Intrinsic value of Sibanye Gold ADR - SBGL

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$5.01

  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 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 1.2

 

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, %
  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
  42,956
  57,669
  75,734
  97,464
  123,119
  152,903
  186,957
  225,367
  268,164
  315,338
  366,839
  422,594
  482,514
  546,500
  614,457
  686,296
  761,942
  841,337
  924,445
  1,011,252
  1,101,772
  1,196,041
  1,294,122
  1,396,105
  1,502,103
  1,612,255
  1,726,722
  1,845,691
  1,969,369
  2,097,984
Variable operating expenses, $m
 
  20,154
  27,025
  35,462
  45,609
  57,591
  71,500
  87,403
  105,341
  125,327
  147,358
  171,315
  197,353
  225,336
  255,218
  286,954
  320,503
  355,830
  392,908
  431,719
  472,259
  514,532
  558,556
  604,360
  651,987
  701,488
  752,929
  806,386
  861,945
  919,703
  979,767
Fixed operating expenses, $m
 
  10,676
  10,943
  11,217
  11,497
  11,785
  12,079
  12,381
  12,691
  13,008
  13,333
  13,667
  14,008
  14,359
  14,718
  15,085
  15,463
  15,849
  16,245
  16,652
  17,068
  17,495
  17,932
  18,380
  18,840
  19,311
  19,793
  20,288
  20,795
  21,315
  21,848
Total operating expenses, $m
  1,893
  30,830
  37,968
  46,679
  57,106
  69,376
  83,579
  99,784
  118,032
  138,335
  160,691
  184,982
  211,361
  239,695
  269,936
  302,039
  335,966
  371,679
  409,153
  448,371
  489,327
  532,027
  576,488
  622,740
  670,827
  720,799
  772,722
  826,674
  882,740
  941,018
  1,001,615
Operating income, $m
  464
  12,126
  19,700
  29,055
  40,357
  53,744
  69,324
  87,172
  107,335
  129,829
  154,647
  181,857
  211,233
  242,819
  276,565
  312,418
  350,330
  390,263
  432,184
  476,074
  521,926
  569,746
  619,553
  671,382
  725,279
  781,304
  839,532
  900,048
  962,951
  1,028,351
  1,096,369
EBITDA, $m
  769
  13,740
  21,835
  31,830
  43,901
  58,196
  74,830
  93,884
  115,407
  139,415
  165,903
  194,843
  226,192
  259,900
  295,911
  334,169
  374,625
  417,235
  461,967
  508,799
  557,724
  608,748
  661,893
  717,194
  774,701
  834,479
  896,606
  961,174
  1,028,288
  1,098,066
  1,170,638
Interest expense (income), $m
  33
  600
  1,158
  1,857
  2,715
  3,747
  4,965
  6,379
  7,997
  9,821
  11,853
  14,093
  16,539
  19,187
  22,032
  25,071
  28,298
  31,709
  35,302
  39,072
  43,019
  47,141
  51,440
  55,916
  60,574
  65,417
  70,451
  75,682
  81,118
  86,767
  92,640
Earnings before tax, $m
  341
  11,526
  18,542
  27,198
  37,642
  49,997
  64,359
  80,793
  99,339
  120,008
  142,794
  167,764
  194,694
  223,633
  254,533
  287,347
  322,033
  358,553
  396,882
  437,002
  478,907
  522,605
  568,114
  615,466
  664,705
  715,887
  769,081
  824,366
  881,833
  941,583
  1,003,729
Tax expense, $m
  94
  3,112
  5,006
  7,344
  10,163
  13,499
  17,377
  21,814
  26,821
  32,402
  38,554
  45,296
  52,567
  60,381
  68,724
  77,584
  86,949
  96,809
  107,158
  117,990
  129,305
  141,103
  153,391
  166,176
  179,470
  193,290
  207,652
  222,579
  238,095
  254,227
  271,007
Net income, $m
  279
  8,414
  13,536
  19,855
  27,479
  36,498
  46,982
  58,979
  72,517
  87,606
  104,239
  122,468
  142,126
  163,252
  185,809
  209,763
  235,084
  261,744
  289,724
  319,011
  349,602
  381,501
  414,723
  449,290
  485,234
  522,598
  561,429
  601,787
  643,738
  687,356
  732,722

