Intrinsic value of Sky Solar Holdings ADR - SKYS

Previous Close

$1.66

  Intrinsic Value

$1.87

stock screener

  Rating & Target

hold

+13%

Previous close

$1.66

 
Intrinsic value

$1.87

 
Up/down potential

+13%

 
Rating

hold

We calculate the intrinsic value of SKYS 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 0.1

 

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, %
  40.43
  40.40
  36.86
  33.67
  30.81
  28.23
  25.90
  23.81
  21.93
  20.24
  18.71
  17.34
  16.11
  15.00
  14.00
  13.10
  12.29
  11.56
  10.90
  10.31
  9.78
  9.30
  8.87
  8.49
  8.14
  7.82
  7.54
  7.29
  7.06
  6.85
  6.67
Revenue, $m
  66
  93
  127
  170
  222
  284
  358
  443
  540
  650
  771
  905
  1,051
  1,209
  1,378
  1,558
  1,750
  1,952
  2,165
  2,388
  2,622
  2,866
  3,120
  3,385
  3,660
  3,947
  4,244
  4,554
  4,875
  5,209
  5,557
Variable operating expenses, $m
 
  39
  54
  72
  94
  121
  152
  188
  229
  276
  327
  384
  446
  512
  584
  661
  742
  828
  918
  1,013
  1,112
  1,215
  1,323
  1,435
  1,552
  1,673
  1,800
  1,931
  2,067
  2,209
  2,356
Fixed operating expenses, $m
 
  27
  27
  28
  29
  29
  30
  31
  32
  32
  33
  34
  35
  36
  37
  38
  39
  40
  41
  42
  43
  44
  45
  46
  47
  48
  49
  51
  52
  53
  55
Total operating expenses, $m
  53
  66
  81
  100
  123
  150
  182
  219
  261
  308
  360
  418
  481
  548
  621
  699
  781
  868
  959
  1,055
  1,155
  1,259
  1,368
  1,481
  1,599
  1,721
  1,849
  1,982
  2,119
  2,262
  2,411
Operating income, $m
  12
  27
  46
  70
  99
  134
  176
  224
  280
  342
  411
  487
  570
  660
  757
  860
  969
  1,085
  1,207
  1,334
  1,468
  1,607
  1,752
  1,904
  2,061
  2,225
  2,395
  2,572
  2,756
  2,947
  3,146
EBITDA, $m
  26
  46
  73
  106
  146
  195
  252
  318
  394
  480
  575
  679
  793
  917
  1,049
  1,191
  1,341
  1,499
  1,666
  1,841
  2,024
  2,215
  2,414
  2,622
  2,838
  3,062
  3,296
  3,538
  3,790
  4,052
  4,325
Interest expense (income), $m
  6
  6
  12
  20
  30
  41
  56
  72
  91
  113
  138
  166
  196
  229
  264
  303
  343
  387
  432
  480
  531
  584
  639
  696
  756
  818
  883
  950
  1,020
  1,093
  1,168
Earnings before tax, $m
  5
  20
  33
  50
  69
  93
  121
  152
  188
  228
  273
  322
  375
  432
  493
  557
  626
  698
  774
  854
  937
  1,023
  1,114
  1,208
  1,305
  1,407
  1,512
  1,622
  1,736
  1,855
  1,978
Tax expense, $m
  2
  6
  9
  13
  19
  25
  33
  41
  51
  62
  74
  87
  101
  117
  133
  150
  169
  189
  209
  231
  253
  276
  301
  326
  352
  380
  408
  438
  469
  501
  534
Net income, $m
  4
  15
  24
  36
  51
  68
  88
  111
  137
  167
  199
  235
  273
  315
  360
  407
  457
  510
  565
  623
  684
  747
  813
  882
  953
  1,027
  1,104
  1,184
  1,267
  1,354
  1,444

