Intrinsic value of China Distance Education Holdings Limite - DL

Previous Close

$6.40

  Intrinsic Value

$92.96

stock screener

  Rating & Target

str. buy

+999%

Previous close

$6.40

 
Intrinsic value

$92.96

 
Up/down potential

+999%

 
Rating

str. buy

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

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 0.2

 

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, %
  27.20
  24.98
  22.98
  21.18
  19.57
  18.11
  16.80
  15.62
  14.56
  13.60
  12.74
  11.97
  11.27
  10.64
  10.08
  9.57
  9.11
  8.70
  8.33
  8.00
  7.70
  7.43
  7.19
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.05
Revenue, $m
  212
  265
  327
  396
  473
  559
  653
  755
  864
  982
  1,107
  1,240
  1,379
  1,526
  1,680
  1,841
  2,008
  2,183
  2,365
  2,554
  2,751
  2,955
  3,167
  3,388
  3,618
  3,856
  4,104
  4,362
  4,631
  4,911
Variable operating expenses, $m
  175
  215
  262
  315
  375
  440
  512
  590
  675
  765
  849
  950
  1,057
  1,170
  1,288
  1,411
  1,540
  1,674
  1,813
  1,958
  2,109
  2,266
  2,429
  2,598
  2,774
  2,957
  3,147
  3,345
  3,551
  3,766
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
  175
  215
  262
  315
  375
  440
  512
  590
  675
  765
  849
  950
  1,057
  1,170
  1,288
  1,411
  1,540
  1,674
  1,813
  1,958
  2,109
  2,266
  2,429
  2,598
  2,774
  2,957
  3,147
  3,345
  3,551
  3,766
Operating income, $m
  38
  50
  64
  80
  98
  118
  140
  164
  190
  217
  258
  289
  322
  356
  392
  429
  468
  509
  552
  596
  642
  689
  739
  790
  844
  899
  957
  1,018
  1,080
  1,146
EBITDA, $m
  52
  65
  80
  97
  116
  137
  160
  185
  212
  241
  272
  304
  338
  374
  412
  452
  493
  536
  580
  627
  675
  725
  777
  831
  888
  946
  1,007
  1,070
  1,136
  1,205
Interest expense (income), $m
  0
  4
  8
  14
  20
  27
  34
  43
  52
  63
  74
  86
  98
  111
  125
  140
  156
  172
  189
  206
  225
  244
  263
  284
  305
  327
  350
  374
  399
  425
  452
Earnings before tax, $m
  34
  42
  51
  61
  72
  84
  97
  112
  127
  143
  173
  191
  210
  230
  252
  274
  297
  321
  345
  371
  398
  426
  455
  485
  517
  549
  583
  618
  655
  693
Tax expense, $m
  9
  11
  14
  16
  19
  23
  26
  30
  34
  39
  47
  52
  57
  62
  68
  74
  80
  87
  93
  100
  107
  115
  123
  131
  139
  148
  157
  167
  177
  187
Net income, $m
  25
  30
  37
  44
  52
  61
  71
  81
  93
  105
  126
  139
  153
  168
  184
  200
  217
  234
  252
  271
  291
  311
  332
  354
  377
  401
  426
  451
  478
  506

