Intrinsic value of China Telecom ADR - CHA

Previous Close

$44.57

  Intrinsic Value

$25.44

stock screener

  Rating & Target

sell

-43%

Previous close

$44.57

 
Intrinsic value

$25.44

 
Up/down potential

-43%

 
Rating

sell

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

We calculate the intrinsic value of CHA 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.

Please visit our new site that uses elements of artificial intelligence for stock valuation: artificial intelligence value of China Telecom ADR (CHA) stock.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  6.37
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.69
  4.72
  4.75
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
Revenue, $m
  50,966
  53,056
  55,279
  57,640
  60,143
  62,795
  65,601
  68,568
  71,701
  75,008
  78,497
  82,176
  86,052
  90,136
  94,437
  98,964
  103,729
  108,743
  114,016
  119,563
  125,396
  131,529
  137,976
  144,752
  151,874
  159,359
  167,224
  175,488
  184,170
  193,292
  202,875
Variable operating expenses, $m
 
  48,793
  50,820
  52,972
  55,254
  57,671
  60,229
  62,933
  65,789
  68,803
  71,984
  74,904
  78,437
  82,160
  86,080
  90,207
  94,550
  99,120
  103,927
  108,983
  114,299
  119,889
  125,766
  131,942
  138,434
  145,257
  152,426
  159,958
  167,872
  176,187
  184,922
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
  47,031
  48,793
  50,820
  52,972
  55,254
  57,671
  60,229
  62,933
  65,789
  68,803
  71,984
  74,904
  78,437
  82,160
  86,080
  90,207
  94,550
  99,120
  103,927
  108,983
  114,299
  119,889
  125,766
  131,942
  138,434
  145,257
  152,426
  159,958
  167,872
  176,187
  184,922
Operating income, $m
  3,935
  4,262
  4,459
  4,668
  4,889
  5,124
  5,372
  5,635
  5,912
  6,205
  6,514
  7,272
  7,615
  7,977
  8,357
  8,758
  9,179
  9,623
  10,090
  10,581
  11,097
  11,639
  12,210
  12,810
  13,440
  14,102
  14,798
  15,530
  16,298
  17,105
  17,953
EBITDA, $m
  13,764
  14,340
  14,940
  15,579
  16,255
  16,972
  17,730
  18,532
  19,379
  20,273
  21,216
  22,210
  23,258
  24,362
  25,524
  26,748
  28,035
  29,390
  30,816
  32,315
  33,891
  35,549
  37,291
  39,123
  41,048
  43,071
  45,196
  47,430
  49,777
  52,242
  54,832
Interest expense (income), $m
  540
  428
  493
  561
  634
  711
  792
  878
  969
  1,066
  1,167
  1,274
  1,387
  1,507
  1,632
  1,764
  1,903
  2,050
  2,204
  2,366
  2,536
  2,715
  2,904
  3,102
  3,310
  3,528
  3,758
  4,000
  4,254
  4,521
  4,801
Earnings before tax, $m
  3,486
  3,834
  3,966
  4,107
  4,256
  4,413
  4,580
  4,757
  4,943
  5,139
  5,346
  5,998
  6,228
  6,470
  6,725
  6,994
  7,276
  7,573
  7,886
  8,215
  8,561
  8,924
  9,306
  9,708
  10,130
  10,574
  11,040
  11,530
  12,044
  12,585
  13,152
Tax expense, $m
  866
  1,035
  1,071
  1,109
  1,149
  1,192
  1,237
  1,284
  1,335
  1,388
  1,444
  1,619
  1,681
  1,747
  1,816
  1,888
  1,965
  2,045
  2,129
  2,218
  2,311
  2,410
  2,513
  2,621
  2,735
  2,855
  2,981
  3,113
  3,252
  3,398
  3,551
Net income, $m
  2,605
  2,799
  2,895
  2,998
  3,107
  3,222
  3,344
  3,472
  3,608
  3,752
  3,903
  4,378
  4,546
  4,723
  4,909
  5,105
  5,312
  5,529
  5,757
  5,997
  6,249
  6,515
  6,794
  7,087
  7,395
  7,719
  8,059
  8,417
  8,792
  9,187
  9,601

