Intrinsic value of Semgroup Cl A - SEMG

Previous Close

$26.95

  Intrinsic Value

$4.49

stock screener

  Rating & Target

str. sell

-83%

  Value-price divergence*

+55%

Previous close

$26.95

 
Intrinsic value

$4.49

 
Up/down potential

-83%

 
Rating

str. sell

 
Value-price divergence*

+55%

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

We calculate the intrinsic value of SEMG 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 2.1

 

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, %
  -8.45
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  1,332
  2,131
  3,293
  4,924
  7,145
  10,080
  13,858
  18,602
  24,425
  31,429
  39,698
  49,295
  60,268
  72,644
  86,432
  101,628
  118,218
  136,177
  155,477
  176,086
  197,973
  221,109
  245,471
  271,040
  297,804
  325,759
  354,910
  385,267
  416,852
  449,694
  483,828
Variable operating expenses, $m
 
  1,939
  2,995
  4,477
  6,494
  9,161
  12,593
  16,902
  22,192
  28,555
  36,067
  44,782
  54,751
  65,993
  78,519
  92,324
  107,395
  123,710
  141,243
  159,965
  179,848
  200,866
  222,998
  246,226
  270,539
  295,935
  322,417
  349,995
  378,689
  408,523
  439,532
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
  1,211
  1,939
  2,995
  4,477
  6,494
  9,161
  12,593
  16,902
  22,192
  28,555
  36,067
  44,782
  54,751
  65,993
  78,519
  92,324
  107,395
  123,710
  141,243
  159,965
  179,848
  200,866
  222,998
  246,226
  270,539
  295,935
  322,417
  349,995
  378,689
  408,523
  439,532
Operating income, $m
  122
  192
  298
  447
  651
  919
  1,265
  1,700
  2,233
  2,874
  3,631
  4,513
  5,518
  6,651
  7,913
  9,304
  10,823
  12,467
  14,234
  16,121
  18,125
  20,243
  22,474
  24,814
  27,265
  29,824
  32,493
  35,272
  38,164
  41,171
  44,296
EBITDA, $m
  221
  350
  541
  809
  1,174
  1,656
  2,276
  3,056
  4,012
  5,163
  6,521
  8,098
  9,900
  11,933
  14,198
  16,694
  19,419
  22,369
  25,539
  28,925
  32,520
  36,321
  40,322
  44,522
  48,919
  53,511
  58,299
  63,286
  68,474
  73,869
  79,476
Interest expense (income), $m
  71
  70
  136
  231
  365
  547
  787
  1,097
  1,485
  1,963
  2,537
  3,214
  4,001
  4,900
  5,914
  7,043
  8,289
  9,648
  11,120
  12,701
  14,390
  16,183
  18,079
  20,075
  22,170
  24,363
  26,654
  29,042
  31,530
  34,118
  36,809
Earnings before tax, $m
  25
  121
  162
  216
  286
  373
  478
  603
  747
  911
  1,094
  1,299
  1,517
  1,751
  1,999
  2,261
  2,535
  2,819
  3,115
  3,420
  3,735
  4,060
  4,395
  4,739
  5,095
  5,461
  5,839
  6,230
  6,634
  7,053
  7,487
Tax expense, $m
  12
  33
  44
  58
  77
  101
  129
  163
  202
  246
  296
  351
  410
  473
  540
  610
  684
  761
  841
  923
  1,009
  1,096
  1,187
  1,280
  1,376
  1,474
  1,577
  1,682
  1,791
  1,904
  2,021
Net income, $m
  2
  89
  118
  158
  209
  272
  349
  440
  546
  665
  799
  948
  1,108
  1,278
  1,460
  1,650
  1,850
  2,058
  2,274
  2,497
  2,727
  2,964
  3,208
  3,460
  3,719
  3,987
  4,263
  4,548
  4,843
  5,149
  5,465

