Intrinsic value of Braskem ADR - BAK

Previous Close

$28.69

  Intrinsic Value

$71.72

stock screener

  Rating & Target

str. buy

+150%

Previous close

$28.69

 
Intrinsic value

$71.72

 
Up/down potential

+150%

 
Rating

str. buy

We calculate the intrinsic value of BAK 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 22.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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, %
  21.50
  19.85
  18.37
  17.03
  15.83
  14.74
  13.77
  12.89
  12.10
  11.39
  10.75
  10.18
  9.66
  9.19
  8.77
  8.40
  8.06
  7.75
  7.48
  7.23
  7.01
  6.81
  6.62
  6.46
  6.32
  6.18
  6.07
  5.96
  5.86
  5.78
Revenue, $m
  17,786
  21,317
  25,232
  29,528
  34,202
  39,244
  44,647
  50,403
  56,503
  62,940
  69,709
  76,803
  84,223
  91,966
  100,036
  108,436
  117,173
  126,256
  135,696
  145,505
  155,699
  166,295
  177,312
  188,771
  200,694
  213,106
  226,033
  239,503
  253,547
  268,194
Variable operating expenses, $m
  9,444
  11,301
  13,361
  15,621
  18,080
  20,733
  23,575
  26,604
  29,813
  33,200
  36,674
  40,407
  44,310
  48,384
  52,629
  57,049
  61,645
  66,424
  71,390
  76,551
  81,914
  87,489
  93,285
  99,313
  105,586
  112,116
  118,917
  126,004
  133,392
  141,098
Fixed operating expenses, $m
  4,058
  4,148
  4,239
  4,332
  4,427
  4,525
  4,624
  4,726
  4,830
  4,936
  5,045
  5,156
  5,269
  5,385
  5,504
  5,625
  5,749
  5,875
  6,004
  6,136
  6,271
  6,409
  6,550
  6,695
  6,842
  6,992
  7,146
  7,303
  7,464
  7,628
Total operating expenses, $m
  13,502
  15,449
  17,600
  19,953
  22,507
  25,258
  28,199
  31,330
  34,643
  38,136
  41,719
  45,563
  49,579
  53,769
  58,133
  62,674
  67,394
  72,299
  77,394
  82,687
  88,185
  93,898
  99,835
  106,008
  112,428
  119,108
  126,063
  133,307
  140,856
  148,726
Operating income, $m
  4,284
  5,868
  7,632
  9,575
  11,694
  13,986
  16,447
  19,073
  21,860
  24,804
  27,990
  31,241
  34,643
  38,197
  41,903
  45,762
  49,779
  53,957
  58,301
  62,818
  67,514
  72,397
  77,477
  82,763
  88,266
  93,997
  99,970
  106,196
  112,690
  119,468
EBITDA, $m
  5,539
  7,355
  9,376
  11,601
  14,028
  16,651
  19,467
  22,471
  25,659
  29,026
  32,569
  36,287
  40,177
  44,239
  48,475
  52,887
  57,478
  62,252
  67,216
  72,377
  77,743
  83,323
  89,126
  95,165
  101,452
  107,999
  114,820
  121,931
  129,348
  137,088
Interest expense (income), $m
  486
  1,120
  1,359
  1,715
  2,109
  2,542
  3,013
  3,521
  4,065
  4,645
  5,260
  5,909
  6,591
  7,306
  8,053
  8,833
  9,647
  10,493
  11,373
  12,288
  13,240
  14,228
  15,255
  16,323
  17,433
  18,588
  19,789
  21,040
  22,342
  23,699
  25,114
Earnings before tax, $m
  3,165
  4,509
  5,917
  7,466
  9,152
  10,973
  12,926
  15,008
  17,215
  19,544
  22,081
  24,650
  27,338
  30,144
  33,069
  36,116
  39,286
  42,584
  46,013
  49,578
  53,286
  57,142
  61,154
  65,330
  69,678
  74,209
  78,930
  83,854
  88,991
  94,353
Tax expense, $m
  854
  1,217
  1,598
  2,016
  2,471
  2,963
  3,490
  4,052
  4,648
  5,277
  5,962
  6,656
  7,381
  8,139
  8,929
  9,751
  10,607
  11,498
  12,423
  13,386
  14,387
  15,428
  16,512
  17,639
  18,813
  20,036
  21,311
  22,641
  24,028
  25,475
Net income, $m
  2,310
  3,292
  4,320
  5,450
  6,681
  8,011
  9,436
  10,956
  12,567
  14,267
  16,119
  17,995
  19,957
  22,005
  24,141
  26,365
  28,679
  31,086
  33,589
  36,192
  38,899
  41,714
  44,642
  47,691
  50,865
  54,172
  57,619
  61,213
  64,964
  68,878

