Intrinsic value of Central European Media Enterprises Cl A - CETV

Previous Close

$3.35

  Intrinsic Value

$2.61

stock screener

  Rating & Target

sell

-22%

Previous close

$3.35

 
Intrinsic value

$2.61

 
Up/down potential

-22%

 
Rating

sell

We calculate the intrinsic value of CETV 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 0.8

 

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, %
  8.60
  8.24
  7.92
  7.62
  7.36
  7.13
  6.91
  6.72
  6.55
  6.39
  6.26
  6.13
  6.02
  5.92
  5.82
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
Revenue, $m
  624
  675
  728
  784
  842
  902
  964
  1,029
  1,096
  1,166
  1,239
  1,315
  1,394
  1,477
  1,563
  1,652
  1,746
  1,844
  1,946
  2,053
  2,164
  2,281
  2,403
  2,531
  2,665
  2,805
  2,952
  3,106
  3,267
  3,436
Variable operating expenses, $m
  298
  313
  329
  346
  363
  381
  400
  419
  439
  460
  371
  394
  417
  442
  468
  495
  523
  552
  582
  614
  648
  683
  719
  757
  798
  839
  883
  929
  978
  1,028
Fixed operating expenses, $m
  169
  172
  176
  180
  184
  188
  192
  196
  201
  205
  210
  214
  219
  224
  229
  234
  239
  244
  249
  255
  261
  266
  272
  278
  284
  291
  297
  303
  310
  317
Total operating expenses, $m
  467
  485
  505
  526
  547
  569
  592
  615
  640
  665
  581
  608
  636
  666
  697
  729
  762
  796
  831
  869
  909
  949
  991
  1,035
  1,082
  1,130
  1,180
  1,232
  1,288
  1,345
Operating income, $m
  157
  189
  223
  258
  295
  333
  372
  413
  456
  501
  659
  707
  758
  811
  866
  924
  985
  1,048
  1,114
  1,184
  1,256
  1,332
  1,412
  1,496
  1,583
  1,675
  1,772
  1,873
  1,979
  2,091
EBITDA, $m
  401
  445
  490
  536
  585
  636
  689
  744
  801
  861
  923
  988
  1,055
  1,126
  1,200
  1,277
  1,357
  1,441
  1,529
  1,621
  1,718
  1,819
  1,924
  2,035
  2,151
  2,273
  2,401
  2,535
  2,676
  2,823
Interest expense (income), $m
  54
  74
  71
  80
  89
  99
  109
  119
  130
  141
  153
  165
  178
  191
  205
  219
  234
  249
  266
  283
  300
  319
  338
  358
  380
  402
  425
  449
  475
  501
  529
Earnings before tax, $m
  83
  118
  143
  169
  196
  224
  253
  283
  315
  348
  494
  530
  567
  606
  647
  690
  735
  782
  832
  883
  937
  994
  1,054
  1,116
  1,181
  1,250
  1,322
  1,398
  1,478
  1,561
Tax expense, $m
  22
  32
  39
  46
  53
  60
  68
  76
  85
  94
  133
  143
  153
  164
  175
  186
  199
  211
  225
  238
  253
  268
  284
  301
  319
  338
  357
  377
  399
  422
Net income, $m
  61
  86
  104
  123
  143
  163
  185
  207
  230
  254
  360
  387
  414
  443
  473
  504
  537
  571
  607
  645
  684
  726
  769
  815
  862
  913
  965
  1,021
  1,079
  1,140

