Intrinsic value of VTTI Energy Partners - VTTI

Previous Close

$19.50

  Intrinsic Value

$15.06

stock screener

  Rating & Target

sell

-23%

  Value-price divergence*

+2%

Previous close

$19.50

 
Intrinsic value

$15.06

 
Up/down potential

-23%

 
Rating

sell

 
Value-price divergence*

+2%

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

We calculate the intrinsic value of VTTI 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 0.9

 

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, %
  7.59
  6.60
  6.44
  6.30
  6.17
  6.05
  5.94
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.18
  5.16
  5.14
  5.13
  5.11
  5.10
  5.09
  5.08
  5.08
Revenue, $m
  312
  333
  354
  376
  400
  424
  449
  475
  503
  531
  561
  592
  625
  659
  694
  732
  771
  811
  854
  899
  946
  995
  1,046
  1,100
  1,157
  1,216
  1,279
  1,344
  1,412
  1,484
  1,559
Variable operating expenses, $m
 
  191
  203
  215
  227
  241
  254
  268
  283
  299
  315
  321
  339
  357
  377
  397
  418
  440
  463
  488
  513
  540
  568
  597
  628
  660
  693
  729
  766
  805
  846
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
  183
  191
  203
  215
  227
  241
  254
  268
  283
  299
  315
  321
  339
  357
  377
  397
  418
  440
  463
  488
  513
  540
  568
  597
  628
  660
  693
  729
  766
  805
  846
Operating income, $m
  129
  141
  151
  161
  172
  183
  195
  207
  219
  232
  246
  271
  286
  301
  318
  335
  353
  371
  391
  411
  433
  455
  479
  504
  529
  557
  585
  615
  646
  679
  714
EBITDA, $m
  202
  224
  238
  253
  269
  285
  302
  320
  338
  357
  377
  398
  420
  443
  467
  492
  518
  546
  574
  605
  636
  669
  704
  740
  778
  818
  860
  904
  950
  998
  1,049
Interest expense (income), $m
  26
  26
  28
  32
  35
  38
  42
  45
  49
  53
  57
  61
  66
  71
  75
  81
  86
  92
  97
  104
  110
  117
  124
  131
  139
  147
  156
  165
  174
  184
  194
Earnings before tax, $m
  91
  116
  123
  130
  137
  145
  153
  161
  170
  179
  189
  210
  220
  231
  242
  254
  267
  280
  293
  308
  323
  338
  355
  372
  390
  409
  429
  450
  472
  495
  519
Tax expense, $m
  18
  31
  33
  35
  37
  39
  41
  44
  46
  48
  51
  57
  59
  62
  65
  69
  72
  76
  79
  83
  87
  91
  96
  100
  105
  111
  116
  122
  127
  134
  140
Net income, $m
  25
  85
  90
  95
  100
  106
  112
  118
  124
  131
  138
  153
  161
  169
  177
  186
  195
  204
  214
  225
  236
  247
  259
  272
  285
  299
  313
  329
  345
  361
  379