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  23
  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
  476
  635
  869
  1,161
  1,519
  1,948
  2,452
  3,036
  3,702
  4,451
  5,284
  6,200
  7,199
  8,279
  9,438
  10,674
  11,986
  13,371
  14,829
  16,358
  17,959
  19,629
  21,371
  23,185
  25,071
  27,033
  29,072
  31,190
  33,392
  35,680
  38,059
Adjusted assets (=assets-cash), $m
  453
  635
  869
  1,161
  1,519
  1,948
  2,452
  3,036
  3,702
  4,451
  5,284
  6,200
  7,199
  8,279
  9,438
  10,674
  11,986
  13,371
  14,829
  16,358
  17,959
  19,629
  21,371
  23,185
  25,071
  27,033
  29,072
  31,190
  33,392
  35,680
  38,059
Revenue / Adjusted assets
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
Average production assets, $m
  266
  373
  511
  683
  894
  1,146
  1,443
  1,786
  2,178
  2,619
  3,109
  3,648
  4,236
  4,871
  5,553
  6,280
  7,052
  7,867
  8,725
  9,625
  10,566
  11,550
  12,574
  13,641
  14,752
  15,906
  17,105
  18,352
  19,647
  20,993
  22,393
Working capital, $m
  97
  46
  63
  85
  111
  142
  179
  222
  270
  325
  386
  453
  526
  604
  689
  779
  875
  976
  1,083
  1,194
  1,311
  1,433
  1,560
  1,692
  1,830
  1,973
  2,122
  2,277
  2,438
  2,605
  2,778
Total debt, $m
  159
  266
  434
  644
  900
  1,207
  1,569
  1,988
  2,465
  3,002
  3,600
  4,257
  4,973
  5,747
  6,578
  7,464
  8,405
  9,398
  10,443
  11,540
  12,687
  13,885
  15,134
  16,434
  17,787
  19,194
  20,655
  22,174
  23,753
  25,393
  27,099
Total liabilities, $m
  348
  455
  623
  833
  1,089
  1,396
  1,758
  2,177
  2,654
  3,191
  3,789
  4,446
  5,162
  5,936
  6,767
  7,653
  8,594
  9,587
  10,632
  11,729
  12,876
  14,074
  15,323
  16,623
  17,976
  19,383
  20,844
  22,363
  23,942
  25,582
  27,288
Total equity, $m
  128
  180
  246
  329
  430
  551
  694
  859
  1,048
  1,260
  1,495
  1,755
  2,037
  2,343
  2,671
  3,021
  3,392
  3,784
  4,197
  4,629
  5,082
  5,555
  6,048
  6,561
  7,095
  7,650
  8,227
  8,827
  9,450
  10,097
  10,771
Total liabilities and equity, $m
  476
  635
  869
  1,162
  1,519
  1,947
  2,452
  3,036
  3,702
  4,451
  5,284
  6,201
  7,199
  8,279
  9,438
  10,674
  11,986
  13,371
  14,829
  16,358
  17,958
  19,629
  21,371
  23,184
  25,071
  27,033
  29,071
  31,190
  33,392
  35,679
  38,059
Debt-to-equity ratio
  1.242
  1.480
  1.760
  1.960
  2.090
  2.190
  2.260
  2.310
  2.350
  2.380
  2.410
  2.430
  2.440
  2.450
  2.460
  2.470
  2.480
  2.480
  2.490
  2.490
  2.500
  2.500
  2.500
  2.500
  2.510
  2.510
  2.510
  2.510
  2.510
  2.510
  2.520
Adjusted equity ratio
  0.232
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4
  15
  24
  36
  51
  68
  88
  111
  137
  167
  199
  235
  273
  315
  360
  407
  457
  510
  565
  623
  684
  747
  813
  882
  953
  1,027
  1,104
  1,184
  1,267
  1,354
  1,444
Depreciation, amort., depletion, $m
  14
  20
  27
  36
  47
  60
  76
  94