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  74
  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
  3,075
  4,800
  7,416
  11,091
  16,092
  22,703
  31,212
  41,896
  55,012
  70,786
  89,409
  111,026
  135,740
  163,612
  194,666
  228,892
  266,257
  306,706
  350,173
  396,590
  445,884
  497,994
  552,863
  610,450
  670,730
  733,692
  799,346
  867,719
  938,857
  1,012,824
  1,089,703
Adjusted assets (=assets-cash), $m
  3,001
  4,800
  7,416
  11,091
  16,092
  22,703
  31,212
  41,896
  55,012
  70,786
  89,409
  111,026
  135,740
  163,612
  194,666
  228,892
  266,257
  306,706
  350,173
  396,590
  445,884
  497,994
  552,863
  610,450
  670,730
  733,692
  799,346
  867,719
  938,857
  1,012,824
  1,089,703
Revenue / Adjusted assets
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
Average production assets, $m
  1,821
  2,913
  4,501
  6,731
  9,767
  13,780
  18,944
  25,428
  33,389
  42,964
  54,267
  67,387
  82,387
  99,304
  118,152
  138,926
  161,604
  186,154
  212,537
  240,709
  270,629
  302,256
  335,559
  370,512
  407,098
  445,313
  485,162
  526,660
  569,837
  614,731
  661,393
Working capital, $m
  148
  119
  184
  276
  400
  564
  776
  1,042
  1,368
  1,760
  2,223
  2,761
  3,375
  4,068
  4,840
  5,691
  6,620
  7,626
  8,707
  9,861
  11,086
  12,382
  13,746
  15,178
  16,677
  18,243
  19,875
  21,575
  23,344
  25,183
  27,094
Total debt, $m
  1,051
  2,028
  3,449
  5,444
  8,160
  11,750
  16,370
  22,171
  29,293
  37,859
  47,971
  59,709
  73,129
  88,263
  105,126
  123,711
  144,000
  165,963
  189,566
  214,770
  241,537
  269,833
  299,626
  330,897
  363,628
  397,817
  433,467
  470,594
  509,221
  549,385
  591,131
Total liabilities, $m
  1,629
  2,606
  4,027
  6,022
  8,738
  12,328
  16,948
  22,749
  29,871
  38,437
  48,549
  60,287
  73,707
  88,841
  105,704
  124,289
  144,578
  166,541
  190,144
  215,348
  242,115
  270,411
  300,204
  331,475
  364,206
  398,395
  434,045
  471,172
  509,799
  549,963
  591,709
Total equity, $m
  1,446
  2,194
  3,389
  5,068
  7,354
  10,375
  14,264
  19,146
  25,140
  32,349
  40,860
  50,739
  62,033
  74,771
  88,962
  104,604
  121,679
  140,164
  160,029
  181,241
  203,769
  227,583
  252,658
  278,976
  306,524
  335,297
  365,301
  396,548
  429,058
  462,861
  497,994
Total liabilities and equity, $m
  3,075
  4,800
  7,416
  11,090
  16,092
  22,703
  31,212
  41,895
  55,011
  70,786
  89,409
  111,026
  135,740
  163,612
  194,666
  228,893
  266,257
  306,705
  350,173
  396,589
  445,884
  497,994
  552,862
  610,451
  670,730
  733,692
  799,346
  867,720
  938,857
  1,012,824
  1,089,703
Debt-to-equity ratio
  0.727
  0.920
  1.020
  1.070
  1.110
  1.130
  1.150
  1.160
  1.170
  1.170
  1.170
  1.180
  1.180
  1.180
  1.180
  1.180
  1.180
  1.180
  1.180
  1.180
  1.190
  1.190
  1.190
  1.190
  1.190
  1.190
  1.190
  1.190
  1.190
  1.190
  1.190
Adjusted equity ratio
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2
  89
  118
  158
  209
  272
  349
  440
  546
  665
  799
  948
  1,108
  1,278
  1,460
  1,650
  1,850
  2,058
  2,274
  2,497
  2,727
  2,964
  3,208
  3,460
  3,719
  3,987
  4,263
  4,548
  4,843
  5,149
  5,465
Depreciation, amort., depletion, $m
  99
  158
  243
  361
  523
  736
  1,011
  1,356
  1,779
  2,289
  2,890
  3,584
  4,382
  5,282
  6,285
  7,390
  8,596
  9,902
  11,305
  12,804
  14,395
  16,077
  17,849
  19,708
  21,654
  23,687
  25,806
  28,014
  30,310
  32,698
  35,180
Funds from operations, $m
  147
  247
  361
  519