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  21
  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
  1,481
  1,554
  1,654
  1,758
  1,867
  1,980
  2,097
  2,220
  2,348
  2,482
  2,621
  2,767
  2,919
  3,078
  3,245
  3,419
  3,601
  3,792
  3,991
  4,201
  4,420
  4,649
  4,890
  5,142
  5,407
  5,684
  5,975
  6,279
  6,599
  6,935
  7,287
Adjusted assets (=assets-cash), $m
  1,460
  1,554
  1,654
  1,758
  1,867
  1,980
  2,097
  2,220
  2,348
  2,482
  2,621
  2,767
  2,919
  3,078
  3,245
  3,419
  3,601
  3,792
  3,991
  4,201
  4,420
  4,649
  4,890
  5,142
  5,407
  5,684
  5,975
  6,279
  6,599
  6,935
  7,287
Revenue / Adjusted assets
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
Average production assets, $m
  1,248
  1,330
  1,415
  1,504
  1,597
  1,694
  1,795
  1,900
  2,009
  2,123
  2,243
  2,367
  2,498
  2,634
  2,776
  2,925
  3,081
  3,244
  3,415
  3,594
  3,781
  3,978
  4,184
  4,399
  4,626
  4,863
  5,112
  5,372
  5,646
  5,933
  6,234
Working capital, $m
  17
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
Total debt, $m
  696
  768
  852
  939
  1,029
  1,123
  1,221
  1,324
  1,430
  1,542
  1,658
  1,780
  1,907
  2,039
  2,178
  2,323
  2,475
  2,634
  2,801
  2,975
  3,158
  3,350
  3,550
  3,761
  3,981
  4,212
  4,455
  4,709
  4,976
  5,256
  5,549
Total liabilities, $m
  1,224
  1,296
  1,380
  1,467
  1,557
  1,651
  1,749
  1,852
  1,958
  2,070
  2,186
  2,308
  2,435
  2,567
  2,706
  2,851
  3,003
  3,162
  3,329
  3,503
  3,686
  3,878
  4,078
  4,289
  4,509
  4,740
  4,983
  5,237
  5,504
  5,784
  6,077
Total equity, $m
  257
  258
  275
  292
  310
  329
  348
  369
  390
  412
  435
  459
  485
  511
  539
  568
  598
  629
  663
  697
  734
  772
  812
  854
  897
  944
  992
  1,042
  1,095
  1,151
  1,210
Total liabilities and equity, $m
  1,481
  1,554
  1,655
  1,759
  1,867
  1,980
  2,097
  2,221
  2,348
  2,482
  2,621
  2,767
  2,920
  3,078
  3,245
  3,419
  3,601
  3,791
  3,992
  4,200
  4,420
  4,650
  4,890
  5,143
  5,406
  5,684
  5,975
  6,279
  6,599
  6,935
  7,287
Debt-to-equity ratio
  2.708
  2.980
  3.100
  3.220
  3.320
  3.420
  3.510
  3.590
  3.670
  3.740
  3.810
  3.870
  3.930
  3.990
  4.040
  4.090
  4.140
  4.190
  4.230
  4.270
  4.300
  4.340
  4.370
  4.410
  4.440
  4.460
  4.490
  4.520
  4.540
  4.570
  4.590
Adjusted equity ratio
  0.162
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  25
  85
  90
  95
  100
  106
  112
  118
  124
  131
  138
  153
  161
  169
  177
  186
  195
  204
  214
  225
  236
  247
  259
  272
  285
  299
  313
  329
  345
  361
  379
Depreciation, amort., depletion, $m
  73
  82
  87
  92
  97
  102
  107
  113
  119
  125
  131
  127
  134
  142
  149
  157
  166
  174
  184
  193
  203
  214
  225
  237
  249
  261
  275
  289
  304
  319
  335
Funds from operations, $m
  136
  167
  177
  187
  197
  208
  219
  231
  243
  256
  269
  280
  295
  310
  326
  343
  360
  379
  398
  418
  439
  461
  484
  508
  534
  560
  588
  617
  648
  680
  714
Change in working capital, $m
  -20
  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 operations, $m
  156
  167
  176
  186
  197
  208
  219
  231
  243
  256
  269
  280
  295
  310
  326
  343
  360
  378
  398
  418
  439
  461
  484
  508
  533
  560
  588
  617
  648
  680
  714
Maintenance CAPEX, $m
  0
  -67
  -71
  -76
  -81
  -86
  -91
  -96
  -102
  -108
  -114
  -121
  -127
  -134
  -142
  -149
  -157
  -166
  -174
  -184
  -193
  -203
  -214
  -225
  -237
  -249
  -261
  -275
  -289
  -304
  -319
New CAPEX, $m
  -67
  -82
  -86
  -89
  -93
  -97
  -101
  -105
  -110
  -114
  -119
  -125
  -130
  -136
  -142
  -149
  -156
  -163
  -171
  -179
  -187
  -196
  -206
  -216
  -226
  -237
  -249
  -261
  -274
  -287
  -301
Cash from investing activities, $m
  -163
  -149
  -157
  -165
  -174
  -183
  -192
  -201
  -212
  -222
  -233
  -246
  -257
  -270
  -284
  -298
  -313
  -329
  -345
  -363
  -380
  -399
  -420
  -441
  -463
  -486
  -510
  -536
  -563
  -591
  -620
Free cash flow, $m
  -7
  17
  19
  21
  23
  25
  27
  29
  31
  33
  36
  35
  37
  40
  42
  44
  47
  50
  52
  55
  58
  61
  64
  67
  71
  74
  78
  81
  85
  89
  94
Issuance/(repayment) of debt, $m
  14
  78
  83
  87
  90
  94
  98
  102
  107
  111
  116
  122
  127
  133
  139
  145
  152
  159
  167
  174
  183
  191
  201
  210
  221
  231
  242
  254
  267
  280
  294
Issuance/(repurchase) of shares, $m
  103
  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  
  26
  78
  83
  87
  90
  94
  98
  102
  107
  111
  116
  122
  127
  133
  139
  145
  152
  159
  167
  174
  183
  191
  201
  210
  221
  231
  242
  254
  267
  280
  294
Total cash flow (excl. dividends), $m
  19
  96
  103
  108
  114
  119
  125
  131
  138
  145
  152
  156
  164
  172
  181
  190
  199
  209
  219
  229
  241
  252
  265
  278
  291
  305
  320
  336
  352
  369
  387
Retained Cash Flow (-), $m
  -31
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -58
Prev. year cash balance distribution, $m
 
