Intrinsic value of China TechFaith Wireless Communication T - CNTF

Previous Close

$1.81

  Intrinsic Value

$6.18

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  Rating & Target

str. buy

+241%

Previous close

$1.81

 
Intrinsic value

$6.18

 
Up/down potential

+241%

 
Rating

str. buy

Our model is not good at valuating stocks of financial companies, such as CNTF.

We calculate the intrinsic value of CNTF 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 0.0

 

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, %
  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
  48
  49
  50
  52
  53
  55
  57
  59
  61
  63
  66
  68
  71
  74
  77
  81
  84
  88
  92
  96
  101
  106
  111
  116
  121
  127
  133
  140
  146
  154
Variable operating expenses, $m
  40
  41
  42
  43
  44
  45
  47
  49
  50
  52
  54
  56
  59
  61
  64
  67
  69
  73
  76
  79
  83
  87
  91
  95
  100
  105
  110
  115
  121
  126
Fixed operating expenses, $m
  13
  14
  14
  14
  14
  15
  15
  15
  16
  16
  17
  17
  17
  18
  18
  18
  19
  19
  20
  20
  21
  21
  21
  22
  22
  23
  23
  24
  24
  25
Total operating expenses, $m
  53
  55
  56
  57
  58
  60
  62
  64
  66
  68
  71
  73
  76
  79
  82
  85
  88
  92
  96
  99
  104
  108
  112
  117
  122
  128
  133
  139
  145
  151
Operating income, $m
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -4
  -4
  -4
  -4
  -3
  -3
  -3
  -2
  -2
  -1
  -1
  0
  0
  1
  1
  2
EBITDA, $m
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  3
  3
  4
  4
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
Interest expense (income), $m
  0
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
Earnings before tax, $m
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -7
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
Tax expense, $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
Net income, $m
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -7
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8

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
  348
  356
  366
  376
  387
  400
  413
  428
  444
  461
  479
  499
  520
  542
  565
  590
  616
  644
  673
  704
  736
  771
  807
  845
  886
  928
  972
  1,019
  1,069
  1,121
Adjusted assets (=assets-cash), $m
  348
  356
  366
  376
  387
  400
  413
  428
  444
  461
  479
  499
  520
  542
  565
  590
  616
  644
  673
  704
  736
  771
  807
  845
  886
  928
  972
  1,019
  1,069
  1,121
Revenue / Adjusted assets
  0.138
  0.138
  0.137
  0.138
  0.137
  0.138
  0.138
  0.138
  0.137
  0.137
  0.138
  0.136
  0.137
  0.137
  0.136
  0.137
  0.136
  0.137
  0.137
  0.136
  0.137
  0.137
  0.138
  0.137
  0.137
  0.137
  0.137
  0.137
  0.137
  0.137
Average production assets, $m
  131
  134
  137
  141
  146
  150
  155
  161
  167
  173
  180
  187
  195
  203
  212
  222
  231
  242
  253
  264
  277
  290
  303
  318
  333
  349
  365
  383
  401
  421
Working capital, $m
  24
  24
  25
  26
  27
  27
  28
  29
  30
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  53
  55
  58
  61
  64
  67
  70
  73
  77
Total debt, $m
  14
  16
  18
  21
  24
  27
  30
  34
  38
  42
  46
  51
  56
  62
  67
  74
  80
  87
  94
  102
  110
  118
  127
  137
  147
  157
  168
  180
  192
  205
Total liabilities, $m
  86
  88
  90
  93
  96
  99
  102
  106
  110
  114
  118
  123
  128
  134
  140
  146
  152
  159
  166
  174
  182
  190
  199
  209
  219
  229
  240
  252
  264
  277
Total equity, $m
  262
  268
  275
  283
  292
  301
  311
  322
  334
  347
  361
  376
  391
  408
  425
  444
  464
  485
  507
  530
  555
  580
  608
  636
  667
  699
  732
  768
  805
  844
Total liabilities and equity, $m
  348
  356
  365
  376
  388
  400
  413
  428
  444
  461
  479
  499
  519
  542
  565
  590
  616
  644
  673
  704
  737
  770
  807
  845
  886
  928
  972
  1,020
  1,069
  1,121
Debt-to-equity ratio
  0.050
  0.060
  0.070
  0.070
  0.080
  0.090
  0.100
  0.100
  0.110
  0.120
  0.130
  0.140
  0.140
  0.150
  0.160
  0.170
  0.170
  0.180
  0.190
  0.190
  0.200
  0.200
  0.210
  0.210
  0.220
  0.220
  0.230
  0.230
  0.240
  0.240
Adjusted equity ratio
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -7
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
  -8
Depreciation, amort., depletion, $m
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
Funds from operations, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  1
  1
  1
  2
  2
  2
  3
  3
  4
  5
  5
  6
  7
Change in working capital, $m
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
Cash from operations, $m
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  1
  1
  2
  2
  3
  3
Maintenance CAPEX, $m
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
New CAPEX, $m
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
Cash from investing activities, $m
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -12
  -12
  -12
  -13
  -13
  -15
  -15
  -16
  -17
  -18
  -18
  -20
  -21
  -21
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -33
  -34
Free cash flow, $m
  -8
  -9
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
Issuance/(repayment) of debt, $m
  1
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
Issuance/(repurchase) of shares, $m
  10
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  31
  33
  34
  36
  37
  39
  40
  42
  44
  45
  47
Cash from financing (excl. dividends), $m  
  11
  14
  15
  17
  18
  19
  20
  22
  23
  24
  26
  27
  28
  29
  31
  32
  34
  36
  37
  39
  41
  42
  45
  46
  49
  50
  53
  56
  57
  60
Total cash flow (excl. dividends), $m
  4
  5
  6
  6
  7
  7
  8
  9
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  30
Retained Cash Flow (-), $m
  -10
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -44
  -45
  -47
Prev. year cash balance distribution, $m
  6
  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
  0
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -12
  -13
  -13
  -13
  -14
  -14
  -15
  -15
  -15
  -16
  -16
  -17
  -17
  -17
  -18
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
  0
  -7
  -7
  -7
  -6
  -6
  -6
  -6
  -6
  -5
  -5
  -5
  -4
  -4
  -4
  -3
  -3
  -2
  -2
  -2
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  94.8
  88.9
  83.1
  77.5
  72.0
  66.7
  61.7
  56.9
  52.5
  48.3
  44.5
  40.9
  37.6
  34.6
  31.8
  29.2
  26.8
  24.6
  22.6
  20.8
  19.1
  17.5
  16.1
  14.8
  13.6
  12.6
  11.6
  10.7
  9.8
  9.1

