Intrinsic value of B Communications Ltd. - BCOM

Previous Close

$1.24

  Intrinsic Value

$139.68

stock screener

  Rating & Target

str. buy

+999%

Previous close

$1.24

 
Intrinsic value

$139.68

 
Up/down potential

+999%

 
Rating

str. buy

We calculate the intrinsic value of BCOM 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 0001), $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 0.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  7.70
  7.43
  7.19
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.05
  5.94
  5.85
  5.76
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
  5.16
  5.14
  5.13
Revenue, $m
  3,036
  3,262
  3,496
  3,740
  3,993
  4,256
  4,530
  4,815
  5,112
  5,421
  5,743
  6,079
  6,429
  6,795
  7,176
  7,575
  7,992
  8,427
  8,883
  9,359
  9,858
  10,380
  10,927
  11,499
  12,099
  12,727
  13,386
  14,076
  14,800
  15,559
Variable operating expenses, $m
  2,459
  2,627
  2,801
  2,983
  3,171
  3,367
  3,571
  3,783
  4,004
  4,234
  4,273
  4,523
  4,784
  5,056
  5,340
  5,636
  5,947
  6,271
  6,610
  6,964
  7,335
  7,724
  8,130
  8,556
  9,003
  9,470
  9,960
  10,474
  11,012
  11,577
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
  2,459
  2,627
  2,801
  2,983
  3,171
  3,367
  3,571
  3,783
  4,004
  4,234
  4,273
  4,523
  4,784
  5,056
  5,340
  5,636
  5,947
  6,271
  6,610
  6,964
  7,335
  7,724
  8,130
  8,556
  9,003
  9,470
  9,960
  10,474
  11,012
  11,577
Operating income, $m
  577
  635
  695
  757
  822
  889
  959
  1,032
  1,108
  1,187
  1,470
  1,556
  1,645
  1,739
  1,837
  1,939
  2,045
  2,157
  2,273
  2,395
  2,523
  2,656
  2,796
  2,943
  3,096
  3,257
  3,426
  3,602
  3,787
  3,982
EBITDA, $m
  1,275
  1,370
  1,468
  1,571
  1,677
  1,788
  1,903
  2,022
  2,147
  2,277
  2,412
  2,553
  2,700
  2,854
  3,014
  3,182
  3,357
  3,540
  3,731
  3,931
  4,140
  4,360
  4,589
  4,830
  5,082
  5,346
  5,622
  5,912
  6,216
  6,535
Interest expense (income), $m
  102
  222
  232
  254
  277
  301
  326
  352
  380
  408
  437
  468
  499
  533
  567
  603
  641
  680
  721
  764
  809
  857
  906
  957
  1,011
  1,068
  1,127
  1,189
  1,254
  1,322
  1,394
Earnings before tax, $m
  355
  403
  441
  480
  520
  563
  607
  653
  701
  750
  1,002
  1,056
  1,113
  1,172
  1,233
  1,298
  1,365
  1,435
  1,509
  1,586
  1,666
  1,751
  1,839
  1,931
  2,028
  2,130
  2,236
  2,348
  2,465
  2,588
Tax expense, $m
  96
  109
  119
  130
  141
  152
  164
  176
  189
  203
  271
  285
  300
  316
  333
  350
  369
  387
  407
  428
  450
  473
  496
  521
  548
  575
  604
  634
  666
  699
Net income, $m
  259
  294
  322
  350
  380
  411
  443
  477
  511
  548
  732
  771
  812
  855
  900
  947
  996
  1,048
  1,101
  1,158
  1,216
  1,278
  1,342
  1,410
  1,481
  1,555
  1,633
  1,714
  1,799
  1,889