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
  1,767
  1,912
  2,063
  2,221
  2,384
  2,554
  2,731
  2,914
  3,105
  3,304
  3,510
  3,726
  3,950
  4,183
  4,427
  4,681
  4,947
  5,224
  5,513
  5,815
  6,132
  6,462
  6,808
  7,171
  7,550
  7,947
  8,362
  8,798
  9,255
  9,733
Adjusted assets (=assets-cash), $m
  1,767
  1,912
  2,063
  2,221
  2,384
  2,554
  2,731
  2,914
  3,105
  3,304
  3,510
  3,726
  3,950
  4,183
  4,427
  4,681
  4,947
  5,224
  5,513
  5,815
  6,132
  6,462
  6,808
  7,171
  7,550
  7,947
  8,362
  8,798
  9,255
  9,733
Revenue / Adjusted assets
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
Average production assets, $m
  665
  720
  776
  836
  897
  961
  1,028
  1,097
  1,168
  1,243
  1,321
  1,402
  1,486
  1,574
  1,666
  1,762
  1,861
  1,966
  2,075
  2,188
  2,307
  2,432
  2,562
  2,698
  2,841
  2,990
  3,147
  3,311
  3,482
  3,662
Working capital, $m
  244
  264
  285
  307
  329
  353
  377
  402
  429
  456
  485
  514
  545
  577
  611
  646
  683
  721
  761
  803
  846
  892
  940
  990
  1,042
  1,097
  1,154
  1,214
  1,277
  1,343
Total debt, $m
  1,045
  1,176
  1,312
  1,454
  1,601
  1,754
  1,913
  2,078
  2,250
  2,428
  2,614
  2,808
  3,010
  3,220
  3,439
  3,668
  3,907
  4,156
  4,416
  4,689
  4,973
  5,271
  5,582
  5,908
  6,250
  6,607
  6,981
  7,373
  7,784
  8,215
Total liabilities, $m
  1,590
  1,721
  1,857
  1,999
  2,146
  2,299
  2,458
  2,623
  2,795
  2,973
  3,159
  3,353
  3,555
  3,765
  3,984
  4,213
  4,452
  4,701
  4,962
  5,234
  5,518
  5,816
  6,128
  6,453
  6,795
  7,152
  7,526
  7,918
  8,329
  8,760
Total equity, $m
  177
  191
  206
  222
  238
  255
  273
  291
  311
  330
  351
  373
  395
  418
  443
  468
  495
  522
  551
  582
  613
  646
  681
  717
  755
  795
  836
  880
  925
  973
Total liabilities and equity, $m
  1,767
  1,912
  2,063
  2,221
  2,384
  2,554
  2,731
  2,914
  3,106
  3,303
  3,510
  3,726
  3,950
  4,183
  4,427
  4,681
  4,947
  5,223
  5,513
  5,816
  6,131
  6,462
  6,809
  7,170
  7,550
  7,947
  8,362
  8,798
  9,254
  9,733
Debt-to-equity ratio
  5.910
  6.150
  6.360
  6.550
  6.710
  6.870
  7.000
  7.130
  7.240
  7.350
  7.450
  7.540
  7.620
  7.700
  7.770
  7.840
  7.900
  7.960
  8.010
  8.060
  8.110
  8.160
  8.200
  8.240
  8.280
  8.310
  8.350
  8.380
  8.410
  8.440
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
  61
  86
  104
  123
  143
  163
  185
  207
  230
  254
  360
  387
  414
  443
  473
  504
  537
  571
  607
  645
  684
  726
  769
  815
  862
  913
  965
  1,021
  1,079
  1,140
Depreciation, amort., depletion, $m
  244
  255
  267
  278
  291
  303
  317
  331
  345
  360
  264
  280
  297
  315
  333
  352
  372
  393
  415
  438
  461
  486
  512
  540
  568
  598
  629
  662
  696
  732
Funds from operations, $m
  305
  342
  371
  402
  434
  467
  501
  537
  575
  614
  625