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  4,043
  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
  94,379
  94,070
  98,012
  102,198
  106,637
  111,339
  116,315
  121,574
  127,129
  132,993
  139,179
  145,702
  152,575
  159,816
  167,441
  175,469
  183,917
  192,806
  202,157
  211,992
  222,333
  233,207
  244,638
  256,653
  269,281
  282,551
  296,496
  311,149
  326,543
  342,717
  359,707
Adjusted assets (=assets-cash), $m
  90,336
  94,070
  98,012
  102,198
  106,637
  111,339
  116,315
  121,574
  127,129
  132,993
  139,179
  145,702
  152,575
  159,816
  167,441
  175,469
  183,917
  192,806
  202,157
  211,992
  222,333
  233,207
  244,638
  256,653
  269,281
  282,551
  296,496
  311,149
  326,543
  342,717
  359,707
Revenue / Adjusted assets
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
Average production assets, $m
  67,642
  70,405
  73,355
  76,488
  79,810
  83,330
  87,053
  90,989
  95,147
  99,536
  104,166
  109,047
  114,191
  119,611
  125,318
  131,326
  137,649
  144,301
  151,300
  158,660
  166,401
  174,539
  183,094
  192,086
  201,537
  211,469
  221,906
  232,872
  244,394
  256,499
  269,215
Working capital, $m
  -35,448
  -25,573
  -26,644
  -27,782
  -28,989
  -30,267
  -31,620
  -33,050
  -34,560
  -36,154
  -37,836
  -39,609
  -41,477
  -43,446
  -45,519
  -47,701
  -49,997
  -52,414
  -54,956
  -57,629
  -60,441
  -63,397
  -66,504
  -69,770
  -73,203
  -76,811
  -80,602
  -84,585
  -88,770
  -93,167
  -97,786
Total debt, $m
  16,280
  14,085
  16,036
  18,108
  20,305
  22,633
  25,096
  27,699
  30,449
  33,352
  36,414
  39,642
  43,045
  46,629
  50,403
  54,377
  58,559
  62,959
  67,588
  72,456
  77,575
  82,957
  88,616
  94,563
  100,814
  107,383
  114,286
  121,539
  129,159
  137,165
  145,575
Total liabilities, $m
  48,761
  46,565
  48,516
  50,588
  52,785
  55,113
  57,576
  60,179
  62,929
  65,832
  68,894
  72,122
  75,525
  79,109
  82,883
  86,857
  91,039
  95,439
  100,068
  104,936
  110,055
  115,437
  121,096
  127,043
  133,294
  139,863
  146,766
  154,019
  161,639
  169,645
  178,055
Total equity, $m
  45,619
  47,505
  49,496
  51,610
  53,852
  56,226
  58,739
  61,395
  64,200
  67,162
  70,286
  73,579
  77,050
  80,707
  84,558
  88,612
  92,878
  97,367
  102,089
  107,056
  112,278
  117,769
  123,542
  129,610
  135,987
  142,688
  149,731
  157,130
  164,904
  173,072
  181,652
Total liabilities and equity, $m
  94,380
  94,070
  98,012
  102,198
  106,637
  111,339
  116,315
  121,574
  127,129
  132,994
  139,180
  145,701
  152,575
  159,816
  167,441
  175,469
  183,917
  192,806
  202,157
  211,992
  222,333
  233,206
  244,638
  256,653
  269,281
  282,551
  296,497
  311,149
  326,543
  342,717
  359,707
Debt-to-equity ratio
  0.357
  0.300
  0.320
  0.350
  0.380
  0.400
  0.430
  0.450
  0.470
  0.500
  0.520
  0.540
  0.560
  0.580
  0.600
  0.610
  0.630
  0.650
  0.660
  0.680
  0.690
  0.700
  0.720
  0.730
  0.740
  0.750
  0.760
  0.770
  0.780
  0.790
  0.800
Adjusted equity ratio
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,605
  2,799
  2,895
  2,998
  3,107
  3,222
  3,344
  3,472
  3,608
  3,752
  3,903
  4,378
  4,546
  4,723
  4,909
  5,105
  5,312
  5,529
  5,757
  5,997
  6,249
  6,515
  6,794
  7,087
  7,395
  7,719
  8,059
  8,417
  8,792
  9,187
  9,601
Depreciation, amort., depletion, $m
  9,829
  10,077
  10,481
  10,911
  11,366
  11,848
  12,358
  12,897
  13,467
  14,068
  14,702
  14,938
  15,643
  16,385
  17,167
  17,990
  18,856
  19,767
