Intrinsic value of Concord Medical Services Holdings ADR - CCM

Previous Close

$3.51

  Intrinsic Value

$0.98

stock screener

  Rating & Target

str. sell

-72%

  Value-price divergence*

-86%

Previous close

$3.51

 
Intrinsic value

$0.98

 
Up/down potential

-72%

 
Rating

str. sell

 
Value-price divergence*

-86%

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

We calculate the intrinsic value of CCM 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 0.2

 

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, %
  -25.84
  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
  66
  67
  69
  71
  73
  75
  77
  80
  83
  86
  89
  93
  96
  100
  105
  109
  114
  119
  124
  130
  136
  142
  149
  156
  163
  171
  179
  188
  197
  206
  216
Variable operating expenses, $m
 
  14
  15
  15
  15
  16
  16
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
Fixed operating expenses, $m
 
  80
  82
  84
  86
  88
  90
  93
  95
  97
  100
  102
  105
  108
  110
  113
  116
  119
  122
  125
  128
  131
  134
  138
  141
  145
  148
  152
  156
  160
  164
Total operating expenses, $m
  90
  94
  97
  99
  101
  104
  106
  110
  113
  115
  119
  122
  125
  129
  132
  136
  140
  144
  148
  153
  157
  161
  166
  171
  176
  181
  186
  192
  198
  204
  210
Operating income, $m
  -24
  -27
  -28
  -28
  -29
  -29
  -30
  -30
  -30
  -30
  -30
  -29
  -29
  -28
  -28
  -27
  -26
  -25
  -24
  -22
  -21
  -19
  -17
  -15
  -12
  -10
  -7
  -4
  -1
  3
  7
EBITDA, $m
  -5
  -8
  -8
  -8
  -8
  -8
  -7
  -7
  -6
  -5
  -4
  -3
  -1
  0
  2
  4
  7
  9
  12
  15
  18
  22
  26
  30
  34
  39
  44
  50
  56
  62
  69
Interest expense (income), $m
  12
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  14
  15
  15
  16
  17
  18
  20
  21
  22
  23
  25
  26
  28
  30
  31
  33
  35
  37
  39
  42
Earnings before tax, $m
  -30
  -35
  -36
  -37
  -38
  -39
  -40
  -41
  -41
  -42
  -43
  -43
  -43
  -44
  -44
  -44
  -44
  -45
  -44
  -44
  -44
  -44
  -43
  -43
  -42
  -41
  -40
  -39
  -38
  -36
  -35
Tax expense, $m
  8
  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
Net income, $m
  -38
  -35
  -36
  -37
  -38
  -39
  -40
  -41
  -41
  -42
  -43
  -43
  -43
  -44
  -44
  -44
  -44
  -45
  -44
  -44
  -44
  -44
  -43
  -43
  -42
  -41
  -40
  -39
  -38
  -36
  -35