  667
  711
  758
  806
  856
  909
  964
  1,022
  1,082
  1,146
  1,212
  1,281
  1,354
  1,431
  1,511
  1,595
  1,683
  1,775
  1,872
Change in working capital, $m
  19
  20
  21
  22
  23
  23
  24
  25
  26
  27
  29
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  52
  55
  57
  60
  63
  66
Cash from operations, $m
  286
  321
  350
  380
  411
  443
  477
  512
  548
  586
  596
  637
  680
  725
  772
  821
  872
  926
  982
  1,041
  1,102
  1,166
  1,234
  1,304
  1,378
  1,456
  1,537
  1,623
  1,712
  1,806
Maintenance CAPEX, $m
  -122
  -133
  -144
  -155
  -167
  -179
  -192
  -206
  -219
  -234
  -249
  -264
  -280
  -297
  -315
  -333
  -352
  -372
  -393
  -415
  -438
  -461
  -486
  -512
  -540
  -568
  -598
  -629
  -662
  -696
New CAPEX, $m
  -53
  -55
  -57
  -59
  -62
  -64
  -66
  -69
  -72
  -75
  -78
  -81
  -84
  -88
  -92
  -96
  -100
  -104
  -109
  -114
  -119
  -124
  -130
  -136
  -143
  -149
  -156
  -164
  -172
  -180
Cash from investing activities, $m
  -175
  -188
  -201
  -214
  -229
  -243
  -258
  -275
  -291
  -309
  -327
  -345
  -364
  -385
  -407
  -429
  -452
  -476
  -502
  -529
  -557
  -585
  -616
  -648
  -683
  -717
  -754
  -793
  -834
  -876
Free cash flow, $m
  110
  134
  149
  165
  182
  200
  218
  237
  257
  278
  270
  292
  316
  340
  366
  392
  420
  449
  480
  512
  545
  580
  617
  656
  696
  738
  783
  829
  878
  930
Issuance/(repayment) of debt, $m
  -44
  131
  136
  142
  147
  153
  159
  165
  172
  179
  186
  194
  202
  210
  219
  229
  239
  249
  260
  272
  285
  298
  311
  326
  341
  357
  374
  392
  411
  431
Issuance/(repurchase) of shares, $m
  122
  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  
  78
  131
  136
  142
  147
  153
  159
  165
  172
  179
  186
  194
  202
  210
  219
  229
  239
  249
  260
  272
  285
  298
  311
  326
  341
  357
  374
  392
  411
  431
Total cash flow (excl. dividends), $m
  188
  265
  285
  307
  329
  353
  377
  403
  429
  457
  456
  486
  517
  550
  585
  621
  659
  699
  740
  784
  830
  878
  929
  982
  1,037
  1,096
  1,157
  1,221
  1,289
  1,360
Retained Cash Flow (-), $m
  -182
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -48
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
  6
  250
  270
  291
  313
  336
  360
  384
  410
  437
  435
  464
  495
  527
  561
  596
  633
  671
  712
  754
  798
  845
  894
  945
  999
  1,056
  1,115
  1,178
  1,243
  1,312
Discount rate, %
  13.90
  14.60
  15.32
  16.09
  16.90
  17.74
  18.63
  19.56
  20.54
  21.56
  22.64
  23.77
  24.96
  26.21
  27.52
  28.90
  30.34
  31.86
  33.45
  35.12
  36.88
  38.72
  40.66
  42.69
  44.83
  47.07
  49.42
  51.90
  54.49
  57.21
PV of cash for distribution, $m
  5
  191
  176
  160
  143
  126
  109
  92
  76
  62
  46
  36
  27
  20
  15
  10
  7
  5
  3
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