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
  6,171
  6,629
  7,106
  7,601
  8,116
  8,651
  9,208
  9,787
  10,390
  11,018
  11,673
  12,355
  13,067
  13,810
  14,586
  15,396
  16,243
  17,129
  18,054
  19,023
  20,037
  21,098
  22,209
  23,372
  24,591
  25,868
  27,207
  28,610
  30,081
  31,623
Adjusted assets (=assets-cash), $m
  6,171
  6,629
  7,106
  7,601
  8,116
  8,651
  9,208
  9,787
  10,390
  11,018
  11,673
  12,355
  13,067
  13,810
  14,586
  15,396
  16,243
  17,129
  18,054
  19,023
  20,037
  21,098
  22,209
  23,372
  24,591
  25,868
  27,207
  28,610
  30,081
  31,623
Revenue / Adjusted assets
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
Average production assets, $m
  3,039
  3,265
  3,500
  3,743
  3,997
  4,260
  4,535
  4,820
  5,117
  5,426
  5,749
  6,085
  6,435
  6,801
  7,184
  7,583
  8,000
  8,436
  8,892
  9,369
  9,868
  10,390
  10,938
  11,511
  12,111
  12,740
  13,399
  14,090
  14,815
  15,574
Working capital, $m
  30
  33
  35
  37
  40
  43
  45
  48
  51
  54
  57
  61
  64
  68
  72
  76
  80
  84
  89
  94
  99
  104
  109
  115
  121
  127
  134
  141
  148
  156
Total debt, $m
  4,295
  4,708
  5,137
  5,583
  6,046
  6,527
  7,028
  7,550
  8,093
  8,658
  9,247
  9,861
  10,502
  11,171
  11,869
  12,598
  13,361
  14,157
  14,991
  15,862
  16,775
  17,730
  18,729
  19,777
  20,874
  22,023
  23,228
  24,491
  25,814
  27,202
Total liabilities, $m
  5,554
  5,966
  6,395
  6,841
  7,304
  7,786
  8,287
  8,808
  9,351
  9,916
  10,505
  11,120
  11,760
  12,429
  13,127
  13,857
  14,619
  15,416
  16,249
  17,121
  18,033
  18,988
  19,988
  21,035
  22,132
  23,281
  24,486
  25,749
  27,073
  28,461
Total equity, $m
  617
  663
  711
  760
  812
  865
  921
  979
  1,039
  1,102
  1,167
  1,236
  1,307
  1,381
  1,459
  1,540
  1,624
  1,713
  1,805
  1,902
  2,004
  2,110
  2,221
  2,337
  2,459
  2,587
  2,721
  2,861
  3,008
  3,162
Total liabilities and equity, $m
  6,171
  6,629
  7,106
  7,601
  8,116
  8,651
  9,208
  9,787
  10,390
  11,018
  11,672
  12,356
  13,067
  13,810
  14,586
  15,397
  16,243
  17,129
  18,054
  19,023
  20,037
  21,098
  22,209
  23,372
  24,591
  25,868
  27,207
  28,610
  30,081
  31,623
Debt-to-equity ratio
  6.960
  7.100
  7.230
  7.340
  7.450
  7.550
  7.630
  7.710
  7.790
  7.860
  7.920
  7.980
  8.040
  8.090
  8.140
  8.180
  8.230
  8.270
  8.300
  8.340
  8.370
  8.400
  8.430
  8.460
  8.490
  8.510
  8.540
  8.560
  8.580
  8.600
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
  259
  294
  322
  350
  380
  411
  443
  477
  511
  548
  732
  771
  812
  855
  900
  947
  996
  1,048
  1,101
  1,158
  1,216
  1,278
  1,342
  1,410
  1,481
  1,555
  1,633
  1,714
  1,799
  1,889
Depreciation, amort., depletion, $m
  698
  735
  774
  814
  855
  898
  943
  990
  1,039
  1,089
  942
  998
  1,055
  1,115
  1,178
  1,243
  1,311
  1,383
  1,458
  1,536
  1,618
  1,703
  1,793
  1,887
  1,985
  2,089
  2,197
  2,310
  2,429
  2,553
Funds from operations, $m
  957
  1,029
  1,095
  1,164
  1,235
  1,309
  1,386
  1,467
  1,550
  1,637
  1,674
  1,769
  1,867
  1,970
  2,078
  2,190
  2,308