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  36
  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
  467
  440
  450
  462
  475
  489
  505
  522
  541
  561
  582
  605
  630
  656
  684
  713
  745
  778
  813
  850
  889
  930
  973
  1,019
  1,067
  1,118
  1,172
  1,228
  1,287
  1,349
  1,415
Adjusted assets (=assets-cash), $m
  431
  440
  450
  462
  475
  489
  505
  522
  541
  561
  582
  605
  630
  656
  684
  713
  745
  778
  813
  850
  889
  930
  973
  1,019
  1,067
  1,118
  1,172
  1,228
  1,287
  1,349
  1,415
Revenue / Adjusted assets
  0.153
  0.152
  0.153
  0.154
  0.154
  0.153
  0.152
  0.153
  0.153
  0.153
  0.153
  0.154
  0.152
  0.152
  0.154
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
Average production assets, $m
  190
  193
  198
  203
  209
  215
  222
  229
  237
  246
  256
  266
  277
  288
  300
  313
  327
  342
  357
  373
  390
  408
  428
  448
  469
  491
  515
  539
  565
  593
  622
Working capital, $m
  35
  34
  34
  35
  36
  37
  39
  40
  41
  43
  45
  46
  48
  50
  52
  55
  57
  59
  62
  65
  68
  71
  74
  78
  82
  86
  90
  94
  98
  103
  108
Total debt, $m
  172
  142
  148
  155
  163
  171
  181
  191
  203
  215
  228
  242
  257
  273
  290
  308
  327
  347
  368
  391
  414
  439
  466
  494
  523
  554
  586
  621
  657
  694
  734
Total liabilities, $m
  298
  268
  274
  281
  289
  297
  307
  317
  329
  341
  354
  368
  383
  399
  416
  434
  453
  473
  494
  517
  540
  565
  592
  620
  649
  680
  712
  747
  783
  820
  860
Total equity, $m
  169
  172
  176
  181
  186
  192
  198
  205
  212
  220
  228
  237
  247
  257
  268
  280
  292
  305
  319
  333
  348
  364
  382
  399
  418
  438
  459
  481
  505
  529
  555
Total liabilities and equity, $m
  467
  440
  450
  462
  475
  489
  505
  522
  541
  561
  582
  605
  630
  656
  684
  714
  745
  778
  813
  850
  888
  929
  974
  1,019
  1,067
  1,118
  1,171
  1,228
  1,288
  1,349
  1,415
Debt-to-equity ratio
  1.018
  0.820
  0.840
  0.850
  0.870
  0.890
  0.910
  0.940
  0.960
  0.980
  1.000
  1.020
  1.040
  1.060
  1.080
  1.100
  1.120
  1.140
  1.160
  1.170
  1.190
  1.210
  1.220
  1.240
  1.250
  1.260
  1.280
  1.290
  1.300
  1.310
  1.320
Adjusted equity ratio
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -38
  -35
  -36
  -37
  -38
  -39
  -40
  -41
  -41
  -42
  -43
  -43
  -43
  -44
  -44
  -44
  -44
  -45
  -44
  -44
  -44
  -44
  -43
  -43
  -42
  -41
  -40
  -39
  -38
  -36
  -35
Depreciation, amort., depletion, $m
  19
  19
  20
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  51
  54
  57
  59
  62
Funds from operations, $m
  -20
  -16
  -16
  -17
  -17
  -18
  -18
  -18
  -18
  -17
  -17
  -16
  -16
  -15
  -14
  -13
  -12
  -10
  -9
  -7
  -5
  -3
  -1
  2
  5
  8
  11
  15
  19
  23
  27
Change in working capital, $m
  -9
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
Cash from operations, $m
  -11
  -16
  -17
  -18
  -18
  -19
  -19
  -19
  -19
  -19
  -19
  -18
  -18
  -17
  -16
  -15
  -14
  -13
  -11
  -10
  -8
  -6
  -4
  -1
  1
  4
  7
  11
  14
  18
  22
Maintenance CAPEX, $m
  0
  -19
  -19
  -20
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -57
  -59
New CAPEX, $m
  -12
  -4
  -4
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
Cash from investing activities, $m
  -11
  -23
  -23
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -38
  -39
  -41
  -43
  -45
  -48
  -49
  -52
  -54
  -57
  -60
  -63
  -66
  -69
  -72
  -76
  -80
  -84
  -88
Free cash flow, $m
  -22
  -39
  -41
  -43
  -44
  -46
  -47
  -49
  -50
  -51
  -53
  -54
  -55
  -56
  -57
  -58
  -59
  -60
  -61
  -62
  -63
  -63
  -64
  -64
  -65
  -65
  -65
  -66
  -66
  -66
  -66
Issuance/(repayment) of debt, $m
  -67
  6
  6
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
Issuance/(repurchase) of shares, $m
  16
  39
  40
  42
  43
  45
  46
  47
  49
  50
  51
  52
  53
  54
  55
  56
  57
  58
  58
  59
  59
  60
  60
  61
  61
  61
  61
  61
  61
  61
  60
Cash from financing (excl. dividends), $m  
  22
  45
  46
  49
  51
  54
  56
  57
  60
  62
  64
  66
  68
  70
  72
  74
  76
  78
  79
  81
  83
  85
  86
  89
  90
  92
  94
  95
  97
  99
  100
Total cash flow (excl. dividends), $m
  -2
  5
  5
  6
  7
  8
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  17
  18
  20
  21
  22
  23
  24
  25
  27
  28
  30
  31
  33
  35
Retained Cash Flow (-), $m
  32
  -39
  -40
  -42
  -43
  -45
  -46
  -47
  -49
  -50
  -51
  -52
  -53
  -54
  -55
  -56
  -57
  -58
  -58
  -59
  -59
  -60
  -60
  -61
  -61
  -61
  -61
  -61
  -61
  -61
  -60
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
 
  -34
  -35
  -36
  -36
  -37
  -38
  -38
  -39
  -39
  -40
  -40
  -40
  -40
  -40
  -40
  -40
  -40
  -40
  -39
  -39
  -38
  -37
  -36
  -35
  -34
  -33
  -31
  -30
  -28
  -26
Discount rate, %
 
  8.90
  9.35
  9.81
  10.30
  10.82
  11.36
  11.93
  12.52
  13.15
  13.81
  14.50
  15.22
  15.98
  16.78
  17.62
  18.50
  19.43
  20.40
  21.42
  22.49
  23.61
  24.80
  26.03
  27.34
  28.70
  30.14
  31.65
  33.23
  34.89
  36.63
PV of cash for distribution, $m
 