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  19,333
  23,171
  27,426
  32,096
  37,176
  42,656
  48,530
  54,786
  61,417
  68,413
  75,770
  83,482
  91,546
  99,963
  108,735
  117,865
  127,362
  137,235
  147,496
  158,158
  169,238
  180,756
  192,731
  205,186
  218,145
  231,637
  245,688
  260,330
  275,594
  291,516
Adjusted assets (=assets-cash), $m
  19,333
  23,171
  27,426
  32,096
  37,176
  42,656
  48,530
  54,786
  61,417
  68,413
  75,770
  83,482
  91,546
  99,963
  108,735
  117,865
  127,362
  137,235
  147,496
  158,158
  169,238
  180,756
  192,731
  205,186
  218,145
  231,637
  245,688
  260,330
  275,594
  291,516
Revenue / Adjusted assets
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
Average production assets, $m
  11,686
  14,005
  16,577
  19,400
  22,470
  25,783
  29,333
  33,115
  37,123
  41,352
  45,798
  50,460
  55,334
  60,422
  65,724
  71,243
  76,983
  82,950
  89,152
  95,597
  102,294
  109,256
  116,494
  124,022
  131,856
  140,010
  148,504
  157,354
  166,580
  176,204
Working capital, $m
  -907
  -1,087
  -1,287
  -1,506
  -1,744
  -2,001
  -2,277
  -2,571
  -2,882
  -3,210
  -3,555
  -3,917
  -4,295
  -4,690
  -5,102
  -5,530
  -5,976
  -6,439
  -6,920
  -7,421
  -7,941
  -8,481
  -9,043
  -9,627
  -10,235
  -10,868
  -11,528
  -12,215
  -12,931
  -13,678
Total debt, $m
  13,194
  16,648
  20,477
  24,681
  29,252
  34,185
  39,471
  45,102
  51,069
  57,366
  63,987
  70,928
  78,186
  85,761
  93,655
  101,873
  110,420
  119,306
  128,540
  138,136
  148,109
  158,474
  169,252
  180,461
  192,125
  204,267
  216,913
  230,091
  243,829
  258,158
Total liabilities, $m
  17,400
  20,854
  24,683
  28,887
  33,458
  38,391
  43,677
  49,307
  55,275
  61,572
  68,193
  75,134
  82,392
  89,967
  97,861
  106,079
  114,626
  123,512
  132,746
  142,342
  152,315
  162,680
  173,458
  184,667
  196,331
  208,473
  221,119
  234,297
  248,035
  262,364
Total equity, $m
  1,933
  2,317
  2,743
  3,210
  3,718
  4,266
  4,853
  5,479
  6,142
  6,841
  7,577
  8,348
  9,155
  9,996
  10,873
  11,787
  12,736
  13,724
  14,750
  15,816
  16,924
  18,076
  19,273
  20,519
  21,815
  23,164
  24,569
  26,033
  27,559
  29,152
Total liabilities and equity, $m
  19,333
  23,171
  27,426
  32,097
  37,176
  42,657
  48,530
  54,786
  61,417
  68,413
  75,770
  83,482
  91,547
  99,963
  108,734
  117,866
  127,362
  137,236
  147,496
  158,158
  169,239
  180,756
  192,731
  205,186
  218,146
