Intrinsic value of China Southern Airlines ADR - ZNH

Previous Close

$35.17

  Intrinsic Value

premium content

  Rating & Target

premium content

  Value-price divergence*

premium content

Previous close

$35.17

 
Intrinsic value

$18.53

 
Up/down potential

-47%

 
Rating

sell

 
Value-price divergence* premium content

Premium access subscription - $499/yr

please register and log in before paying

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

We calculate the intrinsic value of ZNH 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 10.8

 

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, %
  2.98
  3.00
  3.20
  3.38
  3.54
  3.69
  3.82
  3.94
  4.04
  4.14
  4.23
  4.30
  4.37
  4.44
  4.49
  4.54
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.80
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
  4.91
Revenue, $m
  16,635
  17,134
  17,682
  18,280
  18,927
  19,625
  20,375
  21,177
  22,033
  22,945
  23,915
  24,944
  26,035
  27,189
  28,410
  29,701
  31,064
  32,502
  34,018
  35,617
  37,302
  39,076
  40,945
  42,911
  44,981
  47,158
  49,448
  51,857
  54,389
  57,052
  59,851
Variable operating expenses, $m
 
  15,078
  15,560
  16,086
  16,656
  17,270
  17,929
  18,635
  19,389
  20,191
  21,044
  21,947
  22,906
  23,922
  24,997
  26,132
  27,331
  28,596
  29,931
  31,338
  32,820
  34,381
  36,025
  37,755
  39,576
  41,492
  43,507
  45,626
  47,854
  50,197
  52,659
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
  14,797
  15,078
  15,560
  16,086
  16,656
  17,270
  17,929
  18,635
  19,389
  20,191
  21,044
  21,947
  22,906
  23,922
  24,997
  26,132
  27,331
  28,596
  29,931
  31,338
  32,820
  34,381
  36,025
  37,755
  39,576
  41,492
  43,507
  45,626
  47,854
  50,197
  52,659
Operating income, $m
  1,838
  2,056
  2,122
  2,194
  2,272
  2,356
  2,446
  2,542
  2,645
  2,754
  2,871
  2,997
  3,128
  3,267
  3,414
  3,569
  3,733
  3,905
  4,088
  4,280
  4,482
  4,695
  4,920
  5,156
  5,405
  5,666
  5,942
  6,231
  6,535
  6,855
  7,191
EBITDA, $m
  3,573
  3,835
  3,958
  4,091
  4,236
  4,393
  4,560
  4,740
  4,932
  5,136
  5,353
  5,583
  5,827
  6,086
  6,359
  6,648
  6,953
  7,275
  7,614
  7,972
  8,349
  8,746
  9,164
  9,605
  10,068
  10,555
  11,068
  11,607
  12,174
  12,769
  13,396
Interest expense (income), $m
  329
  524
  548
  573
  601
  631
  664
  699
  736
  776
  818
  863
  911
  962
  1,016
  1,072
  1,132
  1,196
  1,263
  1,333
  1,408
  1,486
  1,569
  1,656
  1,747
  1,843
  1,945
  2,051
  2,163
  2,281
  2,405
Earnings before tax, $m
  1,108
  1,532
  1,574
  1,621
  1,671
  1,724
  1,782
  1,843
  1,909
  1,979
  2,053
  2,134
  2,217
  2,305
  2,398
  2,496
  2,600
  2,709
  2,825
  2,946
  3,074
  3,209
  3,351
  3,500
  3,658
  3,823
  3,997
  4,180
  4,372
  4,574
  4,786
Tax expense, $m
  255
  414
  425
  438
  451
  466
  481
  498
  515
  534
  554
  576
  599
  622
  647
  674
  702
  732
  763
  795
  830
  866
  905
  945
  988
  1,032
  1,079
  1,128
  1,180
  1,235
  1,292
Net income, $m
  730
  1,118
  1,149
  1,183
  1,219
  1,259
  1,301
  1,346
  1,394
  1,444
  1,499
  1,558
  1,618
  1,683
  1,751
  1,822
  1,898
  1,978
  2,062
  2,151
  2,244
  2,343
  2,446
  2,555
  2,670
  2,791
  2,918
  3,051
  3,191
  3,339
  3,494

