Intrinsic value of Bright Scholar Education Holdings ADR - BEDU

Previous Close

$11.64

  Intrinsic Value

$247.69

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  Rating & Target

str. buy

+999%

Previous close

$11.64

 
Intrinsic value

$247.69

 
Up/down potential

+999%

 
Rating

str. buy

We calculate the intrinsic value of BEDU 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 0.3

 

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, %
  29.30
  26.87
  24.68
  22.71
  20.94
  19.35
  17.91
  16.62
  15.46
  14.41
  13.47
  12.63
  11.86
  11.18
  10.56
  10.00
  9.50
  9.05
  8.65
  8.28
  7.95
  7.66
  7.39
  7.15
  6.94
  6.74
  6.57
  6.41
  6.27
  6.14
Revenue, $m
  260
  330
  412
  505
  611
  730
  860
  1,003
  1,158
  1,325
  1,504
  1,694
  1,895
  2,106
  2,329
  2,562
  2,805
  3,059
  3,324
  3,599
  3,885
  4,183
  4,492
  4,813
  5,147
  5,494
  5,855
  6,231
  6,622
  7,028
Variable operating expenses, $m
  90
  113
  141
  172
  208
  248
  291
  339
  392
  448
  505
  569
  637
  708
  782
  861
  942
  1,028
  1,117
  1,209
  1,305
  1,405
  1,509
  1,617
  1,729
  1,846
  1,967
  2,093
  2,225
  2,361
Fixed operating expenses, $m
  102
  104
  107
  109
  111
  114
  116
  119
  122
  124
  127
  130
  133
  136
  139
  142
  145
  148
  151
  155
  158
  161
  165
  169
  172
  176
  180
  184
  188
  192
Total operating expenses, $m
  192
  217
  248
  281
  319
  362
  407
  458
  514
  572
  632
  699
  770
  844
  921
  1,003
  1,087
  1,176
  1,268
  1,364
  1,463
  1,566
  1,674
  1,786
  1,901
  2,022
  2,147
  2,277
  2,413
  2,553
Operating income, $m
  68
  112
  164
  224
  292
  368
  452
  545
  645
  753
  872
  995
  1,125
  1,263
  1,408
  1,559
  1,718
  1,883
  2,056
  2,235
  2,422
  2,616
  2,818
  3,028
  3,246
  3,472
  3,708
  3,954
  4,209
  4,475
EBITDA, $m
  84
  131
  187
  252
  325
  407
  498
  597
  705
  822
  947
  1,079
  1,220
  1,368
  1,524
  1,687
  1,858
  2,036
  2,222
  2,415
  2,616
  2,825
  3,042
  3,268
  3,503
  3,747
  4,001
  4,265
  4,540
  4,826
Interest expense (income), $m
  0
  0
  3
  7
  11
  16
  21
  27
  34
  42
  50
  58
  67
  77
  88
  99
  110
  122
  135
  148
  162
  176
  191
  206
  222
  239
  256
  274
  293
  312
  332
Earnings before tax, $m
  68
  109
  158
  213
  276
  347
  425
  511
  604
  704
  813
  927
  1,048
  1,175
  1,309
  1,449
  1,596
  1,749
  1,908
  2,074
  2,246
  2,425
  2,612
  2,806
  3,007
  3,216
  3,434
  3,661
  3,897
  4,143
Tax expense, $m
  18
  30
  43
  58
  75
  94
  115
  138
  163
  190
  220
  250
  283
  317
  353
  391
  431
  472
  515
  560
  606
  655
  705
  758
  812
  868
  927
  988
  1,052
  1,119
Net income, $m
  50
  80
  115
  156
  202
  253
  310
  373
  441
  514
  594
  677
  765
  858
  956
  1,058
  1,165
  1,277
  1,393
  1,514
  1,640
  1,771
  1,907
  2,048
  2,195
  2,348
  2,507
  2,673
  2,845
  3,024