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
  55,643
  74,701
  98,101
  126,248
  159,481
  198,061
  242,173
  291,926
  347,363
  408,469
  475,180
  547,402
  625,018
  707,901
  795,929
  888,984
  986,971
  1,089,814
  1,197,467
  1,309,912
  1,427,166
  1,549,276
  1,676,324
  1,808,426
  1,945,729
  2,088,413
  2,236,687
  2,390,792
  2,550,996
  2,717,596
Adjusted assets (=assets-cash), $m
  3,075
  55,643
  74,701
  98,101
  126,248
  159,481
  198,061
  242,173
  291,926
  347,363
  408,469
  475,180
  547,402
  625,018
  707,901
  795,929
  888,984
  986,971
  1,089,814
  1,197,467
  1,309,912
  1,427,166
  1,549,276
  1,676,324
  1,808,426
  1,945,729
  2,088,413
  2,236,687
  2,390,792
  2,550,996
  2,717,596
Revenue / Adjusted assets
  0.767
  0.772
  0.772
  0.772
  0.772
  0.772
  0.772
  0.772
  0.772
  0.772
  0.772
  0.772
  0.772
  0.772
  0.772
  0.772
  0.772
  0.772
  0.772
  0.772
  0.772
  0.772
  0.772
  0.772
  0.772
  0.772
  0.772
  0.772
  0.772
  0.772
  0.772
Average production assets, $m
  1,863
  15,207
  20,415
  26,810
  34,502
  43,584
  54,128
  66,183
  79,780
  94,930
  111,630
  129,861
  149,598
  170,810
  193,461
  217,518
  242,949
  269,727
  297,833
  327,253
  357,983
  390,027
  423,398
  458,119
  494,221
  531,744
  570,738
  611,260
  653,375
  697,157
  742,686
Working capital, $m
  110
  1,289
  1,730
  2,272
  2,924
  3,694
  4,587
  5,609
  6,761
  8,045
  9,460
  11,005
  12,678
  14,475
  16,395
  18,434
  20,589
  22,858
  25,240
  27,733
  30,338
  33,053
  35,881
  38,824
  41,883
  45,063
  48,368
  51,802
  55,371
  59,081
  62,940
Total debt, $m
  677
  18,988
  30,442
  44,506
  61,422
  81,395
  104,582
  131,093
  160,995
  194,312
  231,037
  271,130
  314,535
  361,183
  410,996
  463,900
  519,827
  578,717
  640,525
  705,225
  772,804
  843,274
  916,662
  993,018
  1,072,411
  1,154,930
  1,240,683
  1,329,796
  1,422,413
  1,518,696
  1,618,822
Total liabilities, $m
  1,889
  33,441
  44,895
  58,959
  75,875
  95,848
  119,035
  145,546
  175,448
  208,765
  245,490
  285,583
  328,988
  375,636
  425,449
  478,353
  534,280
  593,170
  654,978
  719,678
  787,257
  857,727
  931,115
  1,007,471
  1,086,864
  1,169,383
  1,255,136
  1,344,249
  1,436,866
  1,533,149
  1,633,275
Total equity, $m
  1,258
  22,202
  29,806
  39,142
  50,373
  63,633
  79,026
  96,627
  116,478
  138,598
  162,979
  189,597
  218,413
  249,382
  282,453
  317,576
  354,705
  393,801
  434,836
  477,789
  522,655
  569,439
  618,161
  668,853
  721,562
  776,346
  833,277
  892,438
  953,926
  1,017,847
  1,084,321
Total liabilities and equity, $m
  3,147
  55,643
  74,701
  98,101
  126,248
  159,481
  198,061
  242,173
  291,926
  347,363
  408,469
  475,180
  547,401
  625,018
  707,902
  795,929
  888,985
  986,971
  1,089,814
  1,197,467
  1,309,912
  1,427,166
  1,549,276
  1,676,324
  1,808,426
  1,945,729
  2,088,413
  2,236,687
  2,390,792
  2,550,996
  2,717,596
Debt-to-equity ratio
  0.538
  0.860
  1.020
  1.140
  1.220
  1.280
  1.320
  1.360
  1.380
  1.400
  1.420
  1.430
  1.440
  1.450
  1.460
  1.460
  1.470
  1.470
  1.470
  1.480
  1.480
  1.480
  1.480
  1.480
  1.490
  1.490
  1.490
  1.490
  1.490
  1.490
  1.490
Adjusted equity ratio
  0.385
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  279
  8,414
  13,536
  19,855
  27,479
  36,498
  46,982
  58,979
  72,517
  87,606
  104,239
  122,468
  142,126
  163,252
  185,809
  209,763
  235,084
  261,744
  289,724
  319,011
  349,602
  381,501
  414,723
  449,290
  485,234
  522,598
  561,429
  601,787
  643,738
  687,356
  732,722
Depreciation, amort., depletion, $m
  305
  1,614
  2,135
  2,775
  3,544
  4,452
  5,506
  6,712
  8,072
  9,587
  11,257
  12,986
