Intrinsic value of Central European Media Enterprises Ltd. - CETV

Previous Close

$4.12

  Intrinsic Value

$5.40

stock screener

  Rating & Target

buy

+31%

Previous close

$4.12

 
Intrinsic value

$5.40

 
Up/down potential

+31%

 
Rating

buy

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 1.0

 

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, %
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.40
  5.36
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.07
Revenue, $m
  749
  796
  845
  896
  949
  1,004
  1,062
  1,122
  1,185
  1,250
  1,319
  1,391
  1,466
  1,544
  1,626
  1,712
  1,802
  1,897
  1,996
  2,099
  2,208
  2,321
  2,441
  2,566
  2,697
  2,834
  2,979
  3,130
  3,289
  3,455
Variable operating expenses, $m
  285
  303
  320
  339
  358
  378
  400
  422
  444
  468
  482
  508
  535
  564
  594
  625
  658
  693
  729
  767
  806
  848
  891
  937
  985
  1,035
  1,088
  1,143
  1,201
  1,262
Fixed operating expenses, $m
  269
  275
  281
  287
  293
  300
  306
  313
  320
  327
  334
  341
  349
  357
  365
  373
  381
  389
  398
  406
  415
  424
  434
  443
  453
  463
  473
  484
  494
  505
Total operating expenses, $m
  554
  578
  601
  626
  651
  678
  706
  735
  764
  795
  816
  849
  884
  921
  959
  998
  1,039
  1,082
  1,127
  1,173
  1,221
  1,272
  1,325
  1,380
  1,438
  1,498
  1,561
  1,627
  1,695
  1,767
Operating income, $m
  195
  219
  244
  270
  297
  326
  356
  387
  420
  455
  503
  541
  581
  623
  668
  714
  763
  815
  869
  926
  986
  1,049
  1,115
  1,185
  1,259
  1,336
  1,417
  1,503
  1,593
  1,688
EBITDA, $m
  350
  382
  417
  452
  490
  529
  570
  613
  658
  705
  755
  807
  861
  918
  978
  1,041
  1,107
  1,177
  1,250
  1,326
  1,407
  1,492
  1,581
  1,675
  1,773
  1,877
  1,986
  2,100
  2,221
  2,347
Interest expense (income), $m
  54
  43
  47
  51
  56
  61
  66
  72
  77
  83
  89
  95
  102
  109
  116
  124
  132
  140
  149
  158
  167
  177
  188
  199
  210
  222
  235
  248
  262
  277
  292
Earnings before tax, $m
  152
  172
  192
  214
  236
  260
  284
  310
  337
  366
  408
  439
  472
  507
  544
  583
  623
  666
  711
  759
  809
  861
  917
  975
  1,036
  1,101
  1,169
  1,241
  1,316
  1,396
Tax expense, $m
  41
  46
  52
  58
  64
  70
  77
  84
  91
  99
  110
  119
  128
  137
  147
  157
  168
  180
  192
  205
  218
  233
  247
  263
  280
  297
  316
  335
  355
  377
Net income, $m
  111
  125
  140
  156
  172
  189
  208
  226
  246
  267
  298
  321
  345
  370
  397
  425
  455
  486
  519
  554
  590
  629
  669
  712
  757
  804
  853
  906
  961
  1,019