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
  390
  494
  617
  757
  915
  1,092
  1,288
  1,502
  1,734
  1,984
  2,251
  2,535
  2,836
  3,153
  3,486
  3,835
  4,199
  4,579
  4,975
  5,387
  5,816
  6,261
  6,724
  7,205
  7,705
  8,225
  8,765
  9,328
  9,913
  10,522
Adjusted assets (=assets-cash), $m
  390
  494
  617
  757
  915
  1,092
  1,288
  1,502
  1,734
  1,984
  2,251
  2,535
  2,836
  3,153
  3,486
  3,835
  4,199
  4,579
  4,975
  5,387
  5,816
  6,261
  6,724
  7,205
  7,705
  8,225
  8,765
  9,328
  9,913
  10,522
Revenue / Adjusted assets
  0.667
  0.668
  0.668
  0.667
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
  0.668
Average production assets, $m
  99
  126
  157
  192
  232
  277
  327
  381
  440
  504
  571
  644
  720
  800
  885
  973
  1,066
  1,162
  1,263
  1,368
  1,476
  1,589
  1,707
  1,829
  1,956
  2,088
  2,225
  2,368
  2,516
  2,671
Working capital, $m
  -227
  -288
  -359
  -440
  -532
  -635
  -749
  -874
  -1,009
  -1,154
  -1,310
  -1,475
  -1,650
  -1,835
  -2,028
  -2,231
  -2,443
  -2,664
  -2,895
  -3,135
  -3,384
  -3,643
  -3,912
  -4,192
  -4,483
  -4,786
  -5,100
  -5,427
  -5,767
  -6,122
Total debt, $m
  57
  124
  202
  292
  393
  506
  632
  769
  917
  1,077
  1,248
  1,430
  1,623
  1,825
  2,039
  2,262
  2,495
  2,738
  2,992
  3,255
  3,530
  3,815
  4,111
  4,419
  4,739
  5,071
  5,417
  5,777
  6,151
  6,541
Total liabilities, $m
  249
  316
  395
  484
  586
  699
  824
  961
  1,110
  1,270
  1,441
  1,623
  1,815
  2,018
  2,231
  2,454
  2,688
  2,931
  3,184
  3,448
  3,722
  4,007
  4,304
  4,611
  4,931
  5,264
  5,610
  5,970
  6,344
  6,734
Total equity, $m
  140
  178
  222
  272
  329
  393
  464
  541
  624
  714
  810
  913
  1,021
  1,135
  1,255
  1,381
  1,512
  1,649
  1,791
  1,939
  2,094
  2,254
  2,421
  2,594
  2,774
  2,961
  3,156
  3,358
  3,569
  3,788
Total liabilities and equity, $m
  389
  494
  617
  756
  915
  1,092
  1,288
  1,502
  1,734
  1,984
  2,251
  2,536
  2,836
  3,153
  3,486
  3,835
  4,200
  4,580
  4,975
  5,387
  5,816
  6,261
  6,725
  7,205
  7,705
  8,225
  8,766
  9,328
  9,913
  10,522
Debt-to-equity ratio
  0.410
  0.700
  0.910
  1.070
  1.190
  1.290
  1.360
  1.420
  1.470
  1.510
  1.540
  1.570
  1.590
  1.610
  1.620
  1.640
  1.650
  1.660
  1.670
  1.680
  1.690
  1.690
  1.700
  1.700
  1.710
  1.710
  1.720
  1.720
  1.720
  1.730
Adjusted equity ratio
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  50
  80
  115
  156
  202
  253
  310
  373
  441
  514
  594
  677
  765
  858
  956
  1,058
  1,165
  1,277
  1,393
  1,514
  1,640
  1,771
  1,907
  2,048
  2,195
  2,348
  2,507
  2,673
  2,845
  3,024
Depreciation, amort., depletion, $m
  15
  19
  23
  28
  33
  39
  45
  53
  60
  69
  75
  85
  95
  105
  116
  128
  140
  153
  166
  180
  194
  209
  225
  241
  257
  275
  293
  312
  331
  351
Funds from operations, $m
  65
  99
  138
  183
  235
  292
  356
  425
  501
  582
  669
  762
  860
  963