  231,637
  245,688
  260,330
  275,594
  291,516
Debt-to-equity ratio
  6.820
  7.180
  7.470
  7.690
  7.870
  8.010
  8.130
  8.230
  8.320
  8.390
  8.440
  8.500
  8.540
  8.580
  8.610
  8.640
  8.670
  8.690
  8.710
  8.730
  8.750
  8.770
  8.780
  8.800
  8.810
  8.820
  8.830
  8.840
  8.850
  8.860
Adjusted equity ratio
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,310
  3,292
  4,320
  5,450
  6,681
  8,011
  9,436
  10,956
  12,567
  14,267
  16,119
  17,995
  19,957
  22,005
  24,141
  26,365
  28,679
  31,086
  33,589
  36,192
  38,899
  41,714
  44,642
  47,691
  50,865
  54,172
  57,619
  61,213
  64,964
  68,878
Depreciation, amort., depletion, $m
  1,255
  1,487
  1,744
  2,026
  2,333
  2,665
  3,020
  3,398
  3,799
  4,221
  4,580
  5,046
  5,533
  6,042
  6,572
  7,124
  7,698
  8,295
  8,915
  9,560
  10,229
  10,926
  11,649
  12,402
  13,186
  14,001
  14,850
  15,735
  16,658
  17,620
Funds from operations, $m
  3,565
  4,778
  6,064
  7,476
  9,014
  10,675
  12,456
  14,354
  16,365
  18,489
  20,699
  23,041
  25,490
  28,047
  30,713
  33,489
  36,377
  39,381
  42,505
  45,752
  49,128
  52,639
  56,292
  60,093
  64,051
  68,173
  72,469
  76,949
  81,622
  86,498
Change in working capital, $m
  -161
  -180
  -200
  -219
  -238
  -257
  -276
  -294
  -311
  -328
  -345
  -362
  -378
  -395
  -412
  -428
  -446
  -463
  -481
  -500
  -520
  -540
  -562
  -584
  -608
  -633
  -659
  -687
  -716
  -747
Cash from operations, $m
  3,726
  4,959
  6,263
  7,695
  9,253
  10,932
  12,731
  14,647
  16,676
  18,817
  21,044
  23,402
  25,868
  28,442
  31,125
  33,917
  36,823
  39,844
  42,986
  46,252
  49,648
  53,180
  56,854
  60,678
  64,659
  68,806
  73,129
  77,636
  82,338
  87,245
Maintenance CAPEX, $m
  -962
  -1,169
  -1,401
  -1,658
  -1,940
  -2,247
  -2,578
  -2,933
  -3,311
  -3,712
  -4,135
  -4,580
  -5,046
  -5,533
  -6,042
  -6,572
  -7,124
  -7,698
  -8,295
  -8,915
  -9,560
  -10,229
  -10,926
  -11,649
  -12,402
  -13,186
  -14,001
  -14,850
  -15,735
  -16,658
New CAPEX, $m
  -2,065
  -2,320
  -2,572
  -2,823
  -3,070
  -3,313
  -3,550
  -3,782
  -4,008
  -4,229
  -4,447
  -4,661
  -4,874
  -5,087
  -5,302
  -5,519
  -5,740
  -5,968
  -6,202
  -6,445
  -6,698
  -6,962
  -7,238
  -7,528
  -7,833
  -8,155
  -8,493
  -8,850
  -9,226
  -9,624
Cash from investing activities, $m
  -3,027
  -3,489
  -3,973
  -4,481
  -5,010
  -5,560
  -6,128
  -6,715
  -7,319
  -7,941
  -8,582
  -9,241
  -9,920
  -10,620