China Techfaith Wireless Communication Technology Limited is a developer, owner and operator of commercial real estate properties across China, as well as China-based mobile solutions provider for the global mobile handsets market. The Company's segments include Mobile phone business and Real estate business. The Company focuses on the original design and development of specialized mobile handsets under its customer's brands and its own brands for consumers and enterprises, and the sales of finished products to its local and international customers. Its Mobile phone business provides primary types of products to its customers, including feature phones, smart phones, wireless modules and data cards, other components, such as printed circuit board assemblies, as well as wireless software and applications. The Company's Real estate business activities range from construction, renovation and re-lease of existing buildings to purchase of raw land and the sale of existing buildings.

FINANCIAL RATIOS  of  China TechFaith Wireless Communication T (CNTF)

Valuation Ratios
P/E Ratio 143.7
Price to Sales 23.6
Price to Book 5.5
Price to Tangible Book
Price to Cash Flow -179.6
Price to Free Cash Flow -119.8
Growth Rates
Sales Growth Rate -4.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -93.7%
Cap. Spend. - 3 Yr. Gr. Rate -21%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 4.6%
Total Debt to Equity 10%
Interest Coverage 0
Management Effectiveness
Return On Assets 2.6%
Ret/ On Assets - 3 Yr. Avg. -1.3%
Return On Total Capital 3.5%
Ret/ On T. Cap. - 3 Yr. Avg. -1.6%
Return On Equity 3.8%
Return On Equity - 3 Yr. Avg. -1.7%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 19.7%
Gross Margin - 3 Yr. Avg. 12.7%
EBITDA Margin 27.9%
EBITDA Margin - 3 Yr. Avg. 3.6%
Operating Margin 19.7%
Oper. Margin - 3 Yr. Avg. -4.6%
Pre-Tax Margin 16.4%
Pre-Tax Margin - 3 Yr. Avg. -6.4%
Net Profit Margin 16.4%
Net Profit Margin - 3 Yr. Avg. -5.7%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. -4.8%
Payout Ratio 0%

CNTF stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CNTF stock intrinsic value calculation we used $46.806 million for the last fiscal year's total revenue generated by China TechFaith Wireless Communication T. The default revenue input number comes from 0001 income statement of China TechFaith Wireless Communication T. 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 CNTF 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 4.3%, whose default value for CNTF is calculated based on our internal credit rating of China TechFaith Wireless Communication T, 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 TechFaith Wireless Communication T.
    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 CNTF stock the variable cost ratio is equal to 83%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $13 million in the base year in the intrinsic value calculation for CNTF 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 China TechFaith Wireless Communication T.

Corporate tax rate of 27% is the nominal tax rate for China TechFaith Wireless Communication T. 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 CNTF 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 CNTF are equal to 274.2%.

Life of production assets of 28.1 years is the average useful life of capital assets used in China TechFaith Wireless Communication T 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 CNTF 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 - $264.675 million for China TechFaith Wireless Communication T - 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 10.587 million for China TechFaith Wireless Communication T 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 TechFaith Wireless Communication T at the current share price and the inputted number of shares is $0.0 billion.

RELATED COMPANIES Price Int.Val. Rating

COMPANY NEWS

▶ CES 2018 ALERT: TechFaith to Have Expanded Presence   [Nov-27-17 08:30AM  PR Newswire]
▶ TechFaith Wins Enterprise Device Order for Latin America   [Dec-07-16 07:00AM  PR Newswire]
▶ TechFaith Announces Board of Directors Changes   [Nov-23-16 05:30AM  PR Newswire]
▶ TechFaith to Launch 4G Intrinsically Safe Smartphone   [May-31-16 06:00AM  PR Newswire]
▶ TechFaith Announces ADS Ratio Change   [Feb-12-16 06:00AM  PR Newswire]
▶ TechFaith to Launch Sleek, 4G Smartphone for Mass Market   [Jan-19-16 06:30AM  PR Newswire]
▶ Do Hedge Funds Love Resolute Energy Corp (REN)?   [Nov-30  10:00AM  at Insider Monkey]
▶ Should You Go Long RMG Networks Holding Corporation (RMGN)?   [Nov-23  09:51AM  at Insider Monkey]
▶ TechFaith to Launch Ruggedized 4G Android Smartphone   [Feb-03  05:30AM  PR Newswire]

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