  1,072
  1,186
  1,305
  1,429
  1,559
  1,694
  1,834
  1,980
  2,131
  2,289
  2,452
  2,623
  2,800
  2,984
  3,176
  3,376
Change in working capital, $m
  -51
  -61
  -71
  -81
  -92
  -103
  -114
  -125
  -135
  -145
  -156
  -165
  -175
  -184
  -194
  -203
  -212
  -221
  -230
  -240
  -249
  -259
  -269
  -280
  -291
  -302
  -314
  -327
  -340
  -354
Cash from operations, $m
  117
  160
  209
  265
  327
  395
  469
  550
  636
  728
  824
  927
  1,035
  1,148
  1,266
  1,389
  1,517
  1,651
  1,789
  1,933
  2,083
  2,239
  2,401
  2,569
  2,743
  2,925
  3,114
  3,311
  3,516
  3,730
Maintenance CAPEX, $m
  -10
  -13
  -17
  -21
  -25
  -31
  -36
  -43
  -50
  -58
  -66
  -75
  -85
  -95
  -105
  -116
  -128
  -140
  -153
  -166
  -180
  -194
  -209
  -225
  -241
  -257
  -275
  -293
  -312
  -331
New CAPEX, $m
  -22
  -27
  -31
  -36
  -40
  -45
  -50
  -54
  -59
  -63
  -68
  -72
  -76
  -80
  -85
  -89
  -93
  -96
  -101
  -105
  -109
  -113
  -118
  -122
  -127
  -132
  -137
  -143
  -148
  -155
Cash from investing activities, $m
  -32
  -40
  -48
  -57
  -65
  -76
  -86
  -97
  -109
  -121
  -134
  -147
  -161
  -175
  -190
  -205
  -221
  -236
  -254
  -271
  -289
  -307
  -327
  -347
  -368
  -389
  -412
  -436
  -460
  -486
Free cash flow, $m
  84
  120
  162
  209
  261
  320
  383
  453
  527
  606
  690
  780
  874
  973
  1,076
  1,184
  1,297
  1,414
  1,536
  1,663
  1,795
  1,932
  2,074
  2,222
  2,376
  2,536
  2,702
  2,876
  3,056
  3,244
Issuance/(repayment) of debt, $m
  57
  67
  78
  90
  101
  113
  125
  137
  149
  160
  171
  182
  192
  203
  213
  223
  233
  243
  253
  264
  274
  285
  296
  308
  320
  333
  346
  360
  374
  390
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  
  57
  67
  78
  90
  101
  113
  125
  137
  149
  160
  171
  182
  192
  203
  213
  223
  233
  243
  253
  264
  274
  285
  296
  308
  320
  333
  346
  360
  374
  390
Total cash flow (excl. dividends), $m
  141
  187
  240
  298
  363
  433
  509
  590
  676
  766
  861
  962
  1,066
  1,176
  1,289
  1,407
  1,530
  1,657
  1,789
  1,926
  2,069
  2,217
  2,370
  2,530
  2,696
  2,868
  3,048
  3,235
  3,431
  3,634
Retained Cash Flow (-), $m
  -32
  -38
  -44
  -50
  -57
  -64
  -70
  -77
  -84
  -90
  -96
  -102
  -108
  -114
  -120
  -126
  -131
  -137
  -143
  -148
  -154
  -160
  -167
  -173
  -180
  -187
  -195
  -202
  -211
  -219
Prev. year cash balance distribution, $m
  106
  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
  215
  149
  196
  248
  306
  369
  438
  512
  592
  676
  765
  859
  958
  1,061
  1,169
  1,282
  1,399
  1,520
  1,647
  1,778
  1,915
  2,056
  2,204
  2,357
  2,516
  2,681
  2,854
  3,033
  3,220
  3,415
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  206
  137
  170
  204
  237
  268
  296
  320
  340
  355
  363
  367
  364
  356
  343
  326
  304
  280
  254
  226
  198
  171
  144
  120
  98
  78
  61
  47
  35
  26
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

