Intrinsic value of VTTI Energy Partners - VTTI

Previous Close

$19.40

  Intrinsic Value

$13.82

stock screener

  Rating & Target

sell

-29%

  Value-price divergence*

-24%

Previous close

$19.40

 
Intrinsic value

$13.82

 
Up/down potential

-29%

 
Rating

sell

 
Value-price divergence*

-24%

*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
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  312
  318
  326
  334
  343
  354
  365
  378
  391
  406
  421
  438
  456
  474
  495
  516
  538
  562
  588
  614
  643
  672
  704
  737
  772
  809
  847
  888
  931
  976
  1,023
Variable operating expenses, $m
 
  183
  187
  192
  197
  203
  209
  216
  223
  231
  239
  237
  247
  257
  268
  280
  292
  305
  319
  333
  349
  365
  382
  400
  419
  439
  460
  482
  505
  529
  555
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
  183
  187
  192
  197
  203
  209
  216
  223
  231
  239
  237
  247
  257
  268
  280
  292
  305
  319
  333
  349
  365
  382
  400
  419
  439
  460
  482
  505
  529
  555
Operating income, $m
  129
  135
  138
  142
  146
  151
  156
  162
  168
  175
  182
  200
  208
  217
  226
  236
  246
  257
  269
  281
  294
  308
  322
  337
  353
  370
  388
  406
  426
  447
  468
EBITDA, $m
  202
  214
  219
  225
  231
  238
  246
  254
  263
  273
  283
  294
  306
  319
  333
  347
  362
  378
  395
  413
  432
  452
  473
  496
  519
  544
  570
  597
  626
  656
  688
Interest expense (income), $m
  26
  26
  26
  27
  29
  30
  31
  33
  35
  37
  39
  41
  44
  46
  49
  52
  55
  58
  62
  65
  69
  73
  77
  82
  87
  92
  97
  103
  109
  115
  121
Earnings before tax, $m
  91
  109
  112
  115
  118
  121
  125
  129
  133
  138
  143
  159
  165
  171
  177
  184
  192
  199
  207
  216
  225
  235
  245
  255
  267
  278
  291
  304
  317
  332
  347
Tax expense, $m
  18
  30
  30
  31
  32
  33
  34
  35
  36
  37
  39
  43
  45
  46
  48
  50
  52
  54
  56
  58
  61
  63
  66
  69
  72
  75
  78
  82
  86
  90
  94
Net income, $m
  25
  80
  82
  84
  86
  88
  91
  94
  97
  101
  104
  116
  120
  125
  130
  135
  140
  145
  151
  158
  164
  171
  179
  186
  195
  203
  212
  222
  232
  242
  253

