
  90,933
  99,472
  108,375
  117,648
  127,296
  137,327
  147,754
  158,589
  169,849
  181,551
  193,716
  206,368
Revenue / Adjusted assets
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
Average production assets, $m
  1,863
  2,560
  3,437
  4,514
  5,809
  7,338
  9,113
  11,143
  13,432
  15,983
  18,795
  21,864
  25,188
  28,759
  32,573
  36,623
  40,905
  45,413
  50,145
  55,099
  60,273
  65,668
  71,287
  77,132
  83,211
  89,529
  96,094
  102,916
  110,007
  117,379
  125,044
Working capital, $m
  110
  130
  174
  229
  294
  372
  461
  564
  680
  809
  952
  1,107
  1,275
  1,456
  1,649
  1,854
  2,071
  2,299
  2,539
  2,790
  3,052
  3,325
  3,609
  3,905
  4,213
  4,533
  4,866
  5,211
  5,570
  5,943
  6,331
Total debt, $m
  677
  1,305
  2,168
  3,227
  4,501
  6,005
  7,751
  9,747
  11,999
  14,508
  17,274
  20,293
  23,562
  27,075
  30,826
  34,810
  39,021
  43,456
  48,111
  52,983
  58,072
  63,379
  68,905
  74,655
  80,634
  86,848
  93,306
  100,017
  106,991
  114,242
  121,782
Total liabilities, $m
  1,889
  2,518
  3,381
  4,440
  5,714
  7,218
  8,964
  10,960
  13,212
  15,721
  18,487
  21,506
  24,775
  28,288
  32,039
  36,023
  40,234
  44,669
  49,324
  54,196
  59,285
  64,592
  70,118
  75,868
  81,847
  88,061
  94,519
  101,230
  108,204
  115,455
  122,995
Total equity, $m
  1,258
  1,707
  2,292
  3,010
  3,873
  4,893
  6,076
  7,430
  8,956
  10,657
  12,531
  14,578
  16,794
  19,175
  21,718
  24,418
  27,273
  30,279
  33,434
  36,737
  40,187
  43,784
  47,530
  51,428
  55,480
  59,693
  64,070
  68,619
  73,347
  78,261
  83,373
Total liabilities and equity, $m
  3,147
  4,225
  5,673
  7,450
  9,587
  12,111
  15,040
  18,390
  22,168
  26,378
  31,018
  36,084
  41,569
  47,463
  53,757
  60,441
  67,507
  74,948
  82,758
  90,933
  99,472
  108,376
  117,648
  127,296
  137,327
  147,754
  158,589
  169,849
  181,551
  193,716
  206,368
Debt-to-equity ratio
  0.538
  0.760
  0.950
  1.070
  1.160
  1.230
  1.280
  1.310
  1.340
  1.360
  1.380
  1.390
  1.400
  1.410
  1.420
  1.430
  1.430
  1.440
  1.440
  1.440
  1.450
  1.450
  1.450
  1.450
  1.450
  1.450
  1.460
  1.460
  1.460
  1.460
  1.460
Adjusted equity ratio
  0.385
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  279
  607
  968
  1,413
  1,951
  2,586
  3,325
  4,170
  5,123
  6,185
  7,356
  8,639
  10,022
  11,508
  13,095
  14,780
  16,561
  18,436
  20,403
  22,463
  24,614
  26,857
  29,193
  31,623
  34,151
  36,778
  39,508
  42,346
  45,295
  48,362
  51,552
Depreciation, amort., depletion, $m
  305
  413
  553
  724
  929
  1,172
  1,454
  1,776
  2,139
  2,544
  2,990
  3,471
  3,998
  4,565
  5,170
  5,813
  6,493
  7,208
  7,960
  8,746
  9,567
  10,423
  11,315
  12,243
  13,208
  14,211
  15,253
  16,336
  17,461
  18,632
  19,848
Funds from operations, $m
  12
  1,020
  1,521
  2,137
  2,880
  3,758
  4,778
  5,945
  7,262
  8,729
  10,346
  12,109
  14,020
  16,073
  18,265
  20,593
  23,054
  25,644
  28,363
  31,209
  34,181
  37,280