  732
  1,008
  1,360
  1,796
  2,325
  2,954
  3,689
  4,533
  5,490
  6,560
  7,744
  9,040
  10,446
  11,960
  13,579
  15,300
  17,122
  19,041
  21,057
  23,168
  25,373
  27,673
  30,069
  32,562
  35,153
  37,847
  40,646
Change in working capital, $m
  -23
  45
  65
  91
  124
  164
  212
  266
  326
  392
  463
  537
  614
  693
  772
  851
  929
  1,006
  1,081
  1,154
  1,226
  1,296
  1,364
  1,432
  1,499
  1,565
  1,632
  1,700
  1,769
  1,839
  1,912
Cash from operations, $m
  170
  202
  296
  428
  607
  844
  1,149
  1,530
  1,999
  2,562
  3,226
  3,995
  4,875
  5,867
  6,972
  8,189
  9,517
  10,954
  12,498
  14,146
  15,896
  17,746
  19,693
  21,736
  23,874
  26,108
  28,437
  30,862
  33,385
  36,008
  38,734
Maintenance CAPEX, $m
  0
  -97
  -155
  -239
  -358
  -520
  -733
  -1,008
  -1,353
  -1,776
  -2,285
  -2,887
  -3,584
  -4,382
  -5,282
  -6,285
  -7,390
  -8,596
  -9,902
  -11,305
  -12,804
  -14,395
  -16,077
  -17,849
  -19,708
  -21,654
  -23,687
  -25,806
  -28,014
  -30,310
  -32,698
New CAPEX, $m
  -312
  -1,092
  -1,588
  -2,230
  -3,036
  -4,013
  -5,164
  -6,484
  -7,961
  -9,575
  -11,303
  -13,120
  -15,000
  -16,917
  -18,848
  -20,774
  -22,678
  -24,550
  -26,383
  -28,172
  -29,919
  -31,628
  -33,303
  -34,953
  -36,587
  -38,215
  -39,849
  -41,499
  -43,177
  -44,894
  -46,662
Cash from investing activities, $m
  -228
  -1,189
  -1,743
  -2,469
  -3,394
  -4,533
  -5,897
  -7,492
  -9,314
  -11,351
  -13,588
  -16,007
  -18,584
  -21,299
  -24,130
  -27,059
  -30,068
  -33,146
  -36,285
  -39,477
  -42,723
  -46,023
  -49,380
  -52,802
  -56,295
  -59,869
  -63,536
  -67,305
  -71,191
  -75,204
  -79,360
Free cash flow, $m
  -58
  -987
  -1,447
  -2,042
  -2,786
  -3,688
  -4,749
  -5,962
  -7,314
  -8,789
  -10,362
  -12,011
  -13,709
  -15,432
  -17,158
  -18,869
  -20,551
  -22,192
  -23,786
  -25,331
  -26,827
  -28,277
  -29,687
  -31,066
  -32,420
  -33,761
  -35,099
  -36,444
  -37,806
  -39,197
  -40,626
Issuance/(repayment) of debt, $m
  -14
  977
  1,420
  1,995
  2,716
  3,590
  4,620
  5,801
  7,122
  8,566
  10,112
  11,738
  13,420
  15,135
  16,862
  18,585
  20,289
  21,964
  23,603
  25,204
  26,767
  28,295
  29,794
  31,270
  32,732
  34,189
  35,650
  37,126
  38,628
  40,164
  41,745
Issuance/(repurchase) of shares, $m
  223
  733
  1,077
  1,521
  2,077
  2,749
  3,539
  4,442
  5,448
  6,544
  7,712
  8,931
  10,187
  11,459
  12,732
  13,991
  15,225
  16,427
  17,591
  18,715
  19,801
  20,850
  21,867
  22,858
  23,829
  24,787
  25,741
  26,699
  27,667
  28,654
  29,668
Cash from financing (excl. dividends), $m  
  169
  1,710
  2,497
  3,516
  4,793
  6,339
  8,159
  10,243
  12,570
  15,110
  17,824
  20,669
  23,607
  26,594
  29,594
  32,576
  35,514
  38,391
  41,194
  43,919
  46,568
  49,145
  51,661
  54,128
  56,561
  58,976
  61,391
  63,825
  66,295
  68,818
  71,413
Total cash flow (excl. dividends), $m
  109
  723
  1,051
  1,475
  2,006
  2,651
  3,411
  4,282
  5,256
  6,321
  7,461
  8,657
  9,897
  11,162
  12,436
  13,707
  14,963
  16,199
  17,408
  18,588
  19,741
  20,868
  21,974
  23,062
  24,140
  25,215
  26,293
  27,381
  28,489
  29,622
  30,788
Retained Cash Flow (-), $m
  -330
  -822
  -1,196
  -1,679
  -2,286
  -3,021
  -3,888
  -4,882
  -5,994
  -7,209
  -8,511
  -9,879
  -11,294
  -12,738
  -14,192
  -15,642
  -17,076
  -18,485
  -19,865
  -21,212
  -22,528
  -23,814
  -25,075
  -26,317
  -27,548
  -28,774
  -30,004
  -31,246
  -32,510
  -33,803
  -35,134
Prev. year cash balance distribution, $m
 