Bright Scholar Education Holdings Limited is an operator of international and bilingual K-12 schools in China. The Company is engaged in providing international education to Chinese students. Its schools comprise international schools, bilingual schools and kindergartens. It offers a broad range of internationally-accredited curricula at its international schools. It also offers a range of complementary education services, including overseas camps and after-school programs. As of February 28, 2017, the Company had six international schools, which focus on internationally-accredited curricula and offer extracurricular activities and programs; 11 bilingual schools, which provide government-mandated curricula and developing students’ English proficiency; and 34 bilingual kindergartens, including 11 that deliver international curricula. As of February 28, 2017, the Company operated 51 schools.

FINANCIAL RATIOS  of  Bright Scholar Education Holdings ADR (BEDU)

Valuation Ratios
P/E Ratio 54.6
Price to Sales 7.1
Price to Book 6.7
Price to Tangible Book
Price to Cash Flow 20.4
Price to Free Cash Flow 25.8
Growth Rates
Sales Growth Rate 27.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 7.7%
Cap. Spend. - 3 Yr. Gr. Rate -8.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 8.8%
Ret/ On Assets - 3 Yr. Avg. 0.6%
Return On Total Capital 22.5%
Ret/ On T. Cap. - 3 Yr. Avg. 27.2%
Return On Equity 22.5%
Return On Equity - 3 Yr. Avg. 27.2%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 35.4%
Gross Margin - 3 Yr. Avg. 25.5%
EBITDA Margin 24%
EBITDA Margin - 3 Yr. Avg. 10.2%
Operating Margin 16.1%
Oper. Margin - 3 Yr. Avg. 3%
Pre-Tax Margin 17.7%
Pre-Tax Margin - 3 Yr. Avg. 3.5%
Net Profit Margin 13%
Net Profit Margin - 3 Yr. Avg. 1.4%
Effective Tax Rate 17.6%
Eff/ Tax Rate - 3 Yr. Avg. 52.5%
Payout Ratio 0%

BEDU stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BEDU stock intrinsic value calculation we used $201.359254206 million for the last fiscal year's total revenue generated by Bright Scholar Education Holdings ADR. The default revenue input number comes from 0001 income statement of Bright Scholar Education Holdings 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 BEDU stock valuation model: a) initial revenue growth rate of 29.3% 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 4.3%, whose default value for BEDU is calculated based on our internal credit rating of Bright Scholar Education Holdings 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 Bright Scholar Education Holdings 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 BEDU stock the variable cost ratio is equal to 34.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $100 million in the base year in the intrinsic value calculation for BEDU 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 Bright Scholar Education Holdings ADR.

Corporate tax rate of 27% is the nominal tax rate for Bright Scholar Education Holdings 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 BEDU 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 BEDU are equal to 38%.

Life of production assets of 7.6 years is the average useful life of capital assets used in Bright Scholar Education Holdings 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 BEDU is equal to -87.1%. 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 - $214.663180233 million for Bright Scholar Education Holdings 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 27.25 million for Bright Scholar Education Holdings 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 Bright Scholar Education Holdings ADR at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ Bright Scholar: 2Q Earnings Snapshot   [Jul-24-18 05:52PM  Associated Press]
▶ Bright Scholar: 1Q Earnings Snapshot   [Apr-24-18 05:40PM  Associated Press]
▶ Stay away from red-hot Chinese IPO market   [Nov-17-17 08:57PM  CNBC Videos]
▶ [$$] Triggering a Debt Bomb   [Nov-11-17 12:01AM  Barrons.com]
▶ Why is there a sudden rush of Chinese IPOs?   [Nov-09-17 05:50AM  CNBC]
▶ Bright Scholar Marketing Event & Business Updates   [Jun-10-17 12:00AM  PR Newswire]
▶ IPOs This Week: Software Maker Appian Plus 3 More Hopefuls   [May-21-17 10:29AM  24/7 Wall St.]

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