Central European Media Enterprises Ltd. (CME Ltd.) is a media and entertainment company operating in Central and Eastern Europe. The Company's assets are held through a series of Dutch and Curacao holding companies. The Company manages its business on a geographical basis, with six segments: Bulgaria, Croatia, the Czech Republic, Romania, the Slovak Republic and Slovenia. The Bulgaria segment operated one general entertainment channel, BTV, and five other channels, including BTV CINEMA, BTV COMEDY, RING.BG, BTV ACTION and BTV LADY, as of December 31, 2016. The Croatia segment operated one general entertainment channel, NOVA TV (Croatia), as of December 31, 2016. The Czech Republic segment operated one general entertainment channel, TV NOVA (Czech Republic), as of December 31, 2016. The Romania segment operated one general entertainment channel, PRO TV, as of December 31, 2016. The Slovak Republic segment operated one general entertainment channel, TV MARKIZA, as of December 31, 2016.

FINANCIAL RATIOS  of  Central European Media Enterprises Cl A (CETV)

Valuation Ratios
P/E Ratio -2.7
Price to Sales 0.8
Price to Book 3.3
Price to Tangible Book
Price to Cash Flow 14.1
Price to Free Cash Flow 120.1
Growth Rates
Sales Growth Rate 5.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -11.8%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio 41
Current Ratio 0.8
LT Debt to Equity 681.6%
Total Debt to Equity 682.3%
Interest Coverage -2
Management Effectiveness
Return On Assets -8.7%
Ret/ On Assets - 3 Yr. Avg. -7.9%
Return On Total Capital -15.1%
Ret/ On T. Cap. - 3 Yr. Avg. -13%
Return On Equity -77.4%
Return On Equity - 3 Yr. Avg. -48.3%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 35.1%
Gross Margin - 3 Yr. Avg. 32.3%
EBITDA Margin 38.9%
EBITDA Margin - 3 Yr. Avg. 47.2%
Operating Margin -6.1%
Oper. Margin - 3 Yr. Avg. 3.1%
Pre-Tax Margin -27.1%
Pre-Tax Margin - 3 Yr. Avg. -22.2%
Net Profit Margin -28.2%
Net Profit Margin - 3 Yr. Avg. -26.8%
Effective Tax Rate -4.6%
Eff/ Tax Rate - 3 Yr. Avg. -0.8%
Payout Ratio 0%

CETV stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CETV stock intrinsic value calculation we used $574.212 million for the last fiscal year's total revenue generated by Central European Media Enterprises Cl A. The default revenue input number comes from 0001 income statement of Central European Media Enterprises Cl A. 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 CETV stock valuation model: a) initial revenue growth rate of 8.6% 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 13.9%, whose default value for CETV is calculated based on our internal credit rating of Central European Media Enterprises Cl A, 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 Central European Media Enterprises Cl A.
    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 CETV stock the variable cost ratio is equal to 49.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $165 million in the base year in the intrinsic value calculation for CETV 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 6.8% for Central European Media Enterprises Cl A.

Corporate tax rate of 27% is the nominal tax rate for Central European Media Enterprises Cl A. 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 CETV 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 CETV are equal to 106.6%.

Life of production assets of 3.8 years is the average useful life of capital assets used in Central European Media Enterprises Cl A 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 CETV is equal to 39.1%. 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 - $-5.788 million for Central European Media Enterprises Cl A - 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 252.121 million for Central European Media Enterprises Cl A 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 Central European Media Enterprises Cl A at the current share price and the inputted number of shares is $0.8 billion.

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COMPANY NEWS

▶ Central European Media: 3Q Earnings Snapshot   [05:02AM  Associated Press]
▶ Central European Media: 2Q Earnings Snapshot   [05:53AM  Associated Press]
▶ Central European Media: 1Q Earnings Snapshot   [Apr-26-18 05:49AM  Associated Press]
▶ Central European Media posts 4Q profit   [05:01AM  Associated Press]
▶ Central European Media reports 3Q loss   [05:55AM  Associated Press]
▶ Central European Media posts 2Q profit   [Jul-26-17 12:39AM  Associated Press]
▶ Company News for July 11, 2017   [10:19AM  Zacks]
▶ [$$] KKR-Backed Media Group Makes 230 Million Add-On Deal   [Jul-10-17 11:24AM  The Wall Street Journal]
▶ Central European Media reports 1Q loss   [05:01AM  Associated Press]

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