  115
  138
  164
  192
  223
  256
  292
  331
  371
  414
  459
  507
  556
  608
  662
  718
  776
  837
  900
  966
  1,034
  1,105
  1,179
Funds from operations, $m
  -104
  35
  51
  72
  98
  128
  164
  205
  252
  305
  363
  427
  496
  571
  652
  737
  828
  924
  1,024
  1,130
  1,240
  1,355
  1,475
  1,600
  1,729
  1,864
  2,004
  2,150
  2,301
  2,459
  2,622
Change in working capital, $m
  -61
  13
  17
  21
  26
  31
  37
  43
  49
  55
  61
  67
  73
  79
  85
  90
  96
  101
  106
  112
  117
  122
  127
  132
  138
  143
  149
  155
  161
  167
  174
Cash from operations, $m
  -43
  21
  34
  51
  72
  97
  127
  163
  203
  250
  302
  360
  424
  493
  567
  647
  732
  823
  918
  1,018
  1,123
  1,233
  1,348
  1,467
  1,592
  1,721
  1,856
  1,995
  2,141
  2,292
  2,449
Maintenance CAPEX, $m
  0
  -14
  -20
  -27
  -36
  -47
  -60
  -76
  -94
  -115
  -138
  -164
  -192
  -223
  -256
  -292
  -331
  -371
  -414
  -459
  -507
  -556
  -608
  -662
  -718
  -776
  -837
  -900
  -966
  -1,034
  -1,105
New CAPEX, $m
  -44
  -107
  -138
  -172
  -210
  -252
  -297
  -344
  -392
  -441
  -490
  -539
  -588
  -635
  -682
  -727
  -772
  -815
  -858
  -900
  -942
  -983
  -1,025
  -1,067
  -1,110
  -1,154
  -1,200
  -1,246
  -1,295
  -1,346
  -1,400
Cash from investing activities, $m
  -58
  -121
  -158
  -199
  -246
  -299
  -357
  -420
  -486
  -556
  -628
  -703
  -780
  -858
  -938
  -1,019
  -1,103
  -1,186
  -1,272
  -1,359
  -1,449
  -1,539
  -1,633
  -1,729
  -1,828
  -1,930
  -2,037
  -2,146
  -2,261
  -2,380
  -2,505
Free cash flow, $m
  -101
  -100
  -123
  -148
  -175
  -202
  -230
  -257
  -282
  -306
  -326
  -343
  -356
  -366
  -371
  -372
  -370
  -364
  -354
  -341
  -325
  -306
  -285
  -262
  -236
  -209
  -181
  -151
  -120
  -89
  -56
Issuance/(repayment) of debt, $m
  52
  130
  168
  210
  256
  307
  362
  419
  477
  537
  597
  657
  716
  774
  831
  886
  940
  993
  1,045
  1,097
  1,147
  1,198
  1,249
  1,300
  1,353
  1,406
  1,462
  1,519
  1,579
  1,641
  1,706
Issuance/(repurchase) of shares, $m
  0
  37
  42
  47
  51
  53
  55
  54
  51
  45
  36
  24
  9
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  90
  167
  210
  257
  307
  360
  417
  473
  528
  582
  633
  681
  725
  774
  831
  886
  940
  993
  1,045
  1,097
  1,147
  1,198
  1,249
  1,300
  1,353
  1,406
  1,462
  1,519
  1,579
  1,641
  1,706
Total cash flow (excl. dividends), $m
  -10
  67
  86
  108
  132
  158
  186
  216
  246
  277
  308
  339
  369
  409
  460
  514
  571
  630
  691
  756
  822
  892
  964
  1,039
  1,116
  1,197
  1,281
  1,368
  1,458
  1,552
  1,650
Retained Cash Flow (-), $m
  -15
  -52
  -66
  -83
  -101
  -121
  -143
  -165
  -188
  -212
  -236
  -259
  -283
  -306
  -328
  -350
  -371
  -392
  -413
  -433
  -453
  -473
  -493
  -513
  -534
  -555
  -577
  -600
  -623
  -648
  -673
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
 