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  601
  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
  28,998
  29,239
  30,175
  31,195
  32,299
  33,491
  34,770
  36,139
  37,600
  39,156
  40,810
  42,566
  44,428
  46,398
  48,482
  50,684
  53,010
  55,464
  58,052
  60,780
  63,655
  66,683
  69,871
  73,227
  76,759
  80,474
  84,382
  88,493
  92,814
  97,358
  102,134
Adjusted assets (=assets-cash), $m
  28,397
  29,239
  30,175
  31,195
  32,299
  33,491
  34,770
  36,139
  37,600
  39,156
  40,810
  42,566
  44,428
  46,398
  48,482
  50,684
  53,010
  55,464
  58,052
  60,780
  63,655
  66,683
  69,871
  73,227
  76,759
  80,474
  84,382
  88,493
  92,814
  97,358
  102,134
Revenue / Adjusted assets
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
Average production assets, $m
  10,353
  10,657
  10,998
  11,370
  11,773
  12,207
  12,673
  13,172
  13,705
  14,272
  14,875
  15,515
  16,193
  16,912
  17,671
  18,474
  19,322
  20,216
  21,159
  22,154
  23,202
  24,305
  25,468
  26,691
  27,978
  29,332
  30,757
  32,255
  33,830
  35,486
  37,227
Working capital, $m
  -7,837
  -3,410
  -3,519
  -3,638
  -3,767
  -3,905
  -4,055
  -4,214
  -4,385
  -4,566
  -4,759
  -4,964
  -5,181
  -5,411
  -5,654
  -5,910
  -6,182
  -6,468
  -6,770
  -7,088
  -7,423
  -7,776
  -8,148
  -8,539
  -8,951
  -9,384
  -9,840
  -10,319
  -10,823
  -11,353
  -11,910
Total debt, $m
  15,585
  15,651
  16,380
  17,175
  18,035
  18,963
  19,960
  21,026
  22,164
  23,377
  24,665
  26,033
  27,483
  29,018
  30,641
  32,357
  34,169
  36,080
  38,096
  40,222
  42,461
  44,820
  47,304
  49,918
  52,669
  55,563
  58,608
  61,810
  65,176
  68,716
  72,436
Total liabilities, $m
  22,712
  22,777
  23,506
  24,301
  25,161
  26,089
  27,086
  28,152
  29,290
  30,503
  31,791
  33,159
  34,609
  36,144
  37,767
  39,483
  41,295
  43,206
  45,222
  47,348
  49,587
  51,946
  54,430
  57,044
  59,795
  62,689
  65,734
  68,936
  72,302
  75,842
  79,562
Total equity, $m
  6,287
  6,462
  6,669
  6,894
  7,138
  7,401
  7,684
  7,987
  8,310
  8,653
  9,019
  9,407
  9,818
  10,254
  10,715
  11,201
  11,715
  12,257
  12,829
  13,432
  14,068
  14,737
  15,442
  16,183
  16,964
  17,785
  18,649
  19,557
  20,512
  21,516
  22,572
Total liabilities and equity, $m
  28,999
  29,239
  30,175
  31,195
  32,299
  33,490
  34,770
  36,139
  37,600
  39,156
  40,810
  42,566
  44,427
  46,398
  48,482
  50,684
  53,010
  55,463
  58,051
  60,780
  63,655
  66,683
  69,872
  73,227
  76,759
  80,474
  84,383
  88,493
  92,814
  97,358
  102,134
Debt-to-equity ratio
  2.479
  2.420
  2.460
  2.490
  2.530
  2.560
  2.600
  2.630
  2.670
  2.700
  2.730
  2.770
  2.800
  2.830
  2.860
  2.890
  2.920
  2.940
  2.970
  2.990
  3.020
  3.040
  3.060
  3.080
  3.100
  3.120
  3.140
  3.160
  3.180
  3.190
  3.210
Adjusted equity ratio
  0.200
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221
  0.221