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
  1,487
  1,521
  1,560
  1,604
  1,653
  1,706
  1,764
  1,827
  1,895
  1,968
  2,046
  2,129
  2,217
  2,311
  2,411
  2,516
  2,628
  2,746
  2,871
  3,003
  3,142
  3,289
  3,444
  3,607
  3,779
  3,960
  4,150
  4,350
  4,561
  4,782
Adjusted assets (=assets-cash), $m
  1,460
  1,487
  1,521
  1,560
  1,604
  1,653
  1,706
  1,764
  1,827
  1,895
  1,968
  2,046
  2,129
  2,217
  2,311
  2,411
  2,516
  2,628
  2,746
  2,871
  3,003
  3,142
  3,289
  3,444
  3,607
  3,779
  3,960
  4,150
  4,350
  4,561
  4,782
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
  1,272
  1,302
  1,335
  1,373
  1,414
  1,460
  1,510
  1,563
  1,621
  1,684
  1,750
  1,821
  1,897
  1,977
  2,063
  2,153
  2,249
  2,350
  2,457
  2,570
  2,689
  2,814
  2,947
  3,086
  3,233
  3,388
  3,551
  3,722
  3,902
  4,092
Working capital, $m
  17
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
Total debt, $m
  696
  712
  741
  773
  810
  851
  895
  944
  996
  1,052
  1,113
  1,178
  1,247
  1,321
  1,399
  1,482
  1,571
  1,664
  1,762
  1,867
  1,977
  2,093
  2,215
  2,344
  2,480
  2,624
  2,774
  2,933
  3,100
  3,276
  3,461
Total liabilities, $m
  1,224
  1,240
  1,269
  1,301
  1,338
  1,379
  1,423
  1,472
  1,524
  1,580
  1,641
  1,706
  1,775
  1,849
  1,927
  2,010
  2,099
  2,192
  2,290
  2,395
  2,505
  2,621
  2,743
  2,872
  3,008
  3,152
  3,302
  3,461
  3,628
  3,804
  3,989
Total equity, $m
  257
  247
  253
  259
  266
  274
  283
  293
  303
  315
  327
  340
  353
  368
  384
  400
  418
  436
  456
  477
  499
  522
  546
  572
  599
  627
  657
  689
  722
  757
  794
Total liabilities and equity, $m
  1,481
  1,487
  1,522
  1,560
  1,604
  1,653
  1,706
  1,765
  1,827
  1,895
  1,968
  2,046
  2,128
  2,217
  2,311
  2,410
  2,517
  2,628
  2,746
  2,872
  3,004
  3,143
  3,289
  3,444
  3,607
  3,779
  3,959
  4,150
  4,350
  4,561
  4,783
Debt-to-equity ratio
  2.708
  2.890
  2.930
  2.990
  3.040
  3.100
  3.160
  3.220
  3.280
  3.350
  3.410
  3.470
  3.530
  3.590
  3.650
  3.700
  3.760
  3.810
  3.870
  3.920
  3.970
  4.010
  4.060
  4.100
  4.140
  4.180
  4.220
  4.260
  4.290
  4.330
  4.360
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
  80
  82
  84
  86
  88
  91
  94
  97
  101
  104
  116
  120
  125
  130
  135
  140
  145
  151
  158
  164
  171
  179
  186
  195
  203
  212
  222
  232
  242
  253
Depreciation, amort., depletion, $m
  73
  79
  81
  83
  85
  87
  89
  92
  95
  98
  101
  94
  98
  102
  106
  111
  116
  121
  126
  132
  138
  145
  151
  158
  166
  174
  182
  191
  200
  210
  220
Funds from operations, $m
  136
  159
  162
  166
  171
  175
  180
  186
  192
  199
  206
  210
  218
  227
  236
  245
  256
  266
  278
  290
  302
  316
  330
  345
  360
  377
  394
  413
  432
  452
  473
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
  159
  162
  166
  170
  175
  180
  186
  192
  199
  206
  210
  218
  227
  236
  245
  255
  266
  278
  290
  302
  316
  330
  345
  360
  377
  394
  412
  432
  452
  473
Maintenance CAPEX, $m
  0
  -67
  -68
  -70
  -72
  -74
  -76
  -78
  -81
  -84
  -87
  -91
  -94
  -98
  -102
  -106
  -111
  -116
  -121
  -126
  -132
  -138
  -145
  -151
  -158
  -166
  -174
  -182
  -191
  -200
  -210
New CAPEX, $m
  -67
  -25
  -29
  -33
  -38
  -42
  -46
  -50
  -54
  -58
  -62
  -67
  -71
  -76
  -80
  -85
  -90
  -96
  -101
  -107
  -113
  -119
  -126
  -132
  -139
  -147
  -155
  -163
  -171
  -180
  -190
Cash from investing activities, $m
  -163
  -92
  -97
  -103
  -110
  -116
  -122
  -128
  -135
  -142
  -149
  -158
  -165
  -174
  -182
  -191
  -201
  -212
  -222
  -233
  -245
  -257
  -271
  -283
  -297
  -313
  -329
  -345
  -362
  -380
  -400
Free cash flow, $m
  -7
  67
  65
  63
  61
  60
  59
  58
  57
  57
  56
  53
  53
  53
  53
  54
  54
  55
  56
  56
  57
  58
  60
  61
  62
  64
  66
  67
  69
  71
  74
Issuance/(repayment) of debt, $m
  14
  22
  29
  33
  37
  41
  45
  48
  52
  57
  61
  65
  69
  74
  78
  83
  88
  93
  99
  104
  110
  116
  122
  129
  136
  143
  151
  159
  167
  176
  185
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
  22
  29
  33
  37
  41
  45
  48
  52
  57
  61
  65
  69
  74
  78
  83
  88
  93
  99
  104
  110
  116
  122
  129
  136
  143
  151
  159
  167
  176
  185
Total cash flow (excl. dividends), $m
  19
  89
  93
  95
  98
  100
  103
  106
  110
  113
  117
  118
  122
  127
  132
  137
  142
  148
  154
  161
  167
  174
  182
  190
  198
  207
  216
  226
  236
  247
  259
Retained Cash Flow (-), $m
  -31
  -5
  -6
  -6
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
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
 
  99
  88
  89
  90
  92
  94
  97
  99
  102
  105
  105
  108
  112
  116
  120
  125
  129
  135
  140
  145
  151
  158
  164
  171
  179
  186
  195
  203
  212
  222
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
 
  91
  73
  66
  60
  54
  48
  42
  37
  32
  27
  22
  18
  15
  12
  10
  7
  6
  4
  3
  2
  1
  1
  1
  0
  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 acquires, develops, owns, and operates refined petroleum product and crude oil terminaling and related energy infrastructure assets. The company owns a portfolio of 6 terminals with 396 tanks and 35.7 million barrels of refined petroleum product and crude oil storage capacity located in Europe, the Middle East, Asia, and North America. It provides terminaling services for various energy industry participants, including marketing companies, integrated oil companies, national oil companies, distributors, and chemical and petrochemical companies. VTTI Energy Partners GP LLC operates as the general partner of VTTI Energy Partners LP. The company was founded in 2014 and is based in London, the United Kingdom.

FINANCIAL RATIOS  of  VTTI Energy Partners (VTTI)

Valuation Ratios
P/E Ratio 35.5
Price to Sales 2.8
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 2% 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 45.919 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.

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Stock chart of VTTI 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.

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