  2,431
  2,559
  2,693
  2,834
  2,981
  3,135
  3,297
  3,466
  3,643
  3,829
  4,024
  4,228
  4,442
Change in working capital, $m
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
Cash from operations, $m
  955
  1,027
  1,093
  1,161
  1,233
  1,307
  1,384
  1,464
  1,547
  1,634
  1,671
  1,765
  1,864
  1,967
  2,074
  2,186
  2,304
  2,426
  2,554
  2,689
  2,829
  2,976
  3,130
  3,291
  3,460
  3,637
  3,823
  4,017
  4,221
  4,435
Maintenance CAPEX, $m
  -463
  -498
  -535
  -574
  -614
  -655
  -698
  -743
  -790
  -839
  -890
  -942
  -998
  -1,055
  -1,115
  -1,178
  -1,243
  -1,311
  -1,383
  -1,458
  -1,536
  -1,618
  -1,703
  -1,793
  -1,887
  -1,985
  -2,089
  -2,197
  -2,310
  -2,429
New CAPEX, $m
  -216
  -226
  -235
  -244
  -253
  -264
  -274
  -285
  -297
  -309
  -322
  -336
  -351
  -366
  -382
  -399
  -417
  -436
  -456
  -477
  -499
  -523
  -547
  -573
  -600
  -629
  -659
  -691
  -724
  -760
Cash from investing activities, $m
  -679
  -724
  -770
  -818
  -867
  -919
  -972
  -1,028
  -1,087
  -1,148
  -1,212
  -1,278
  -1,349
  -1,421
  -1,497
  -1,577
  -1,660
  -1,747
  -1,839
  -1,935
  -2,035
  -2,141
  -2,250
  -2,366
  -2,487
  -2,614
  -2,748
  -2,888
  -3,034
  -3,189
Free cash flow, $m
  276
  303
  323
  344
  365
  388
  411
  435
  460
  486
  459
  487
  516
  546
  577
  610
  643
  679
  716
  754
  794
  836
  879
  925
  973
  1,023
  1,075
  1,129
  1,187
  1,246
Issuance/(repayment) of debt, $m
  178
  413
  429
  446
  463
  482
  501
  521
  543
  565
  589
  614
  641
  669
  698
  729
  762
  797
  833
  872
  912
  955
  1,000
  1,047
  1,097
  1,149
  1,205
  1,263
  1,324
  1,388
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  
  178
  413
  429
  446
  463
  482
  501
  521
  543
  565
  589
  614
  641
  669
  698
  729
  762
  797
  833
  872
  912
  955
  1,000
  1,047
  1,097
  1,149
  1,205
  1,263
  1,324
  1,388
Total cash flow (excl. dividends), $m
  454
  716
  752
  789
  829
  869
  912
  956
  1,003
  1,051
  1,048
  1,101
  1,156
  1,214
  1,275
  1,339
  1,406
  1,476
  1,549
  1,626
  1,706
  1,791
  1,879
  1,972
  2,070
  2,172
  2,279
  2,392
  2,510
  2,634
Retained Cash Flow (-), $m
  -258
  -46
  -48
  -50
  -51
  -54
  -56
  -58
  -60
  -63
  -65
  -68
  -71
  -74
  -78
  -81
  -85
  -89
  -93
  -97
  -101
  -106
  -111
  -116
  -122
  -128
  -134
  -140
  -147
  -154
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
  196
  670
  704
  740
  777
  816
  856
  899
  943
  988
  983
  1,033
  1,085
  1,140
  1,198
  1,258
  1,321
  1,387
  1,456
  1,529
  1,605
  1,685
  1,768
  1,856
  1,948
  2,044
  2,146
  2,252
  2,363
  2,480
Discount rate, %
  8.70
  9.14
  9.59
  10.07
  10.57
  11.10
  11.66
  12.24
  12.85
  13.50
  14.17
  14.88
  15.62
  16.41
  17.23
  18.09
  18.99
  19.94
  20.94
  21.98
  23.08
  24.24
  25.45
  26.72
  28.06
  29.46
  30.93
  32.48
  34.11
  35.81
PV of cash for distribution, $m
  180
  562
  535
  504
  470
  434
  396
  357
  317
  279
  229
  195
  164
  136
  110
  88
  69
  53
  39
  29
  20
  14
  10
  6
  4
  2
  1
  1
  0
  0
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