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  730
  1,118
  1,149
  1,183
  1,219
  1,259
  1,301
  1,346
  1,394
  1,444
  1,499
  1,558
  1,618
  1,683
  1,751
  1,822
  1,898
  1,978
  2,062
  2,151
  2,244
  2,343
  2,446
  2,555
  2,670
  2,791
  2,918
  3,051
  3,191
  3,339
  3,494
Depreciation, amort., depletion, $m
  1,735
  1,779
  1,836
  1,898
  1,965
  2,037
  2,115
  2,198
  2,287
  2,381
  2,482
  2,586
  2,699
  2,819
  2,945
  3,079
  3,220
  3,369
  3,527
  3,692
  3,867
  4,051
  4,245
  4,448
  4,663
  4,889
  5,126
  5,376
  5,638
  5,914
  6,205
Funds from operations, $m
  3,219
  2,897
  2,985
  3,081
  3,184
  3,296
  3,416
  3,544
  3,680
  3,826
  3,980
  4,144
  4,317
  4,501
  4,696
  4,901
  5,118
  5,347
  5,589
  5,843
  6,111
  6,394
  6,691
  7,004
  7,333
  7,679
  8,044
  8,427
  8,830
  9,253
  9,699
Change in working capital, $m
  -215
  -99
  -109
  -119
  -129
  -139
  -149
  -160
  -170
  -181
  -193
  -205
  -217
  -230
  -243
  -257
  -271
  -286
  -302
  -318
  -335
  -353
  -372
  -391
  -412
  -433
  -456
  -479
  -504
  -530
  -557
Cash from operations, $m
  3,434
  -7,356
  3,094
  3,200
  3,313
  3,435
  3,565
  3,703
  3,851
  4,007
  4,173
  4,348
  4,534
  4,731
  4,939
  5,158
  5,389
  5,633
  5,890
  6,161
  6,446
  6,747
  7,063
  7,395
  7,745
  8,113
  8,500
  8,906
  9,334
  9,783
  10,256
Maintenance CAPEX, $m
  0
  -1,725
  -1,776
  -1,833
  -1,895
  -1,962
  -2,035
  -2,112
  -2,195
  -2,284
  -2,379
  -2,479
  -2,586
  -2,699
  -2,819
  -2,945
  -3,079
  -3,220
  -3,369
  -3,527
  -3,692
  -3,867
  -4,051
  -4,245
  -4,448
  -4,663
  -4,889
  -5,126
  -5,376
  -5,638
  -5,914
New CAPEX, $m
  -1,756
  -305
  -341
  -372
  -403
  -434
  -466
  -499
  -533
  -567
  -603
  -640
  -678
  -718
  -760
  -803
  -848
  -894
  -943
  -994
  -1,048
  -1,104
  -1,162
  -1,223
  -1,287
  -1,354
  -1,424
  -1,498
  -1,575
  -1,656
  -1,741
Cash from investing activities, $m
  -1,003
  -2,030
  -2,117
  -2,205
  -2,298
  -2,396
  -2,501
  -2,611
  -2,728
  -2,851
  -2,982
  -3,119
  -3,264
  -3,417
  -3,579
  -3,748
  -3,927
  -4,114
  -4,312
  -4,521
  -4,740
  -4,971
  -5,213
  -5,468
  -5,735
  -6,017
  -6,313
  -6,624
  -6,951
  -7,294
  -7,655
Free cash flow, $m
  2,431
  -9,386
  977
  995
  1,015
  1,038
  1,064
  1,092
  1,123
  1,156
  1,192
  1,229
  1,270
  1,314
  1,361
  1,410
  1,463
  1,519
  1,578
  1,640
  1,706
  1,776
  1,850
  1,927
  2,009
  2,095
  2,186
  2,282
  2,383
  2,489
  2,600
Issuance/(repayment) of debt, $m
  -4,087
  667
  729
  795
  861
  928
  996
  1,066
  1,138
  1,212
  1,289
  1,368
  1,450
  1,535
  1,623
  1,716
  1,812
  1,912
  2,016
  2,125
  2,239
  2,359
  2,484
  2,614
  2,751
  2,894
  3,044
  3,202
  3,367
  3,539
  3,721
Issuance/(repurchase) of shares, $m
  0
  8,894
  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  
  -3,950
  9,561
  729
  795
  861
  928
  996
  1,066
  1,138
  1,212
  1,289
  1,368
  1,450
  1,535
  1,623
  1,716
  1,812
  1,912
  2,016
  2,125
  2,239
  2,359
  2,484
  2,614
  2,751
  2,894
  3,044
  3,202
  3,367
  3,539
  3,721
Total cash flow (excl. dividends), $m
  -1,513
  -8,719
  1,706
  1,789
  1,876
  1,966
  2,060
  2,158
  2,261
  2,368
  2,480
  2,597
  2,720
  2,849
  2,984
  3,126
  3,274
  3,430
  3,594
  3,766
  3,946
  4,135
  4,333
  4,542
  4,760
  4,990
  5,231
  5,484
  5,749
  6,028
  6,321
Retained Cash Flow (-), $m
  -638
  -175
  -207
  -225
  -244
  -263
  -283
  -303
  -323
  -344
  -366
  -388
  -411
  -435
  -461
  -487
  -514
  -542
  -572
  -603
  -635
  -669
  -705
  -742
  -780
  -821
  -864
  -908
  -955
  -1,004
  -1,056
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
 