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
  1,584
  1,683
  1,786
  1,894
  2,006
  2,122
  2,244
  2,372
  2,504
  2,643
  2,788
  2,940
  3,099
  3,265
  3,438
  3,620
  3,811
  4,010
  4,219
  4,438
  4,667
  4,908
  5,160
  5,424
  5,702
  5,992
  6,297
  6,617
  6,953
  7,305
Adjusted assets (=assets-cash), $m
  1,584
  1,683
  1,786
  1,894
  2,006
  2,122
  2,244
  2,372
  2,504
  2,643
  2,788
  2,940
  3,099
  3,265
  3,438
  3,620
  3,811
  4,010
  4,219
  4,438
  4,667
  4,908
  5,160
  5,424
  5,702
  5,992
  6,297
  6,617
  6,953
  7,305
Revenue / Adjusted assets
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
Average production assets, $m
  715
  759
  806
  854
  905
  958
  1,013
  1,070
  1,130
  1,193
  1,258
  1,327
  1,398
  1,473
  1,551
  1,634
  1,719
  1,809
  1,904
  2,003
  2,106
  2,215
  2,328
  2,448
  2,573
  2,704
  2,842
  2,986
  3,138
  3,296
Working capital, $m
  190
  201
  214
  227
  240
  254
  269
  284
  300
  316
  334
  352
  371
  391
  411
  433
  456
  480
  505
  531
  559
  587
  617
  649
  682
  717
  754
  792
  832
  874
Total debt, $m
  869
  953
  1,040
  1,131
  1,226
  1,324
  1,428
  1,535
  1,648
  1,765
  1,888
  2,016
  2,150
  2,291
  2,438
  2,591
  2,753
  2,921
  3,098
  3,283
  3,477
  3,681
  3,894
  4,118
  4,352
  4,598
  4,856
  5,127
  5,411
  5,709
Total liabilities, $m
  1,340
  1,424
  1,511
  1,602
  1,697
  1,796
  1,899
  2,006
  2,119
  2,236
  2,359
  2,487
  2,621
  2,762
  2,909
  3,063
  3,224
  3,392
  3,569
  3,754
  3,948
  4,152
  4,365
  4,589
  4,824
  5,070
  5,328
  5,598
  5,882
  6,180
Total equity, $m
  244
  259
  275
  292
  309
  327
  346
  365
  386
  407
  429
  453
  477
  503
  529
  557
  587
  618
  650
  683
  719
  756
  795
  835
  878
  923
  970
  1,019
  1,071
  1,125
Total liabilities and equity, $m
  1,584
  1,683
  1,786
  1,894
  2,006
  2,123
  2,245
  2,371
  2,505
  2,643
  2,788
  2,940
  3,098
  3,265
  3,438
  3,620
  3,811
  4,010
  4,219
  4,437
  4,667
  4,908
  5,160
  5,424
  5,702
  5,993
  6,298
  6,617
  6,953
  7,305
Debt-to-equity ratio
  3.560
  3.680
  3.780
  3.880
  3.970
  4.050
  4.130
  4.200
  4.270
  4.340
  4.400
  4.450
  4.510
  4.560
  4.600
  4.650
  4.690
  4.730
  4.770
  4.800
  4.840
  4.870
  4.900
  4.930
  4.960
  4.980
  5.010
  5.030
  5.050
  5.070
Adjusted equity ratio
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  111
  125
  140
  156
  172
  189
  208
  226
  246
  267
  298
  321
  345
  370
  397
  425
  455
  486
  519
  554
  590
  629
  669
  712
  757
  804
  853
  906
  961
  1,019
Depreciation, amort., depletion, $m
  155
  164
  173
  183
  193
  203
  214
  226
  238
  250
  252
  265
  280
  295
  310
  327
  344
  362
  381
  401
  421
  443
  466
  490
  515
  541
  568
  597
  628
  659
Funds from operations, $m
  266
  289
  313
  339
  365
  393
  422
  452
  484
  517
  549
  586
  625
  665
  707
  752
  799
  848
  900
  954
  1,012
  1,072
  1,135
  1,201
  1,271
  1,345
  1,422
  1,503
  1,588
  1,678
Change in working capital, $m
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  32
  33
  35
  37
  38
  40
  42
Cash from operations, $m
  255
  277
  301
  326
  352
  379
  407
  437
  468
  501
  532
  568
  606
  645
  687
  730
  776
  824
  875
  928
  984
  1,043
  1,105
  1,170
  1,238
  1,310
  1,385
  1,465
  1,548
  1,636
Maintenance CAPEX, $m
  -134
  -143
  -152
  -161
  -171
  -181
  -192
  -203
  -214
  -226
  -239
  -252
  -265
  -280
  -295
  -310
  -327
  -344
  -362
  -381
  -401
  -421
  -443
  -466
  -490
  -515
  -541
  -568
  -597
  -628
New CAPEX, $m
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -63
  -65
  -68
  -72
  -75
  -78
  -82
  -86
  -90
  -94
  -99
  -104
  -109
  -114
  -119
  -125
  -131
  -138
  -144
  -151
  -159
Cash from investing activities, $m