  20,726
  21,734
  22,795
  23,909
  25,081
  26,313
  27,608
  28,968
  30,398
  31,900
  33,479
  35,137
  36,879
Funds from operations, $m
  14,864
  12,876
  13,377
  13,908
  14,472
  15,070
  15,702
  16,370
  17,075
  17,820
  18,605
  19,316
  20,189
  21,108
  22,076
  23,095
  24,168
  25,296
  26,483
  27,731
  29,044
  30,424
  31,875
  33,400
  35,003
  36,687
  38,457
  40,317
  42,271
  44,324
  46,480
Change in working capital, $m
  233
  -1,007
  -1,072
  -1,138
  -1,207
  -1,278
  -1,353
  -1,430
  -1,510
  -1,594
  -1,682
  -1,773
  -1,869
  -1,968
  -2,073
  -2,182
  -2,297
  -2,416
  -2,542
  -2,674
  -2,811
  -2,956
  -3,107
  -3,266
  -3,433
  -3,608
  -3,791
  -3,983
  -4,185
  -4,397
  -4,619
Cash from operations, $m
  14,631
  13,883
  14,448
  15,046
  15,679
  16,348
  17,054
  17,799
  18,585
  19,414
  20,287
  21,089
  22,057
  23,077
  24,149
  25,277
  26,464
  27,712
  29,025
  30,405
  31,855
  33,380
  34,982
  36,666
  38,436
  40,295
  42,248
  44,300
  46,456
  48,720
  51,099
Maintenance CAPEX, $m
  0
  -9,266
  -9,644
  -10,049
  -10,478
  -10,933
  -11,415
  -11,925
  -12,464
  -13,034
  -13,635
  -14,269
  -14,938
  -15,643
  -16,385
  -17,167
  -17,990
  -18,856
  -19,767
  -20,726
  -21,734
  -22,795
  -23,909
  -25,081
  -26,313
  -27,608
  -28,968
  -30,398
  -31,900
  -33,479
  -35,137
New CAPEX, $m
  -14,000
  -2,763
  -2,950
  -3,133
  -3,323
  -3,519
  -3,724
  -3,936
  -4,158
  -4,389
  -4,630
  -4,881
  -5,144
  -5,419
  -5,707
  -6,008
  -6,323
  -6,653
  -6,998
  -7,361
  -7,740
  -8,138
  -8,555
  -8,992
  -9,451
  -9,932
  -10,437
  -10,966
  -11,522
  -12,105
  -12,716
Cash from investing activities, $m
  -14,328
  -12,029
  -12,594
  -13,182
  -13,801
  -14,452
  -15,139
  -15,861
  -16,622
  -17,423
  -18,265
  -19,150
  -20,082
  -21,062
  -22,092
  -23,175
  -24,313
  -25,509
  -26,765
  -28,087
  -29,474
  -30,933
  -32,464
  -34,073
  -35,764
  -37,540
  -39,405
  -41,364
  -43,422
  -45,584
  -47,853
Free cash flow, $m
  303
  1,854
  1,854
  1,865
  1,879
  1,896
  1,915
  1,938
  1,963
  1,991
  2,022
  1,939
  1,975
  2,015
  2,057
  2,103
  2,151
  2,204
  2,259
  2,318
  2,381
  2,448
  2,518
  2,593
  2,672
  2,755
  2,843
  2,936
  3,034
  3,137
  3,246
Issuance/(repayment) of debt, $m
  -431
  1,848
  1,951
  2,072
  2,197
  2,328
  2,463
  2,603
  2,750
  2,903
  3,062
  3,228
  3,402
  3,584
  3,774
  3,974
  4,182
  4,400
  4,629
  4,868
  5,119
  5,382
  5,658
  5,947
  6,251
  6,569
  6,903
  7,253
  7,620
  8,006
  8,410
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
  0
Cash from financing (excl. dividends), $m  
  -1,382
  1,848
  1,951
  2,072
  2,197
  2,328
  2,463
  2,603
  2,750
  2,903
  3,062
  3,228
  3,402
  3,584
  3,774
  3,974
  4,182
  4,400
  4,629
  4,868
  5,119
  5,382
  5,658
  5,947
  6,251
  6,569
  6,903
  7,253
  7,620
  8,006
  8,410
Total cash flow (excl. dividends), $m
  -1,049
  3,702
  3,805
  3,937
  4,076
  4,223
  4,378
  4,541
  4,713
  4,894
  5,084
  5,167
  5,377
  5,599
  5,832
  6,076
  6,333
  6,604
  6,888
  7,186
  7,500
  7,830
  8,176
  8,540
  8,922
  9,324
  9,746
  10,189
  10,654
  11,143
  11,656
Retained Cash Flow (-), $m
  -1,670
  -1,886
  -1,990
  -2,114
  -2,242
  -2,375
  -2,513
  -2,656
  -2,805
  -2,961
  -3,124
  -3,294
  -3,471
  -3,657
  -3,851
  -4,054
  -4,266
  -4,489
  -4,722
  -4,967
  -5,223
  -5,491
  -5,772
  -6,068
  -6,377
  -6,702
  -7,042
  -7,399
  -7,774
  -8,168
  -8,580
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
 