  0
  1,499
  1,564
  1,632
  1,703
  1,778
  1,856
  1,938
  2,024
  2,115
  2,209
  2,309
  2,413
  2,523
  2,639
  2,760
  2,888
  3,022
  3,163
  3,310
  3,466
  3,629
  3,800
  3,980
  4,169
  4,367
  4,575
  4,794
  5,024
  5,265
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
 
  0
  1,244
  1,167
  1,084
  997
  907
  816
  725
  635
  549
  468
  393
  324
  263
  209
  163
  125
  93
  68
  49
  34
  23
  15
  10
  6
  4
  2
  1
  1
  0
Current shareholders' claim on cash, %
  100
  54.8
  54.8
  54.8
  54.8
  54.8
  54.8
  54.8
  54.8
  54.8
  54.8
  54.8
  54.8
  54.8
  54.8
  54.8
  54.8
  54.8
  54.8
  54.8
  54.8
  54.8
  54.8
  54.8
  54.8
  54.8
  54.8
  54.8
  54.8
  54.8
  54.8

China Southern Airlines Company Limited provides air transportation services in the People’s Republic of China and internationally. The company operates through Airline Transportation Operations and Other segments. It offers passenger, cargo, mail delivery, and other transportation services. The company also provides ground, cargo handling, air catering, logistic, aircraft and engine maintenance, flight simulation, and other services, as well as property management services; and is involved in hotel and tour operations. As of February 6, 2017, it operated 700 passenger and cargo transport aircraft. China Southern Airlines Company Limited was founded in 1995 and is headquartered in Guangzhou, the People’s Republic of China. China Southern Airlines Co. Ltd. operates as a subsidiary of China Southern Air Holding Company.