  15
  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
 
  95
  86
  91
  96
  101
  106
  111
  117
  123
  129
  132
  139
  146
  153
  161
  169
  177
  186
  195
  204
  214
  225
  236
  247
  259
  272
  285
  299
  313
  329
Discount rate, %
 
  9.30
  9.77
  10.25
  10.77
  11.30
  11.87
  12.46
  13.09
  13.74
  14.43
  15.15
  15.91
  16.70
  17.54
  18.41
  19.33
  20.30
  21.32
  22.38
  23.50
  24.68
  25.91
  27.20
  28.57
  29.99
  31.49
  33.07
  34.72
  36.46
  38.28
PV of cash for distribution, $m
 
  87
  71
  68
  63
  59
  54
  49
  44
  38
  33
  28
  24
  20
  16
  13
  10
  8
  6
  4
  3
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
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

VTTI Energy Partners LP provides terminaling services for third party companies engaged in the production, processing, distribution and marketing of refined petroleum products and crude oil. The Company operates through the segment of energy storage terminaling business. Its assets consist of approximately 42.6% interest in VTTI MLP B.V., which owns a portfolio of over six terminals with over 400 tanks and approximately 35.7 million barrels of refined petroleum product and crude oil storage capacity located in Europe, the Middle East, Asia and North America. Its terminals are located in international supply and demand centers for refined petroleum products and crude oil and provide midstream infrastructure services to its customers at these international market hubs. It provides storage and terminaling services for energy industry participants, including marketing companies, integrated oil companies, national oil companies, distributors, and chemical and petrochemical companies.

FINANCIAL RATIOS  of  VTTI Energy Partners (VTTI)

Valuation Ratios
P/E Ratio 35.7
Price to Sales 2.9
Price to Book 3.5
Price to Tangible Book
Price to Cash Flow 5.7
Price to Free Cash Flow 10
Growth Rates
Sales Growth Rate 7.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -17.3%
Cap. Spend. - 3 Yr. Gr. Rate -4.6%
Financial Strength
Quick Ratio 4
Current Ratio 0.3
LT Debt to Equity 268.5%
Total Debt to Equity 270.8%
Interest Coverage 5
Management Effectiveness
Return On Assets 3%
Ret/ On Assets - 3 Yr. Avg. 2.9%
Return On Total Capital 2.7%
Ret/ On T. Cap. - 3 Yr. Avg. 2.9%
Return On Equity 10.4%
Return On Equity - 3 Yr. Avg. 9.6%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 74.4%
Gross Margin - 3 Yr. Avg. 72.5%
EBITDA Margin 60.9%
EBITDA Margin - 3 Yr. Avg. 61.4%
Operating Margin 41.3%
Oper. Margin - 3 Yr. Avg. 40.2%
Pre-Tax Margin 29.2%
Pre-Tax Margin - 3 Yr. Avg. 30.5%
Net Profit Margin 8%
Net Profit Margin - 3 Yr. Avg. 9.8%
Effective Tax Rate 19.8%
Eff/ Tax Rate - 3 Yr. Avg. 25.5%
Payout Ratio 216%

VTTI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VTTI stock intrinsic value calculation we used $312 million for the last fiscal year's total revenue generated by VTTI Energy Partners. The default revenue input number comes from 2016 income statement of VTTI Energy Partners. 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 VTTI stock valuation model: a) initial revenue growth rate of 6.6% 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 9.3%, whose default value for VTTI is calculated based on our internal credit rating of VTTI Energy Partners, 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 VTTI Energy Partners.
    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 VTTI stock the variable cost ratio is equal to 57.7%.

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 VTTI 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 3.7% for VTTI Energy Partners.

Corporate tax rate of 27% is the nominal tax rate for VTTI Energy Partners. 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 VTTI 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 VTTI are equal to 399.8%.

Life of production assets of 18.6 years is the average useful life of capital assets used in VTTI Energy Partners 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 VTTI is equal to 0.6%. 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 - $257 million for VTTI Energy Partners - 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 46.654 million for VTTI Energy Partners 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 VTTI Energy Partners at the current share price and the inputted number of shares is $0.9 billion.

RELATED COMPANIES Price Int.Val. Rating
TLP Transmontaigne 43.16 5.48  str.sell
PSXP Phillips 66 Pa 51.91 12.41  str.sell
NS NuSTAR Energy 37.34 9.81  str.sell
MMP Magellan Midst 69.16 27.80  str.sell
HEP Holly Energy P 33.85 21.59  sell
SEMG Semgroup Cl A 27.90 4.49  str.sell
BPL Buckeye Partne 55.04 14.05  str.sell
EPD Enterprise Pro 26.33 1.90  str.sell
Financial statements of VTTI
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.