B Communications Ltd. is focused on the telecommunications industry. The Company's principal asset is its ownership interest in Bezeq The Israel Telecommunications Corp. Ltd. (Bezeq), a provider of communications services in Israel. Bezeq and its subsidiaries operate through segments, including Bezeq, which offers fixed-line telephony services and fixed-line broadband Internet infrastructure access; Pelephone, which offers cellular telephony services; Bezeq International, which offers Internet service provider (ISP) and international telephony (ILD) services, and DBS, which offers pay television services. Bezeq offers a range of telecommunications operations and services, including domestic fixed-line, Internet services, television and radio broadcasts, satellite broadcasts, maintenance and development of communications infrastructures, providing communications services to other communications providers, and supply and maintenance of equipment on customer premises.

FINANCIAL RATIOS  of  B Communications Ltd. (BCOM)

Valuation Ratios
P/E Ratio 0.1
Price to Sales 0
Price to Book 0.1
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0.1
Growth Rates
Sales Growth Rate 31.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 51.9%
Cap. Spend. - 3 Yr. Gr. Rate 83.1%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 332.5%
Total Debt to Equity 361.4%
Interest Coverage 8
Management Effectiveness
Return On Assets 11.3%
Ret/ On Assets - 3 Yr. Avg. 6.8%
Return On Total Capital 17%
Ret/ On T. Cap. - 3 Yr. Avg. 7.9%
Return On Equity 107%
Return On Equity - 3 Yr. Avg. 37.2%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 100%
Gross Margin - 3 Yr. Avg. 99.3%
EBITDA Margin 40.1%
EBITDA Margin - 3 Yr. Avg. 35.3%
Operating Margin 28.5%
Oper. Margin - 3 Yr. Avg. 19%
Pre-Tax Margin 24.8%
Pre-Tax Margin - 3 Yr. Avg. 16.8%
Net Profit Margin 18.2%
Net Profit Margin - 3 Yr. Avg. 9.7%
Effective Tax Rate 26.9%
Eff/ Tax Rate - 3 Yr. Avg. 36.3%
Payout Ratio 0%

BCOM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BCOM stock intrinsic value calculation we used $2819 million for the last fiscal year's total revenue generated by B Communications Ltd.. The default revenue input number comes from 0001 income statement of B Communications Ltd.. 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 BCOM stock valuation model: a) initial revenue growth rate of 7.7% 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 8.7%, whose default value for BCOM is calculated based on our internal credit rating of B Communications Ltd., 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 B Communications Ltd..
    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 BCOM stock the variable cost ratio is equal to 81.5%.

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 BCOM 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 5.4% for B Communications Ltd..

Corporate tax rate of 27% is the nominal tax rate for B Communications Ltd.. 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 BCOM 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 BCOM are equal to 100.1%.

Life of production assets of 6.1 years is the average useful life of capital assets used in B Communications Ltd. 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 BCOM is equal to 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 - $358.870967742 million for B Communications Ltd. - 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 37.274 million for B Communications Ltd. 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 B Communications Ltd. at the current share price and the inputted number of shares is $0.0 billion.

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