  40,508
  43,867
  47,359
  50,989
  54,761
  58,681
  62,757
  66,994
  71,400
Change in working capital, $m
  -320
  35
  44
  55
  66
  77
  90
  103
  116
  129
  142
  155
  168
  181
  193
  205
  217
  228
  240
  251
  262
  273
  284
  296
  308
  320
  332
  345
  359
  373
  388
Cash from operations, $m
  332
  1,177
  1,476
  2,083
  2,814
  3,681
  4,689
  5,843
  7,146
  8,600
  10,204
  11,954
  13,852
  15,892
  18,072
  20,388
  22,837
  25,416
  28,123
  30,958
  33,919
  37,007
  40,224
  43,571
  47,051
  50,669
  54,428
  58,336
  62,398
  66,620
  71,012
Maintenance CAPEX, $m
  0
  -296
  -406
  -546
  -716
  -922
  -1,165
  -1,447
  -1,769
  -2,132
  -2,537
  -2,983
  -3,471
  -3,998
  -4,565
  -5,170
  -5,813
  -6,493
  -7,208
  -7,960
  -8,746
  -9,567
  -10,423
  -11,315
  -12,243
  -13,208
  -14,211
  -15,253
  -16,336
  -17,461
  -18,632
New CAPEX, $m
  -313
  -698
  -877
  -1,077
  -1,295
  -1,529
  -1,775
  -2,030
  -2,289
  -2,551
  -2,812
  -3,070
  -3,323
  -3,571
  -3,814
  -4,050
  -4,282
  -4,509
  -4,732
  -4,953
  -5,174
  -5,395
  -5,619
  -5,846
  -6,078
  -6,318
  -6,565
  -6,823
  -7,091
  -7,371
  -7,666
Cash from investing activities, $m
  -712
  -994
  -1,283
  -1,623
  -2,011
  -2,451
  -2,940
  -3,477
  -4,058
  -4,683
  -5,349
  -6,053
  -6,794
  -7,569
  -8,379
  -9,220
  -10,095
  -11,002
  -11,940
  -12,913
  -13,920
  -14,962
  -16,042
  -17,161
  -18,321
  -19,526
  -20,776
  -22,076
  -23,427
  -24,832
  -26,298
Free cash flow, $m
  -380
  184
  193
  460
  803
  1,230
  1,749
  2,366
  3,088
  3,917
  4,855
  5,901
  7,058
  8,323
  9,694
  11,167
  12,742
  14,414
  16,183
  18,045
  19,999
  22,045
  24,182
  26,409
  28,729
  31,143
  33,652
  36,261
  38,971
  41,787
  44,715
Issuance/(repayment) of debt, $m
  411
  685
  863
  1,059
  1,274
  1,504
  1,746
  1,996
  2,252
  2,509
  2,766
  3,019
  3,269
  3,513
  3,751
  3,984
  4,212
  4,435
  4,655
  4,872
  5,089
  5,307
  5,527
  5,750
  5,979
  6,214
  6,458
  6,711
  6,975
  7,251
  7,540
Issuance/(repurchase) of shares, $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
Cash from financing (excl. dividends), $m  
  411
  685
  863
  1,059
  1,274
  1,504
  1,746
  1,996
  2,252
  2,509
  2,766
  3,019
  3,269
  3,513
  3,751
  3,984
  4,212
  4,435
  4,655
  4,872
  5,089
  5,307
  5,527
  5,750
  5,979
  6,214
  6,458
  6,711
  6,975
  7,251
  7,540
Total cash flow (excl. dividends), $m
  19
  869
  1,056
  1,519
  2,077
  2,734
  3,495
  4,363
  5,340
  6,426
  7,621
  8,920
  10,327
  11,836
  13,445
  15,151
  16,953
  18,849
  20,837
  22,917
  25,088
  27,352
  29,708
  32,159
  34,708
  37,357
  40,110
  42,971
  45,945
  49,038
  52,255
Retained Cash Flow (-), $m
  -136
  -465
  -585
  -718
  -864
  -1,020
  -1,184
  -1,353
  -1,526
  -1,701
  -1,875
  -2,047
  -2,216
  -2,381
  -2,543
  -2,701
  -2,855
  -3,006
  -3,155
  -3,303
  -3,450
  -3,597
  -3,746
  -3,898
  -4,053
  -4,212
  -4,377
  -4,549
  -4,728
  -4,915
  -5,111
Prev. year cash balance distribution, $m
 
