Intrinsic value of China Distance Education Holdings ADR - DL

Previous Close

$9.12

  Intrinsic Value

$24.33

stock screener

  Rating & Target

str. buy

+167%

Previous close

$9.12

 
Intrinsic value

$24.33

 
Up/down potential

+167%

 
Rating

str. buy

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

We calculate the intrinsic value of DL 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

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
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  11.02
  10.50
  9.95
  9.45
  9.01
  8.61
  8.25
  7.92
  7.63
  7.37
  7.13
  6.92
  6.73
  6.55
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.39
  5.36
  5.32
  5.29
  5.26
Revenue, $m
  131
  145
  159
  174
  190
  206
  223
  241
  259
  278
  298
  319
  340
  363
  386
  410
  435
  461
  489
  517
  547
  578
  610
  644
  679
  716
  755
  795
  838
  882
  928
Variable operating expenses, $m
 
  109
  120
  131
  142
  154
  167
  180
  193
  207
  222
  234
  250
  266
  283
  301
  319
  339
  359
  380
  401
  424
  448
  473
  499
  526
  554
  584
  615
  647
  681
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
  111
  109
  120
  131
  142
  154
  167
  180
  193
  207
  222
  234
  250
  266
  283
  301
  319
  339
  359
  380
  401
  424
  448
  473
  499
  526
  554
  584
  615
  647
  681
Operating income, $m
  20
  36
  39
  43
  48
  52
  57
  61
  66
  71
  76
  85
  91
  97
  103
  109
  116
  123
  130
  138
  146
  154
  162
  171
  181
  191
  201
  212
  223
  235
  247
EBITDA, $m
  24
  40
  44
  48
  53
  57
  62
  67
  72
  77
  83
  89
  95
  101
  107
  114
  121
  128
  136
  144
  152
  160
  169
  179
  189
  199
  210
  221
  233
  245
  258
Interest expense (income), $m
  0
  1
  1
  2
  2
  3
  3
  4
  5
  6
  6
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  18
  19
  20
  22
  23
  24
  26
  28
  29
Earnings before tax, $m
  21
  35
  38
  42
  45
  49
  53
  57
  61
  66
  70
  78
  83
  88
  93
  99
  105
  111
  117
  123
  130
  137
  145
  152
  161
  169
  178
  187
  197
  207
  218
Tax expense, $m
  5
  9
  10
  11
  12
  13
  14
  15
  17
  18
  19
  21
  22
  24
  25
  27
  28
  30
  32
  33
  35
  37
  39
  41
  43
  46
  48
  51
  53
  56
  59
Net income, $m
  15
  25
  28
  31
  33
  36
  39
  42
  45
  48
  51
  57
  60
  64
  68
  72
  76
  81
  85
  90
  95
  100
  106
  111
  117
  123
  130
  137
  144
  151
  159