FINANCIAL RATIOS  of  China Southern Airlines ADR (ZNH)

Valuation Ratios
P/E Ratio 473
Price to Sales 20.8
Price to Book 54.9
Price to Tangible Book
Price to Cash Flow 100.5
Price to Free Cash Flow 205.8
Growth Rates
Sales Growth Rate 3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 40.4%
Cap. Spend. - 3 Yr. Gr. Rate -5.1%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 166.3%
Total Debt to Equity 247.9%
Interest Coverage 4
Management Effectiveness
Return On Assets 3.5%
Ret/ On Assets - 3 Yr. Avg. 2.7%
Return On Total Capital 3.5%
Ret/ On T. Cap. - 3 Yr. Avg. 2.5%
Return On Equity 12.2%
Return On Equity - 3 Yr. Avg. 9.1%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 27.8%
Gross Margin - 3 Yr. Avg. 31.2%
EBITDA Margin 19.1%
EBITDA Margin - 3 Yr. Avg. 16.4%
Operating Margin 11%
Oper. Margin - 3 Yr. Avg. 9.2%
Pre-Tax Margin 6.7%
Pre-Tax Margin - 3 Yr. Avg. 5%
Net Profit Margin 4.4%
Net Profit Margin - 3 Yr. Avg. 3.1%
Effective Tax Rate 23%
Eff/ Tax Rate - 3 Yr. Avg. 22%
Payout Ratio 7.8%

ZNH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ZNH stock intrinsic value calculation we used $16635 million for the last fiscal year's total revenue generated by China Southern Airlines ADR. The default revenue input number comes from 2016 income statement of China Southern Airlines 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 ZNH stock valuation model: a) initial revenue growth rate of 3% 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 ZNH is calculated based on our internal credit rating of China Southern Airlines 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 China Southern Airlines 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 ZNH stock the variable cost ratio is equal to 88%.

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 ZNH 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 3.5% for China Southern Airlines ADR.

Corporate tax rate of 27% is the nominal tax rate for China Southern Airlines 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 ZNH 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 ZNH are equal to 62.2%.

Life of production assets of 6 years is the average useful life of capital assets used in China Southern Airlines 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 ZNH is equal to -19.9%. 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 - $6287 million for China Southern Airlines 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 307.068 million for China Southern Airlines 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 China Southern Airlines ADR at the current share price and the inputted number of shares is $10.8 billion.


Premium access subscription - $499/yr

please register and log in before paying
RELATED COMPANIES Price Int.Val. Rating
CEA China Eastern 27.42 prem.  prem.

COMPANY NEWS

▶ Asia's Flagship Carriers Leak Red Ink   [May-23-17 10:00AM  TheStreet.com]
▶ U.S. laptop ban could cost economy $500,000,000 a year   [May-12-17 01:36PM  Yahoo Finance]
▶ [$$] China's Airlines Lead the World in Delays   [May-01-17 06:00AM  The Wall Street Journal]
▶ China Eastern's Promise Fades   [Mar-30-17 09:43PM  Bloomberg]
▶ [$$] American Airlines to Invest $200 Million in China Southern   [04:43AM  at The Wall Street Journal]
▶ [$$] China Southern/AA: stakes on a plane   [06:26AM  at Financial Times]
▶ Can Chinese Airline Stocks Soar Higher in 2017?   [Jan-25-17 01:40AM  at Barrons.com]
▶ Hang Seng Gains As China Pushes For Mixed Ownership Reform   [Dec-20-16 10:44PM  at Barrons.com]
▶ First China-Adelaide flight touches down   [Dec-12-16 06:32PM  AAP]
▶ Hedge Funds Are Coming Back to Seattle Genetics, Inc. (SGEN)   [Dec-01-16 02:12PM  at Insider Monkey]
▶ BA to Supply ZNH with Dreamliner Planes (BA, ZNH)   [Oct-12-16 01:50PM  at Investopedia]
▶ 2 Chinese Airline Stocks Set to Gain Altitude   [Sep-14-16 12:01AM  at Barrons.com]
▶ Chinese Airlines Hit Stall Speed   [Aug-30-16 04:09AM  at Bloomberg]
Stock chart of ZNH Financial statements of ZNH Annual reports of ZNH
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.