  1,815
  1,814
  1,823
  1,835
  1,849
  1,866
  1,885
  1,908
  1,932
  1,960
  1,873
  1,906
  1,942
  1,981
  2,022
  2,067
  2,115
  2,166
  2,220
  2,278
  2,339
  2,404
  2,472
  2,545
  2,622
  2,703
  2,789
  2,880
  2,975
  3,076
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
 
  1,741
  1,661
  1,587
  1,511
  1,433
  1,354
  1,274
  1,192
  1,110
  1,028
  890
  814
  738
  665
  594
  525
  460
  399
  342
  289
  242
  199
  162
  130
  102
  79
  60
  45
  32
  23
Current shareholders' claim on cash, %
  100
  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

China Telecom Corporation Limited is an investment holding company principally engaged in telecommunications and related businesses. The Company provides integrated information services, including wireline and mobile telecommunications services, Internet access services, information services and other value-added telecommunications services. The Company mainly operates its business in domestic market.

FINANCIAL RATIOS  of  China Telecom ADR (CHA)

Valuation Ratios
P/E Ratio 1384.7
Price to Sales 70.8
Price to Book 79.1
Price to Tangible Book
Price to Cash Flow 246.5
Price to Free Cash Flow 5716.6
Growth Rates
Sales Growth Rate 6.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -5.1%
Cap. Spend. - 3 Yr. Gr. Rate 6.4%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 3%
Total Debt to Equity 35.7%
Interest Coverage 7
Management Effectiveness
Return On Assets 3.2%
Ret/ On Assets - 3 Yr. Avg. 3.7%
Return On Total Capital 4.2%
Ret/ On T. Cap. - 3 Yr. Avg. 4.6%
Return On Equity 5.8%
Return On Equity - 3 Yr. Avg. 6.3%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 72.7%
Gross Margin - 3 Yr. Avg. 70.1%
EBITDA Margin 27.2%
EBITDA Margin - 3 Yr. Avg. 28.8%
Operating Margin 7.7%
Oper. Margin - 3 Yr. Avg. 8.2%
Pre-Tax Margin 6.8%
Pre-Tax Margin - 3 Yr. Avg. 7.4%
Net Profit Margin 5.1%
Net Profit Margin - 3 Yr. Avg. 5.5%
Effective Tax Rate 24.8%
Eff/ Tax Rate - 3 Yr. Avg. 24.3%
Payout Ratio 0%

CHA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CHA stock intrinsic value calculation we used $50966 million for the last fiscal year's total revenue generated by China Telecom ADR. The default revenue input number comes from 2016 income statement of China Telecom 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 CHA stock valuation model: a) initial revenue growth rate of 4.1% 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 CHA is calculated based on our internal credit rating of China Telecom 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 China Telecom 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 CHA stock the variable cost ratio is equal to 92%.

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 CHA 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 3.5% for China Telecom ADR.

Corporate tax rate of 27% is the nominal tax rate for China Telecom 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 CHA 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 CHA are equal to 132.7%.

Life of production assets of 7.3 years is the average useful life of capital assets used in China Telecom 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 CHA is equal to -48.2%. 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 - $45619 million for China Telecom 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 814.62 million for China Telecom 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 China Telecom ADR at the current share price and the inputted number of shares is $36.3 billion.

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Financial statements of CHA
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