  -11,344
  -12,091
  -12,864
  -13,666
  -14,497
  -15,360
  -16,258
  -17,191
  -18,164
  -19,177
  -20,235
  -21,341
  -22,494
  -23,700
  -24,961
  -26,282
Free cash flow, $m
  699
  1,470
  2,291
  3,215
  4,242
  5,372
  6,603
  7,932
  9,357
  10,876
  12,462
  14,161
  15,948
  17,821
  19,781
  21,826
  23,958
  26,179
  28,489
  30,892
  33,391
  35,989
  38,690
  41,500
  44,423
  47,466
  50,635
  53,935
  57,376
  60,964
Issuance/(repayment) of debt, $m
  2,325
  3,454
  3,830
  4,203
  4,571
  4,933
  5,286
  5,631
  5,968
  6,297
  6,621
  6,941
  7,258
  7,575
  7,894
  8,218
  8,547
  8,886
  9,234
  9,596
  9,973
  10,366
  10,777
  11,209
  11,664
  12,142
  12,646
  13,178
  13,738
  14,329
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  2,325
  3,454
  3,830
  4,203
  4,571
  4,933
  5,286
  5,631
  5,968
  6,297
  6,621
  6,941
  7,258
  7,575
  7,894
  8,218
  8,547
  8,886
  9,234
  9,596
  9,973
  10,366
  10,777
  11,209
  11,664
  12,142
  12,646
  13,178
  13,738
  14,329
Total cash flow (excl. dividends), $m
  3,024
  4,924
  6,121
  7,418
  8,814
  10,305
  11,889
  13,563
  15,325
  17,173
  19,083
  21,102
  23,206
  25,396
  27,675
  30,044
  32,506
  35,064
  37,724
  40,488
  43,363
  46,354
  49,467
  52,709
  56,087
  59,608
  63,281
  67,113
  71,114
  75,293
Retained Cash Flow (-), $m
  -1,092
  -384
  -426
  -467
  -508
  -548
  -587
  -626
  -663
  -700
  -736
  -771
  -806
  -842
  -877
  -913
  -950
  -987
  -1,026
  -1,066
  -1,108
  -1,152
  -1,197
  -1,245
  -1,296
  -1,349
  -1,405
  -1,464
  -1,526
  -1,592
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
  1,931
  4,540
  5,695
  6,951
  8,306
  9,757
  11,302
  12,937
  14,662
  16,473
  18,348
  20,331
  22,399
  24,555
  26,798
  29,131
  31,556
  34,077
  36,697
  39,422
  42,255
  45,202
  48,270
  51,464
  54,791
  58,259
  61,876
  65,649
  69,587
  73,701
Discount rate, %
  10.30
  10.82
  11.36
  11.92
  12.52
  13.15
  13.80
  14.49
  15.22
  15.98
  16.78
  17.62
  18.50
  19.42
  20.39
  21.41
  22.48
  23.61
  24.79
  26.03
  27.33
  28.70
  30.13
  31.64
  33.22
  34.88
  36.62
  38.45
  40.38
  42.40
PV of cash for distribution, $m
  1,751
  3,697
  4,124
  4,430
  4,605
  4,650
  4,572
  4,381
  4,097
  3,741
  3,331
  2,901
  2,466
  2,046
  1,656
  1,306
  1,004
  751
  546
  386
  264
  176
  113
  70
  42
  24
  14
  7
  4
  2
Current shareholders' claim on cash, %
  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