  -177
  -188
  -199
  -210
  -222
  -234
  -247
  -260
  -274
  -289
  -304
  -320
  -337
  -355
  -373
  -392
  -413
  -434
  -456
  -480
  -505
  -530
  -557
  -585
  -615
  -646
  -679
  -712
  -748
  -787
Free cash flow, $m
  77
  90
  103
  116
  130
  145
  161
  177
  194
  212
  228
  248
  269
  291
  314
  338
  364
  390
  419
  449
  480
  513
  548
  585
  623
  664
  707
  752
  800
  850
Issuance/(repayment) of debt, $m
  80
  84
  87
  91
  95
  99
  103
  108
  112
  117
  123
  128
  134
  140
  147
  154
  161
  169
  177
  185
  194
  203
  213
  224
  235
  246
  258
  271
  284
  298
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  
  80
  84
  87
  91
  95
  99
  103
  108
  112
  117
  123
  128
  134
  140
  147
  154
  161
  169
  177
  185
  194
  203
  213
  224
  235
  246
  258
  271
  284
  298
Total cash flow (excl. dividends), $m
  158
  173
  190
  207
  225
  244
  264
  285
  307
  330
  351
  376
  403
  431
  461
  492
  525
  559
  596
  634
  674
  717
  761
  808
  858
  910
  965
  1,023
  1,084
  1,148
Retained Cash Flow (-), $m
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -54
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
  143
  158
  174
  190
  208
  226
  245
  265
  286
  308
  328
  353
  378
  405
  434
  464
  495
  528
  563
  600
  639
  680
  722
  768
  815
  865
  918
  973
  1,032
  1,093
Discount rate, %
  10.20
  10.71
  11.25
  11.81
  12.40
  13.02
  13.67
  14.35
  15.07
  15.82
  16.61
  17.45
  18.32
  19.23
  20.20
  21.21
  22.27
  23.38
  24.55
  25.77
  27.06
  28.42
  29.84
  31.33
  32.90
  34.54
  36.27
  38.08
  39.99
  41.98
PV of cash for distribution, $m
  130
  129
  126
  122
  116
  108
  100
  91
  81
  71
  61
  51
  42
  35
  27
  21
  16
  12
  9
  6
  4
  3
  2
  1
  1
  0
  0
  0
  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

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 Ltd. (CETV)

Valuation Ratios
P/E Ratio -3.3
Price to Sales 0.9
Price to Book 4
Price to Tangible Book
Price to Cash Flow 17.4
Price to Free Cash Flow 147.8
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 $704 million for the last fiscal year's total revenue generated by Central European Media Enterprises Ltd.. The default revenue input number comes from 0001 income statement of Central European Media Enterprises 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 CETV stock valuation model: a) initial revenue growth rate of 6.4% 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 10.2%, whose default value for CETV is calculated based on our internal credit rating of Central European Media Enterprises 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 Central European Media Enterprises 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 CETV stock the variable cost ratio is equal to 38.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $263 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 5.4% for Central European Media Enterprises Ltd..

Corporate tax rate of 27% is the nominal tax rate for Central European Media Enterprises 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 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 95.4%.

Life of production assets of 3.4 years is the average useful life of capital assets used in Central European Media Enterprises 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 CETV is equal to 25.3%. 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 - $229.02 million for Central European Media Enterprises 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 252.853 million for Central European Media Enterprises 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 Central European Media Enterprises Ltd. at the current share price and the inputted number of shares is $1.0 billion.

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