  74
  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
 
  -24
  -144
  -204
  -279
  -370
  -478
  -601
  -738
  -888
  -1,049
  -1,222
  -1,397
  -1,576
  -1,755
  -1,935
  -2,112
  -2,286
  -2,457
  -2,624
  -2,787
  -2,946
  -3,102
  -3,255
  -3,407
  -3,559
  -3,711
  -3,865
  -4,021
  -4,181
  -4,346
Discount rate, %
 
  7.20
  7.56
  7.94
  8.33
  8.75
  9.19
  9.65
  10.13
  10.64
  11.17
  11.73
  12.31
  12.93
  13.58
  14.26
  14.97
  15.72
  16.50
  17.33
  18.19
  19.10
  20.06
  21.06
  22.11
  23.22
  24.38
  25.60
  26.88
  28.22
  29.64
PV of cash for distribution, $m
 
  -23
  -125
  -162
  -203
  -243
  -282
  -315
  -341
  -358
  -364
  -361
  -347
  -324
  -295
  -262
  -227
  -191
  -157
  -126
  -98
  -75
  -56
  -40
  -28
  -19
  -13
  -8
  -5
  -3
  -2
Current shareholders' claim on cash, %
  100
  73.3
  54.9
  42.0
  32.9
  26.2
  21.2
  17.5
  14.7
  12.5
  10.7
  9.3
  8.2
  7.3
  6.5
  5.9
  5.4
  4.9
  4.5
  4.2
  3.9
  3.6
  3.4
  3.2
  3.0
  2.9
  2.7
  2.6
  2.5
  2.4
  2.3

SemGroup Corporation is a provider of gathering, transportation, storage, distribution, marketing and other midstream services to producers, refiners of petroleum products and other market participants located in the Midwest and Rocky Mountain regions of the United States and Canada. The Company's segments include Crude Transportation, which operates crude oil pipelines and truck transportation businesses in the United States; Crude Facilities, which operates crude oil storage and terminal businesses in the United States; Crude Supply and Logistics, which operates a crude oil marketing business; SemGas, which provides natural gas gathering and processing services; SemCAMS, which operates natural gas processing and gathering facilities in Alberta, Canada; SemLogistics, which owns petroleum products storage facility in the United Kingdom, and SemMexico, which provides liquid asphalt cement products and product application services to the Mexican market, and Corporate and Other.