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  66
  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
  225
  176
  193
  211
  230
  250
  271
  292
  315
  338
  362
  387
  413
  440
  468
  498
  528
  560
  593
  628
  664
  701
  741
  782
  824
  869
  916
  965
  1,017
  1,070
  1,127
Adjusted assets (=assets-cash), $m
  159
  176
  193
  211
  230
  250
  271
  292
  315
  338
  362
  387
  413
  440
  468
  498
  528
  560
  593
  628
  664
  701
  741
  782
  824
  869
  916
  965
  1,017
  1,070
  1,127
Revenue / Adjusted assets
  0.824
  0.824
  0.824
  0.825
  0.826
  0.824
  0.823
  0.825
  0.822
  0.822
  0.823
  0.824
  0.823
  0.825
  0.825
  0.823
  0.824
  0.823
  0.825
  0.823
  0.824
  0.825
  0.823
  0.824
  0.824
  0.824
  0.824
  0.824
  0.824
  0.824
  0.823
Average production assets, $m
  18
  20
  22
  24
  26
  28
  31
  33
  36
  38
  41
  44
  47
  50
  53
  56
  60
  63
  67
  71
  75
  79
  84
  88
  93
  98
  103
  109
  115
  121
  127
Working capital, $m
  -9
  -50
  -55
  -60
  -65
  -71
  -77
  -83
  -89
  -96
  -103
  -110
  -117
  -125
  -133
  -141
  -150
  -159
  -168
  -178
  -188
  -199
  -210
  -222
  -234
  -246
  -260
  -274
  -288
  -303
  -319
Total debt, $m
  50
  32
  48
  64
  81
  99
  118
  137
  157
  178
  200
  222
  246
  270
  295
  322
  349
  378
  408
  439
  471
  505
  541
  577
  616
  656
  699
  743
  789
  837
  888
Total liabilities, $m
  176
  158
  174
  190
  207
  225
  244
  263
  283
  304
  326
  348
  372
  396
  421
  448
  475
  504
  534
  565
  597
  631
  667
  703
  742
  782
  825
  869
  915
  963
  1,014
Total equity, $m
  49
  18
  19
  21
  23
  25
  27
  29
  31
  34
  36
  39
  41
  44
  47
  50
  53
  56
  59
  63
  66
  70
  74
  78
  82
  87
  92
  97
  102
  107
  113
Total liabilities and equity, $m
  225
  176
  193
  211
  230
  250
  271
  292
  314
  338
  362
  387
  413
  440
  468
  498
  528
  560
  593
  628
  663
  701
  741
  781
  824
  869
  917
  966
  1,017
  1,070
  1,127
Debt-to-equity ratio
  1.020
  1.830
  2.480
  3.040
  3.530
  3.970
  4.350
  4.690
  5.000
  5.270
  5.520
  5.740
  5.950
  6.140
  6.310
  6.470
  6.610
  6.750
  6.880
  6.990
  7.100
  7.200
  7.300
  7.390
  7.470
  7.550
  7.620
  7.690
  7.760
  7.820
  7.880
Adjusted equity ratio
  0.082
  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
  15
  25
  28
  31
  33
  36
  39
  42
  45
  48
  51
  57
  60
  64
  68
  72
  76
  81
  85
  90
  95
  100
  106
  111
  117
  123
  130
  137
  144
  151
  159
Depreciation, amort., depletion, $m
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
Funds from operations, $m
  46
  30
  33
  35
  38
  41
  44
  47
  51
  54
  58
  61
  64
  68
  73
  77
  81
  86
  91
  96
  101
  107
  113
  119
  125
  132
  139
  146
  154
  161
  170
Change in working capital, $m
  7
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
Cash from operations, $m
  39
  35
  38
  41
  44
  47
  50
  53
  57
  61
  64
  68
  72
  76
  81
  85
  90
  95
  100
  106
  112
  118
  124
  130
  137
  144
  152
  160
  168
  177
  186
Maintenance CAPEX, $m
  0
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
New CAPEX, $m
  -3
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
Cash from investing activities, $m
  -34
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -15
  -15
  -16
  -16
Free cash flow, $m
  5
  31
  34
  37
  39
  42
  45
  48
  52
  55
  59
  61
  65
  69
  73
  77
  82
  86
  91
  96
  102
  107
  113
  119
  125
  132
  138
  146
  153
  161
  169
Issuance/(repayment) of debt, $m
  0
  12
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  23
  24
  25
  26
  27
  29
  30
  31
  32
  34
  35
  37
  39
  40
  42
  44
  46
  48
  51
Issuance/(repurchase) of shares, $m
  -35
  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  
  -32
  12
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  23
  24
  25
  26
  27
  29
  30
  31
  32
  34
  35
  37
  39
  40
  42
  44
  46
  48
  51
Total cash flow (excl. dividends), $m
  -33
  44
  50
  53
  57
  60
  64
  68
  72
  76
  80
  84
  89
  93
  98
  104
  109
  115
  121
  127
  134
  141
  148
  156
  164
  172
  181
  190
  199
  209
  220
Retained Cash Flow (-), $m
  -4
  -5
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
Prev. year cash balance distribution, $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
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
 
  75
  48
  51
  55
  58
  62
  66
  70
  74
  78
  81
  86
  91
  96
  101
  106
  112
  118
  124
  130
  137
  144
  152
  159
  167
  176
  185
  194
  204
  214
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
 