  14,960
  17,081
  19,346
  21,752
  24,295
  26,973
  29,783
  32,725
  35,798
  39,003
  42,340
  45,812
  49,422
  53,174
  57,074
  61,126
  65,337
  69,716
  74,269
Funds from operations, $m
  12
  10,028
  15,671
  22,629
  31,022
  40,950
  52,488
  65,691
  80,589
  97,193
  115,496
  135,454
  157,086
  180,333
  205,155
  231,515
  259,379
  288,717
  319,507
  351,737
  385,400
  420,504
  457,063
  495,102
  534,657
  575,772
  618,503
  662,913
  709,076
  757,071
  806,991
Change in working capital, $m
  -320
  351
  441
  542
  652
  770
  894
  1,022
  1,152
  1,284
  1,415
  1,545
  1,673
  1,798
  1,920
  2,039
  2,155
  2,269
  2,382
  2,493
  2,604
  2,716
  2,828
  2,942
  3,059
  3,180
  3,305
  3,434
  3,569
  3,710
  3,858
Cash from operations, $m
  332
  -1,390
  15,229
  22,087
  30,371
  40,180
  51,595
  64,669
  79,436
  95,909
  114,081
  133,909
  155,414
  178,535
  203,235
  229,476
  257,223
  286,447
  317,125
  349,243
  382,796
  417,788
  454,235
  492,159
  531,597
  572,592
  615,199
  659,479
  705,507
  753,361
  803,132
Maintenance CAPEX, $m
  0
  -1,107
  -1,521
  -2,041
  -2,681
  -3,450
  -4,358
  -5,413
  -6,618
  -7,978
  -9,493
  -11,163
  -12,986
  -14,960
  -17,081
  -19,346
  -21,752
  -24,295
  -26,973
  -29,783
  -32,725
  -35,798
  -39,003
  -42,340
  -45,812
  -49,422
  -53,174
  -57,074
  -61,126
  -65,337
  -69,716
New CAPEX, $m
  -313
  -4,140
  -5,208
  -6,395
  -7,692
  -9,082
  -10,543
  -12,055
  -13,597
  -15,150
  -16,699
  -18,231
  -19,737
  -21,211
  -22,651
  -24,057
  -25,431
  -26,779
  -28,106
  -29,420
  -30,730
  -32,044
  -33,371
  -34,721
  -36,102
  -37,523
  -38,994
  -40,522
  -42,115
  -43,782
  -45,530
Cash from investing activities, $m
  -712
  -5,247
  -6,729
  -8,436
  -10,373
  -12,532
  -14,901
  -17,468
  -20,215
  -23,128
  -26,192
  -29,394
  -32,723
  -36,171
  -39,732
  -43,403
  -47,183
  -51,074
  -55,079
  -59,203
  -63,455
  -67,842
  -72,374
  -77,061
  -81,914
  -86,945
  -92,168
  -97,596
  -103,241
  -109,119
  -115,246
Free cash flow, $m
  -380
  -6,637
  8,501
  13,651
  19,997
  27,648
  36,693
  47,201
  59,221
  72,780
  87,888
  104,514
  122,690
  142,364
  163,503
  186,073
  210,041
  235,374
  262,047
  290,040
  319,341
  349,946
  381,861
  415,099
  449,683
  485,647
  523,030
  561,884
  602,266
  644,242
  687,887
Issuance/(repayment) of debt, $m
  411
  9,152
  11,454
  14,063
  16,917
  19,973
  23,187
  26,511
  29,902
  33,318
  36,724
  40,093
  43,405
  46,647
  49,813
  52,904
  55,926
  58,890
  61,809
  64,699
  67,580
  70,469
  73,388
  76,356
  79,393
  82,519
  85,753
  89,113
  92,617
  96,283
  100,127
Issuance/(repurchase) of shares, $m
  0
  3,006
  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
  12,158
  11,454
  14,063
  16,917
  19,973
  23,187
  26,511
  29,902
  33,318
  36,724
  40,093
  43,405
  46,647
  49,813
  52,904
  55,926
  58,890
  61,809
  64,699
  67,580
  70,469
  73,388
  76,356
  79,393
  82,519
  85,753
  89,113
  92,617
  96,283
  100,127
Total cash flow (excl. dividends), $m
  19
  2,516
  19,954
  27,714
  36,914
  47,621
  59,879
  73,712
  89,123
  106,098
  124,613
  144,608
  166,095
  189,011
  213,316
  238,978
  265,967
  294,264
  323,856
  354,739
  386,921
  420,415
  455,249
  491,455
  529,077
  568,166
  608,783
  650,997
  694,883
  740,524
  788,013
Retained Cash Flow (-), $m
  -136
  -6,049
  -7,604
  -9,337
  -11,231
  -13,260
  -15,393
  -17,601
  -19,852
  -22,119
  -24,381
  -26,618
  -28,817
  -30,969
  -33,071
  -35,123
  -37,129
  -39,097
  -41,034
  -42,953
  -44,866
  -46,784
  -48,722
  -50,692
  -52,709
  -54,784
  -56,931
  -59,161
  -61,488
  -63,921
  -66,473
Prev. year cash balance distribution, $m
 