  16
  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
 
  420
  471
  801
  1,213
  1,714
  2,311
  3,010
  3,814
  4,725
  5,746
  6,874
  8,111
  9,455
  10,902
  12,451
  14,099
  15,843
  17,682
  19,614
  21,639
  23,754
  25,962
  28,262
  30,655
  33,145
  35,733
  38,422
  41,218
  44,123
  47,144
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  403
  431
  697
  999
  1,329
  1,677
  2,033
  2,384
  2,714
  3,012
  3,264
  3,461
  3,595
  3,660
  3,655
  3,583
  3,447
  3,256
  3,020
  2,750
  2,457
  2,154
  1,852
  1,561
  1,289
  1,043
  825
  638
  482
  355
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

Sibanye Gold Limited owns and operates underground and surface gold operations in South Africa. The company holds interests in the Driefontein Operations covering an area of approximately 8,561 hectares; the Kloof Operations covering an area of approximately 20,100 hectares; and the Cooke Operations located in the West Witwatersrand region, as well as in the Beatrix Operations covering an area of approximately 16,821 hectares in the Free State province of South Africa. As of December 31, 2015, it had proved and probable gold reserves of approximately 30.988Moz; and probable uranium reserves of approximately 113.8Mlb. The company also owns and operates platinum mines in South Africa. Sibanye Gold Limited was incorporated in 2002 and is based in Westonaria, South Africa.

FINANCIAL RATIOS  of  Sibanye Gold ADR (SBGL)

Valuation Ratios
P/E Ratio 26.7
Price to Sales 3.2
Price to Book 5.9
Price to Tangible Book
Price to Cash Flow 22.4
Price to Free Cash Flow 391.6
Growth Rates
Sales Growth Rate 37.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 24.2%
Cap. Spend. - 3 Yr. Gr. Rate 7.4%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 49.3%
Total Debt to Equity 53.8%
Interest Coverage 11
Management Effectiveness
Return On Assets 11.5%
Ret/ On Assets - 3 Yr. Avg. 7.2%
Return On Total Capital 16.7%
Ret/ On T. Cap. - 3 Yr. Avg. 10.4%
Return On Equity 23.4%
Return On Equity - 3 Yr. Avg. 13.7%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 20.8%
Gross Margin - 3 Yr. Avg. 17.3%
EBITDA Margin 28.8%
EBITDA Margin - 3 Yr. Avg. 20.5%
Operating Margin 19.7%
Oper. Margin - 3 Yr. Avg. 14.3%
Pre-Tax Margin 14.5%
Pre-Tax Margin - 3 Yr. Avg. 9.7%
Net Profit Margin 11.8%
Net Profit Margin - 3 Yr. Avg. 7.4%
Effective Tax Rate 27.6%
Eff/ Tax Rate - 3 Yr. Avg. 34.5%
Payout Ratio 0%

SBGL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SBGL stock intrinsic value calculation we used $2357 million for the last fiscal year's total revenue generated by Sibanye Gold ADR. The default revenue input number comes from 2016 income statement of Sibanye Gold 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 SBGL stock valuation model: a) initial revenue growth rate of 37.5% 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 4.3%, whose default value for SBGL is calculated based on our internal credit rating of Sibanye Gold 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 Sibanye Gold 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 SBGL stock the variable cost ratio is equal to 49.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $738 million in the base year in the intrinsic value calculation for SBGL 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 6.8% for Sibanye Gold ADR.

Corporate tax rate of 27% is the nominal tax rate for Sibanye Gold 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 SBGL 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 SBGL are equal to 79%.

Life of production assets of 6.3 years is the average useful life of capital assets used in Sibanye Gold 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 SBGL is equal to 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 - $1258 million for Sibanye Gold 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 225.88 million for Sibanye Gold 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 Sibanye Gold ADR at the current share price and the inputted number of shares is $1.8 billion.


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Stock chart of SBGL Financial statements of SBGL
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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