  72
  44
  45
  45
  45
  45
  44
  43
  42
  41
  39
  37
  34
  32
  30
  27
  24
  22
  19
  17
  14
  12
  10
  8
  7
  5
  4
  3
  2
  2
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
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China Distance Education Holdings Limited is a holding company. The Company is engaged in providing online and offline education services, and selling related products in the People's Republic of China (PRC). The Company's segments include online education services, business start-up training services and the sale of learning simulation software. The Company primarily sells books and reference materials related to its courses, such as the various levels of Accounting Professional Qualification Examinations, accounting continuing education, the National Practicing Medical Doctor Qualification Examination, the National Pharmacist Qualification Examination, and Associate Constructor and Constructor Qualification Examinations. It offers college oriented online-to-offline products and services, business start-up training courses and others. The Company had a content library with 263 course offerings of audio-video content, as of September 30, 2016.

FINANCIAL RATIOS  of  China Distance Education Holdings ADR (DL)

Valuation Ratios
P/E Ratio 80.2
Price to Sales 9.2
Price to Book 24.5
Price to Tangible Book
Price to Cash Flow 30.8
Price to Free Cash Flow 33.4
Growth Rates
Sales Growth Rate 11%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -40%
Cap. Spend. - 3 Yr. Gr. Rate 8.4%
Financial Strength
Quick Ratio 2
Current Ratio 0.3
LT Debt to Equity 40.8%
Total Debt to Equity 102%
Interest Coverage 0
Management Effectiveness
Return On Assets 8%
Ret/ On Assets - 3 Yr. Avg. 12.9%
Return On Total Capital 18.8%
Ret/ On T. Cap. - 3 Yr. Avg. 24.1%
Return On Equity 31.9%
Return On Equity - 3 Yr. Avg. 32.2%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 56.5%
Gross Margin - 3 Yr. Avg. 58.1%
EBITDA Margin 19.1%
EBITDA Margin - 3 Yr. Avg. 26.4%
Operating Margin 15.3%
Oper. Margin - 3 Yr. Avg. 21.3%
Pre-Tax Margin 16%
Pre-Tax Margin - 3 Yr. Avg. 23.9%
Net Profit Margin 11.5%
Net Profit Margin - 3 Yr. Avg. 18.9%
Effective Tax Rate 23.8%
Eff/ Tax Rate - 3 Yr. Avg. 19.6%
Payout Ratio 206.7%

DL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DL stock intrinsic value calculation we used $131 million for the last fiscal year's total revenue generated by China Distance Education Holdings ADR. The default revenue input number comes from 2017 income statement of China Distance Education 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 DL stock valuation model: a) initial revenue growth rate of 10.5% 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 DL is calculated based on our internal credit rating of China Distance Education 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 China Distance Education 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 DL stock the variable cost ratio is equal to 75.6%.

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 DL 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 Distance Education Holdings ADR.

Corporate tax rate of 27% is the nominal tax rate for China Distance Education 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 DL 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 DL are equal to 13.7%.

Life of production assets of 11.8 years is the average useful life of capital assets used in China Distance Education 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 DL is equal to -34.4%. 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 - $49 million for China Distance Education 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 33.569 million for China Distance Education 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 China Distance Education Holdings ADR at the current share price and the inputted number of shares is $0.3 billion.

RELATED COMPANIES Price Int.Val. Rating
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COMPANY NEWS

▶ China Distance posts 4Q profit   [Nov-28-17 05:22PM  Associated Press]
▶ China Distance posts 3Q profit   [Aug-23-17 10:16PM  Associated Press]
▶ China Distance reports 2Q loss   [May-17-17 05:08PM  Associated Press]
▶ CDEL to Hold Annual General Meeting on May 19, 2017   [Apr-27-17 07:00AM  PR Newswire]
▶ China Distance posts 1Q profit   [Feb-21-17 06:18PM  Associated Press]
▶ 8 High-Yield Stocks With Falling Prices   [05:51PM  GuruFocus.com]
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▶ Is Park Sterling Corp (PSTB) A Good Stock To Buy?   [Dec-08-16 03:11PM  at Insider Monkey]
▶ CDEL to Hold Annual General Meeting on May 26, 2016   [May-05-16 07:00AM  PR Newswire]
Financial statements of DL
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