FINANCIAL RATIOS  of  Semgroup Cl A (SEMG)

Valuation Ratios
P/E Ratio 890.7
Price to Sales 1.3
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 10.5
Price to Free Cash Flow -12.5
Growth Rates
Sales Growth Rate -8.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -35%
Cap. Spend. - 3 Yr. Gr. Rate 7.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 72.7%
Total Debt to Equity 72.7%
Interest Coverage 1
Management Effectiveness
Return On Assets 1.3%
Ret/ On Assets - 3 Yr. Avg. 1.9%
Return On Total Capital 0.1%
Ret/ On T. Cap. - 3 Yr. Avg. 1.1%
Return On Equity 0.2%
Return On Equity - 3 Yr. Avg. 1.8%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 34.5%
Gross Margin - 3 Yr. Avg. 30.2%
EBITDA Margin 14.6%
EBITDA Margin - 3 Yr. Avg. 14.1%
Operating Margin 9.1%
Oper. Margin - 3 Yr. Avg. 8%
Pre-Tax Margin 1.9%
Pre-Tax Margin - 3 Yr. Avg. 3.9%
Net Profit Margin 0.2%
Net Profit Margin - 3 Yr. Avg. 1.2%
Effective Tax Rate 48%
Eff/ Tax Rate - 3 Yr. Avg. 46.3%
Payout Ratio 4650%

SEMG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SEMG stock intrinsic value calculation we used $1332 million for the last fiscal year's total revenue generated by Semgroup Cl A. The default revenue input number comes from 2016 income statement of Semgroup Cl A. 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 SEMG stock valuation model: a) initial revenue growth rate of 60% 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 7.2%, whose default value for SEMG is calculated based on our internal credit rating of Semgroup Cl A, 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 Semgroup Cl A.
    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 SEMG stock the variable cost ratio is equal to 91.1%.

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 SEMG 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 6.7% for Semgroup Cl A.

Corporate tax rate of 27% is the nominal tax rate for Semgroup Cl A. 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 SEMG 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 SEMG are equal to 136.7%.

Life of production assets of 18.8 years is the average useful life of capital assets used in Semgroup Cl A 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 SEMG is equal to 5.6%. 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 - $1446 million for Semgroup Cl A - 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 78.702 million for Semgroup Cl A 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 Semgroup Cl A at the current share price and the inputted number of shares is $2.1 billion.

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COMPANY NEWS

▶ PRESS DIGEST-Canada - Oct 2   [Oct-02-17 06:47AM  Reuters]
▶ SemGroup posts 2Q profit   [Aug-07-17 10:39PM  Associated Press]
▶ SemGroup Names New General Counsel   [Jun-21-17 04:15PM  GlobeNewswire]
▶ New Strong Sell Stocks for June 12th   [Jun-12-17 10:25AM  Zacks]
▶ Texas Oil And Gas Exports Are Booming   [Jun-07-17 07:00PM  Oilprice.com]
▶ [$$] Alinda Capital Selling Houston Fuel Oil Terminal to SemGroup   [Jun-06-17 06:20PM  The Wall Street Journal]
▶ Tulsa-based midstream co. to buy Houston terminal co. for $2B   [01:00PM  American City Business Journals]
▶ ETFs with exposure to SemGroup Corp. : June 2, 2017   [Jun-02-17 02:30PM  Capital Cube]
▶ 5 MLPs Likely to do Best When Crude Rebounds   [May-08-17 08:38PM  Barrons.com]
▶ SemGroup reports 1Q loss   [May-05-17 05:03AM  Associated Press]
▶ SemGroup Corporation Announces First Quarter 2017 Results   [May-04-17 04:15PM  GlobeNewswire]
▶ SemGroup Corporation Announces New Board Member   [Mar-20-17 07:29AM  GlobeNewswire]
▶ Top Ranked Income Stocks to Buy for March 17th   [Mar-17-17 12:19PM  Zacks]
▶ SemGroup Corporation to Participate in Upcoming Conferences   [Feb-21-17 04:15PM  GlobeNewswire]
▶ SemGroup Corporation to Participate in UBS MLP Conference   [Jan-06-17 04:15PM  GlobeNewswire]
▶ Is SemGroup Corp (SEMG) Going to Burn These Hedge Funds?   [Dec-07-16 01:11PM  at Insider Monkey]
Financial statements of SEMG
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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