  -31
  -29
  -27
  -25
  -22
  -20
  -17
  -15
  -13
  -11
  -9
  -7
  -6
  -5
  -4
  -3
  -2
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  79.7
  63.3
  50.1
  39.5
  31.2
  24.6
  19.4
  15.3
  12.1
  9.6
  7.7
  6.2
  4.9
  4.0
  3.2
  2.6
  2.2
  1.8
  1.5
  1.2
  1.0
  0.9
  0.7
  0.6
  0.5
  0.5
  0.4
  0.4
  0.3
  0.3

Concord Medical Services Holdings Limited is engaged in the leasing of radiotherapy and diagnostic imaging equipment, the provision of management services to hospitals. The Company is also engaged in hospital operations. The Company's segments are network and premium cancer hospital. The Company operates a network of radiotherapy and diagnostic imaging centers in China. Its network consists of approximately 130 cooperative centers based in over 70 hospitals, spanning approximately 60 cities across 25 provinces and administrative regions in China. Its network includes approximately 60 radiotherapy centers and over 60 diagnostic imaging centers and approximately seven centers. The Company's cooperative centers are equipped with a primary unit of medical equipment, such as a linear accelerator, head gamma knife system, body gamma knife system, positron emission tomography-computed tomography (PET-CT) scanner or magnetic resonance imaging (MRI) scanner.

FINANCIAL RATIOS  of  Concord Medical Services Holdings ADR (CCM)

Valuation Ratios
P/E Ratio -12
Price to Sales 6.9
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow -41.5
Price to Free Cash Flow -19.9
Growth Rates
Sales Growth Rate -25.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 71.4%
Cap. Spend. - 3 Yr. Gr. Rate 1.8%
Financial Strength
Quick Ratio 0
Current Ratio 0.6
LT Debt to Equity 39.6%
Total Debt to Equity 101.8%
Interest Coverage -2
Management Effectiveness
Return On Assets -4.6%
Ret/ On Assets - 3 Yr. Avg. 5.3%
Return On Total Capital -9.8%
Ret/ On T. Cap. - 3 Yr. Avg. -2.8%
Return On Equity -20.5%
Return On Equity - 3 Yr. Avg. -6.5%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 36.4%
Gross Margin - 3 Yr. Avg. 44.5%
EBITDA Margin 1.5%
EBITDA Margin - 3 Yr. Avg. 35.2%
Operating Margin -36.4%
Oper. Margin - 3 Yr. Avg. -4.1%
Pre-Tax Margin -45.5%
Pre-Tax Margin - 3 Yr. Avg. -6.1%
Net Profit Margin -57.6%
Net Profit Margin - 3 Yr. Avg. -16.9%
Effective Tax Rate -26.7%
Eff/ Tax Rate - 3 Yr. Avg. -327.6%
Payout Ratio -107.9%

CCM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CCM stock intrinsic value calculation we used $66 million for the last fiscal year's total revenue generated by Concord Medical Services Holdings ADR. The default revenue input number comes from 2016 income statement of Concord Medical Services 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 CCM 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 8.9%, whose default value for CCM is calculated based on our internal credit rating of Concord Medical Services 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 Concord Medical Services 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 CCM stock the variable cost ratio is equal to 21.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $78 million in the base year in the intrinsic value calculation for CCM 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 6% for Concord Medical Services Holdings ADR.

Corporate tax rate of 27% is the nominal tax rate for Concord Medical Services 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 CCM 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 CCM are equal to 287.1%.

Life of production assets of 10 years is the average useful life of capital assets used in Concord Medical Services 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 CCM is equal to 50%. 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 - $169 million for Concord Medical Services 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 43.147 million for Concord Medical Services 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 Concord Medical Services Holdings ADR at the current share price and the inputted number of shares is $0.2 billion.

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COMPANY NEWS

▶ Concord Medical Announces Changes to the Board   [Jul-24-17 06:30AM  PR Newswire]
▶ Concord Medical Files 2016 Annual Report on Form 20-F   [May-02-17 05:00AM  PR Newswire]
▶ New Strong Sell Stocks for September 13th   [Sep-13-16 09:06AM  Zacks]
▶ Why Traders Are Clamoring for These 5 Stocks This Morning   [Jul-11-16 11:07AM  at Insider Monkey]
▶ CONCORD MEDICAL SERVICES HOLDINGS LTD Financials   [01:04PM  EDGAR Online Financials]
▶ Concord Medical Files 2015 Annual Report on Form 20-F   [Apr-29-16 06:00AM  PR Newswire]
▶ Concord Medical Declares Special Dividend   [Dec-11  05:00AM  PR Newswire]
▶ Chinese Opportunities For A Changing Child Policy   [May-21  07:55PM  at Investopedia]
▶ Concord Medical Files 2014 Annual Report on Form 20-F   [Apr-28  08:00AM  PR Newswire]
Financial statements of CCM
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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