  527
  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
 
  0
  12,350
  18,378
  25,683
  34,361
  44,486
  56,112
  69,271
  83,979
  100,232
  117,990
  137,279
  158,042
  180,246
  203,855
  228,838
  255,167
  282,821
  311,786
  342,055
  373,631
  406,527
  440,762
  476,368
  513,382
  551,853
  591,835
  633,395
  676,603
  721,540
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
 
  0
  11,306
  15,994
  21,147
  26,634
  32,285
  37,908
  43,296
  48,241
  52,548
  56,032
  58,582
  60,091
  60,512
  59,848
  58,153
  55,520
  52,084
  48,006
  43,465
  38,646
  33,731
  28,888
  24,262
  19,971
  16,100
  12,702
  9,800
  7,386
  5,433
Current shareholders' claim on cash, %
  100
  79.0
  79.0
  79.0
  79.0
  79.0
  79.0
  79.0
  79.0
  79.0
  79.0
  79.0
  79.0
  79.0
  79.0
  79.0
  79.0
  79.0
  79.0
  79.0
  79.0
  79.0
  79.0
  79.0
  79.0
  79.0
  79.0
  79.0
  79.0
  79.0
  79.0

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 16.7
Price to Sales 2
Price to Book 3.7
Price to Tangible Book
Price to Cash Flow 14
Price to Free Cash Flow 245
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 $31241 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 47%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $10416 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 6.1% 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 35.4%.

Life of production assets of 10 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 3%. 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 - $16680 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 237.624 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 $1.2 billion.


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Stock chart of SBGL Financial statements of SBGL Annual reports 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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