  15
  20
  25
  31
  37
  44
  51
  58
  65
  72
  79
  86
  103
  132
  164
  199
  238
  279
  323
  370
  419
  471
  525
  582
  642
  704
  768
  835
  904
  977
Discount rate, %
 
  8.30
  8.72
  9.15
  9.61
  10.09
  10.59
  11.12
  11.68
  12.26
  12.88
  13.52
  14.20
  14.91
  15.65
  16.43
  17.26
  18.12
  19.02
  19.97
  20.97
  22.02
  23.12
  24.28
  25.49
  26.77
  28.11
  29.51
  30.99
  32.54
  34.16
PV of cash for distribution, $m
 
  14
  17
  19
  21
  23
  24
  24
  24
  23
  21
  20
  18
  17
  17
  17
  16
  14
  12
  10
  8
  6
  5
  4
  3
  2
  1
  1
  0
  0
  0
Current shareholders' claim on cash, %
  100
  71.0
  53.3
  41.9
  34.4
  29.2
  25.6
  23.0
  21.2
  20.0
  19.2
  18.7
  18.6
  18.6
  18.6
  18.6
  18.6
  18.6
  18.6
  18.6
  18.6
  18.6
  18.6
  18.6
  18.6
  18.6
  18.6
  18.6
  18.6
  18.6
  18.6

Sky Solar Holdings, Ltd. is an investment holding company. The Company is an independent power producer (IPP) engaged in developing, owning and operating solar parks. The Company focuses on the downstream solar market and develops projects primarily in Asia, South America, Europe and North America. Its subsidiaries are engaged in activities, such as selling electricity generated from solar parks owned by the Company as IPP; pipeline (including obtaining permits required for solar power projects and sourcing of solar modules), and providing engineering, procurement and construction (EPC) services ; providing operating and maintenance (O&M) services for solar parks; sales of solar modules, and building and transferring of solar parks (BT). The Company has developed over 270 solar parks with an aggregate capacity of approximately 252.8 megawatts (MW). It has over 1.3 gigawatts (GW) of solar projects in various stages of development in countries, such as Chile, Uruguay, Japan and Canada.

FINANCIAL RATIOS  of  Sky Solar Holdings ADR (SKYS)

Valuation Ratios
P/E Ratio 174.1
Price to Sales 10.6
Price to Book 5.4
Price to Tangible Book
Price to Cash Flow -16.2
Price to Free Cash Flow -8
Growth Rates
Sales Growth Rate 40.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -56.4%
Cap. Spend. - 3 Yr. Gr. Rate 4.1%
Financial Strength
Quick Ratio 1
Current Ratio 1.2
LT Debt to Equity 103.1%
Total Debt to Equity 124.2%
Interest Coverage 2
Management Effectiveness
Return On Assets 1.8%
Ret/ On Assets - 3 Yr. Avg. -7.7%
Return On Total Capital 1.6%
Ret/ On T. Cap. - 3 Yr. Avg. -14.7%
Return On Equity 3.3%
Return On Equity - 3 Yr. Avg. -21.4%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 53%
Gross Margin - 3 Yr. Avg. 50.4%
EBITDA Margin 37.9%
EBITDA Margin - 3 Yr. Avg. -41.5%
Operating Margin 19.7%
Oper. Margin - 3 Yr. Avg. -54.6%
Pre-Tax Margin 7.6%
Pre-Tax Margin - 3 Yr. Avg. -72.6%
Net Profit Margin 6.1%
Net Profit Margin - 3 Yr. Avg. -73.4%
Effective Tax Rate 40%
Eff/ Tax Rate - 3 Yr. Avg. 12.9%
Payout Ratio 0%

SKYS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SKYS stock intrinsic value calculation we used $66 million for the last fiscal year's total revenue generated by Sky Solar Holdings ADR. The default revenue input number comes from 2016 income statement of Sky Solar Holdings 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 SKYS stock valuation model: a) initial revenue growth rate of 40.4% 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 8.3%, whose default value for SKYS is calculated based on our internal credit rating of Sky Solar Holdings 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 Sky Solar Holdings 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 SKYS stock the variable cost ratio is equal to 42.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $26 million in the base year in the intrinsic value calculation for SKYS 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 4.6% for Sky Solar Holdings ADR.

Corporate tax rate of 27% is the nominal tax rate for Sky Solar Holdings 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 SKYS 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 SKYS are equal to 403%.

Life of production assets of 19 years is the average useful life of capital assets used in Sky Solar Holdings 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 SKYS 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 - $128 million for Sky Solar Holdings 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 52.446 million for Sky Solar Holdings 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 Sky Solar Holdings ADR at the current share price and the inputted number of shares is $0.1 billion.

RELATED COMPANIES Price Int.Val. Rating
ABY Atlantica Yiel 23.52 4.57  str.sell

COMPANY NEWS

▶ Why Sky Solar Holdings Ltd (SKYS) Could Be A Buy   [Oct-30-17 08:21PM  Simply Wall St.]
▶ Sky Solar Announces New Principal Executive Office Location   [Aug-31-17 09:00AM  GlobeNewswire]
Financial statements of SKYS
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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