Braskem S.A. produces thermoplastic resins. The Company's segments are Basic petrochemicals, Polyolefins, Vinyls, the United States and Europe, and Chemical distribution. It is also engaged in the import and export of chemicals, petrochemicals and fuels, the production, supply and sale of utilities such as steam, water, compressed air, industrial gases, the provision of industrial services, and the production, supply and sale of electric energy. It also invests in other companies, either as a partner or as shareholder. It operates over 40 industrial units, over 30 of which are located in the Brazilian states of Alagoas, Bahia, Rio de Janeiro, Rio Grande do Sul and Sao Paulo; over five are located in the United States, in the states of Pennsylvania, Texas and West Virginia, and over two are located in Germany, in the cities of Wesseling and Schkopau. These units produce thermoplastic resins–polyethylene, polypropylene and polyvinyl chloride, as well as basic petrochemicals.

FINANCIAL RATIOS  of  Braskem ADR (BAK)

Valuation Ratios
P/E Ratio -175.7
Price to Sales 1.5
Price to Book 26.3
Price to Tangible Book
Price to Cash Flow 15.2
Price to Free Cash Flow 38.6
Growth Rates
Sales Growth Rate 1.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -30.3%
Cap. Spend. - 3 Yr. Gr. Rate -12.7%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 1161.5%
Total Debt to Equity 1290.5%
Interest Coverage 1
Management Effectiveness
Return On Assets 14.1%
Ret/ On Assets - 3 Yr. Avg. 7.6%
Return On Total Capital -1%
Ret/ On T. Cap. - 3 Yr. Avg. 3%
Return On Equity -18.8%
Return On Equity - 3 Yr. Avg. 24.5%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 26.7%
Gross Margin - 3 Yr. Avg. 20.4%
EBITDA Margin 8.6%
EBITDA Margin - 3 Yr. Avg. 10.9%
Operating Margin 12.5%
Oper. Margin - 3 Yr. Avg. 11.6%
Pre-Tax Margin -0.3%
Pre-Tax Margin - 3 Yr. Avg. 3.8%
Net Profit Margin -0.9%
Net Profit Margin - 3 Yr. Avg. 2.4%
Effective Tax Rate -443.2%
Eff/ Tax Rate - 3 Yr. Avg. -119.9%
Payout Ratio -486.2%

BAK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BAK stock intrinsic value calculation we used $14639 million for the last fiscal year's total revenue generated by Braskem ADR. The default revenue input number comes from 2016 income statement of Braskem 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 BAK stock valuation model: a) initial revenue growth rate of 21.5% 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 10.3%, whose default value for BAK is calculated based on our internal credit rating of Braskem 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 Braskem 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 BAK stock the variable cost ratio is equal to 53.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $3971 million in the base year in the intrinsic value calculation for BAK 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 10.3% for Braskem ADR.

Corporate tax rate of 27% is the nominal tax rate for Braskem 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 BAK 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 BAK are equal to 65.7%.

Life of production assets of 10 years is the average useful life of capital assets used in Braskem 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 BAK is equal to -5.1%. 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 - $841 million for Braskem 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 797 million for Braskem 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 Braskem ADR at the current share price and the inputted number of shares is $22.9 billion.

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COMPANY NEWS

▶ [$$] LyondellBasell, Braskem Confirm Merger Talks   [Jun-17-18 07:42PM  The Wall Street Journal]
▶ [$$] LyondellBasell, Braskem Confirm Merger Talks   [Jun-15-18 07:07PM  The Wall Street Journal]
▶ LyondellBasell confirms talks about Braskem deal   [01:31PM  American City Business Journals]
▶ Braskem: 1Q Earnings Snapshot   [05:04AM  Associated Press]
▶ Record EBITDA of US$3.9 billion in 2017   [05:28AM  PR Newswire]
▶ [$$] How do you steer a company hit by corruption?   [Feb-24-18 10:00PM  Financial Times]
▶ The Long-Term Trend That Makes Braskem an Awesome Buy   [Feb-07-18 06:18AM  Motley Fool]
▶ The Long-Term Trend That Makes Braskem an Awesome Buy   [Feb-06-18 06:18AM  Motley Fool]
▶ Braskem Shows Market Leadership With Jump To 84 RS Rating   [Jan-17-18 03:00AM  Investor's Business Daily]
▶ 3 Top Green Stocks to Consider Buying Now   [Jan-09-18 01:32PM  Motley Fool]
▶ 3 Top Dividend Stocks to Buy in January   [06:05AM  Motley Fool]
▶ ETFs with exposure to Braskem SA : December 18, 2017   [Dec-18-17 02:43PM  Capital Cube]
▶ New Strong Buy Stocks for November 28th   [Nov-28-17 06:37AM  Zacks]
▶ New Strong Buy Stocks for November 24th   [Nov-24-17 08:43AM  Zacks]
▶ New Strong Buy Stocks for November 13th   [Nov-13-17 10:04AM  Zacks]
▶ This Rumor Pushed Braskem 19.6% Higher in October   [Nov-06-17 01:03PM  Motley Fool]
▶ 5 Scary Good Stocks for Halloween   [Oct-31-17 04:37PM  Zacks]
▶ LyondellBasell reportedly eyeing Braskem acquisition   [11:28AM  American City Business Journals]
▶ LyondellBasell Industries Rose on October 30   [10:45AM  Market Realist]
▶ [$$] LyondellBasell Makes Takeover Approach to Braskem   [12:32AM  The Wall Street Journal]
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