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
  418
  523
  643
  779
  931
  1,100
  1,285
  1,485
  1,702
  1,933
  2,179
  2,440
  2,715
  3,004
  3,307
  3,623
  3,953
  4,297
  4,655
  5,028
  5,415
  5,817
  6,235
  6,670
  7,121
  7,591
  8,079
  8,587
  9,117
  9,668
Adjusted assets (=assets-cash), $m
  418
  523
  643
  779
  931
  1,100
  1,285
  1,485
  1,702
  1,933
  2,179
  2,440
  2,715
  3,004
  3,307
  3,623
  3,953
  4,297
  4,655
  5,028
  5,415
  5,817
  6,235
  6,670
  7,121
  7,591
  8,079
  8,587
  9,117
  9,668
Revenue / Adjusted assets
  0.507
  0.507
  0.509
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
Average production assets, $m
  77
  96
  119
  144
  172
  203
  237
  274
  314
  356
  402
  450
  501
  554
  610
  668
  729
  792
  858
  927
  999
  1,073
  1,150
  1,230
  1,313
  1,400
  1,490
  1,584
  1,681
  1,783
Working capital, $m
  -147
  -183
  -225
  -273
  -326
  -386
  -450
  -521
  -596
  -678
  -764
  -855
  -952
  -1,053
  -1,159
  -1,270
  -1,386
  -1,506
  -1,632
  -1,762
  -1,898
  -2,039
  -2,186
  -2,338
  -2,496
  -2,661
  -2,832
  -3,010
  -3,196
  -3,389
Total debt, $m
  140
  230
  334
  452
  584
  730
  890
  1,063
  1,250
  1,450
  1,663
  1,889
  2,127
  2,377
  2,639
  2,912
  3,198
  3,496
  3,805
  4,127
  4,462
  4,810
  5,172
  5,548
  5,938
  6,344
  6,767
  7,207
  7,664
  8,141
Total liabilities, $m
  362
  452
  556
  674
  806
  951
  1,111
  1,285
  1,472
  1,672
  1,885
  2,111
  2,348
  2,598
  2,860
  3,134
  3,420
  3,717
  4,027
  4,349
  4,684
  5,032
  5,393
  5,769
  6,160
  6,566
  6,989
  7,428
  7,886
  8,363
Total equity, $m
  56
  71
  87
  105
  126
  148
  173
  201
  230
  261
  294
  329
  367
  406
  446
  489
  534
  580
  628
  679
  731
  785
  842
  900
  961
  1,025
  1,091
  1,159
  1,231
  1,305
Total liabilities and equity, $m
  418
  523
  643
  779
  932
  1,099
  1,284
  1,486
  1,702
  1,933
  2,179
  2,440
  2,715
  3,004
  3,306
  3,623
  3,954
  4,297
  4,655
  5,028
  5,415
  5,817
  6,235
  6,669
  7,121
  7,591
  8,080
  8,587
  9,117
  9,668
Debt-to-equity ratio
  2.480
  3.270
  3.850
  4.300
  4.640
  4.910
  5.130
  5.300
  5.440
  5.560
  5.650
  5.730
  5.800
  5.860
  5.910
  5.950
  5.990
  6.030
  6.050
  6.080
  6.100
  6.130
  6.140
  6.160
  6.180
  6.190
  6.200
  6.220
  6.230
  6.240
Adjusted equity ratio
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  25
  30
  37
  44
  52
  61
  71
  81
  93
  105
  126
  139
  153
  168
  184
  200
  217
  234
  252
  271
  291
  311
  332
  354
  377
  401
  426
  451
  478
  506
Depreciation, amort., depletion, $m
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  13
  15
  17
  18
  20
  22
  24
  26
  29
  31
  33
  36
  38
  41
  44
  47
  50
  53
  56
  59
Funds from operations, $m
  39
  46
  53
  61
  70
  80
  91
  103
  115
  128
  139
  154
  170
  187
  204
  222
  241
  260
  281
  302
  324
  347
  371
  395
  421
  448
  475
  504
  534
  566
Change in working capital, $m
  -31
  -37
  -42
  -48
  -53
  -59
  -65
  -70
  -76
  -81
  -86
  -91
  -96
  -101
  -106
  -111
  -116
  -121
  -126
  -131
  -136
  -141
  -147
  -152
  -158
  -165
  -171
  -178
  -185
  -193
Cash from operations, $m
  71
  82
  95
  109
  123
  139
  156
  173
  191
  210
  226
  246
  267
  288
  310
  333
  357
  381
  406
  432
  460
  488
  517
  547
  579
  612
  646
  682
  720
  759
Maintenance CAPEX, $m
  -2
  -3
  -3
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -12
  -13
  -15
  -17
  -18
  -20
  -22
  -24
  -26
  -29
  -31
  -33
  -36
  -38
  -41
  -44
  -47
  -50
  -53
  -56
New CAPEX, $m
  -17
  -19
  -22
  -25
  -28
  -31
  -34
  -37
  -40
  -43
  -45
  -48
  -51
  -53
  -56
  -58
  -61
  -63
  -66
  -69
  -71
  -74
  -77
  -80
  -83
  -87
  -90
  -94
  -98
  -102
Cash from investing activities, $m
  -19
  -22
  -25
  -29
  -33
  -37
  -41
  -45
  -49
  -53
  -57
  -61
  -66
  -70
  -74
  -78
  -83
  -87
  -92
  -98
  -102
  -107
  -113
  -118
  -124
  -131
  -137
  -144
  -151
  -158
Free cash flow, $m
  52
  60
  70
  80
  91
  102
  115
  128
  142
  156
  168
  184
  201
  218
  236
  254
  273
  293
  314
  335
  357
  380
  404
  429
  455
  482
  510
  539
  569
  601
Issuance/(repayment) of debt, $m
  77
  90
  104
  118
  132
  146
  160
  174
  187
  200
  213
  226
  238
  250
  262
  274
  286
  298
  310
  322
  335
  348
  362
  376
  391
  406
  422
  440
  458
  477
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  
  77
  90
  104
  118
  132
  146
  160
  174
  187
  200
  213
  226
  238
  250
  262
  274
  286
  298
  310
  322
  335
  348
  362
  376
  391
  406
  422
  440
  458
  477
Total cash flow (excl. dividends), $m
  129
  151
  173
  197
  222
  248
  275
  301
  329
  357
  381
  410
  439
  468
  498
  528
  559
  591
  624
  657
  692
  728
  766
  805
  845
  888
  932
  979
  1,027
  1,078
Retained Cash Flow (-), $m
  -12
  -14
  -16
  -18
  -21
  -23
  -25
  -27
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -46
  -48
  -50
  -52
  -54
  -56
  -59
  -61
  -63
  -66
  -69
  -71
  -74
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
  117
  137
  157
  179
  202
  225
  250
  274
  300
  325
  348
  375
  402
  429
  457
  485
  514
  544
  575
  607
  640
  674
  709
  746
  785
  825
  866
  910
  956
  1,003
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
  112
  125
  137
  147
  156
  164
  169
  172
  172
  171
  165
  160
  153
  144
  134
  123
  112
  100
  89
  77
  66
  56
  46
  38
  31
  24
  19
  14
  10
  8
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

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 Limite (DL)

Valuation Ratios
P/E Ratio 56.3
Price to Sales 6.4
Price to Book 17.2
Price to Tangible Book
Price to Cash Flow 21.6
Price to Free Cash Flow 23.4
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 $167 million for the last fiscal year's total revenue generated by China Distance Education Holdings Limite. The default revenue input number comes from 0001 income statement of China Distance Education Holdings Limite. 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 27.2% 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 DL is calculated based on our internal credit rating of China Distance Education Holdings Limite, 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 Limite.
    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 83.8%.

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 5.9% for China Distance Education Holdings Limite.

Corporate tax rate of 27% is the nominal tax rate for China Distance Education Holdings Limite. 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 36.3%.

Life of production assets of 32.7 years is the average useful life of capital assets used in China Distance Education Holdings Limite 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 -69%. 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 - $44.274 million for China Distance Education Holdings Limite - 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 33.445 million for China Distance Education Holdings Limite 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 Limite at the current share price and the inputted number of shares is $0.2 billion.

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