Intrinsic value of Greentree Hospitality Group ADR - GHG

Previous Close

$12.46

  Intrinsic Value

$354.78

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  Rating & Target

str. buy

+999%

Previous close

$12.46

 
Intrinsic value

$354.78

 
Up/down potential

+999%

 
Rating

str. buy

We calculate the intrinsic value of GHG 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 0.1

 

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, %
  26.10
  23.99
  22.09
  20.38
  18.84
  17.46
  16.21
  15.09
  14.08
  13.17
  12.36
  11.62
  10.96
  10.36
  9.83
  9.34
  8.91
  8.52
  8.17
  7.85
  7.57
  7.31
  7.08
  6.87
  6.68
  6.51
  6.36
  6.23
  6.10
  5.99
Revenue, $m
  148
  184
  225
  270
  321
  377
  438
  505
  576
  652
  732
  817
  907
  1,001
  1,099
  1,202
  1,309
  1,420
  1,536
  1,657
  1,782
  1,912
  2,048
  2,188
  2,335
  2,487
  2,645
  2,810
  2,981
  3,160
Variable operating expenses, $m
  64
  79
  97
  117
  139
  163
  189
  218
  248
  281
  316
  352
  391
  431
  474
  518
  564
  612
  662
  714
  768
  825
  883
  944
  1,007
  1,072
  1,140
  1,211
  1,285
  1,362
Fixed operating expenses, $m
  7
  7
  7
  8
  8
  8
  8
  8
  9
  9
  9
  9
  9
  9
  10
  10
  10
  10
  11
  11
  11
  11
  12
  12
  12
  12
  13
  13
  13
  13
Total operating expenses, $m
  71
  86
  104
  125
  147
  171
  197
  226
  257
  290
  325
  361
  400
  440
  484
  528
  574
  622
  673
  725
  779
  836
  895
  956
  1,019
  1,084
  1,153
  1,224
  1,298
  1,375
Operating income, $m
  77
  97
  120
  146
  175
  207
  241
  279
  319
  362
  408
  456
  506
  560
  615
  674
  734
  798
  863
  932
  1,003
  1,077
  1,153
  1,233
  1,316
  1,402
  1,492
  1,585
  1,683
  1,784
EBITDA, $m
  81
  102
  126
  153
  184
  217
  253
  292
  334
  379
  427
  478
  531
  587
  645
  706
  769
  836
  904
  976
  1,050
  1,128
  1,208
  1,292
  1,379
  1,469
  1,563
  1,661
  1,763
  1,869
Interest expense (income), $m
  0
  0
  2
  5
  8
  11
  14
  18
  23
  27
  32
  38
  43
  50
  56
  63
  69
  77
  84
  92
  100
  109
  118
  127
  137
  147
  157
  168
  179
  191
  203
Earnings before tax, $m
  77
  95
  115
  138
  164
  192
  223
  256
  291
  329
  370
  412
  457
  504
  553
  604
  658
  713
  771
  831
  894
  959
  1,026
  1,096
  1,169
  1,245
  1,324
  1,406
  1,492
  1,581
Tax expense, $m
  21
  26
  31
  37
  44
  52
  60
  69
  79
  89
  100
  111
  123
  136
  149
  163
  178
  193
  208
  224
  241
  259
  277
  296
  316
  336
  358
  380
  403
  427
Net income, $m
  56
  69
  84
  101
  120
  140
  163
  187
  213
  240
  270
  301
  334
  368
  404
  441
  480
  521
  563
  607
  652
  700
  749
  800
  854
  909
  967
  1,027
  1,089
  1,154

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
  220
  273
  333
  401
  477
  560
  651
  749
  854
  967
  1,086
  1,212
  1,345
  1,485
  1,631
  1,783
  1,942
  2,107
  2,279
  2,458
  2,644
  2,837
  3,038
  3,247
  3,464
  3,690
  3,924
  4,169
  4,423
  4,688
Adjusted assets (=assets-cash), $m
  220
  273
  333
  401
  477
  560
  651
  749
  854
  967
  1,086
  1,212
  1,345
  1,485
  1,631
  1,783
  1,942
  2,107
  2,279
  2,458
  2,644
  2,837
  3,038
  3,247
  3,464
  3,690
  3,924
  4,169
  4,423
  4,688
Revenue / Adjusted assets
  0.673
  0.674
  0.676
  0.673
  0.673
  0.673
  0.673
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
Average production assets, $m
  20
  25
  30
  36
  43
  51
  59
  68
  77
  87
  98
  109
  121
  134
  147
  161
  175
  190
  206
  222
  239
  256
  274
  293
  313
  333
  354
  377
  399
  423
Working capital, $m
  -83
  -103
  -126
  -152
  -181
  -212
  -246
  -284
  -324
  -366
  -411
  -459
  -510
  -562
  -618
  -675
  -736
  -798
  -863
  -931
  -1,002
  -1,075
  -1,151
  -1,230
  -1,312
  -1,398
  -1,487
  -1,579
  -1,675
  -1,776
Total debt, $m
  40
  86
  140
  200
  267
  340
  420
  507
  600
  700
  805
  917
  1,034
  1,158
  1,287
  1,421
  1,562
  1,708
  1,860
  2,018
  2,183
  2,354
  2,531
  2,716
  2,907
  3,107
  3,314
  3,530
  3,755
  3,990
Total liabilities, $m
  195
  241
  294
  354
  421
  495
  575
  662
  755
  855
  960
  1,072
  1,189
  1,312
  1,441
  1,576
  1,716
  1,863
  2,015
  2,173
  2,337
  2,508
  2,686
  2,870
  3,062
  3,262
  3,469
  3,685
  3,910
  4,144
Total equity, $m
  26
  32
  39
  47
  55
  65
  75
  87
  99
  112
  126
  141
  156
  172
  189
  207
  225
  244
  264
  285
  307
  329
  352
  377
  402
  428
  455
  484
  513
  544
Total liabilities and equity, $m
  221
  273
  333
  401
  476
  560
  650
  749
  854
  967
  1,086
  1,213
  1,345
  1,484
  1,630
  1,783
  1,941
  2,107
  2,279
  2,458
  2,644
  2,837
  3,038
  3,247
  3,464
  3,690
  3,924
  4,169
  4,423
  4,688
Debt-to-equity ratio
  1.560
  2.730
  3.620
  4.290
  4.820
  5.240
  5.570
  5.840
  6.060
  6.240
  6.390
  6.520
  6.630
  6.720
  6.800
  6.870
  6.930
  6.990
  7.040
  7.080
  7.120
  7.150
  7.180
  7.210
  7.240
  7.260
  7.280
  7.300
  7.320
  7.340
Adjusted equity ratio
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  56
  69
  84
  101
  120
  140
  163
  187
  213
  240
  270
  301
  334
  368
  404
  441
  480
  521
  563
  607
  652
  700
  749
  800
  854
  909
  967
  1,027
  1,089
  1,154
Depreciation, amort., depletion, $m
  4
  5
  6
  7
  9
  10
  12
  14
  16
  18
  20
  22
  24
  27
  29
  32
  35
  38
  41
  44
  48
  51
  55
  59
  63
  67
  71
  75
  80
  85
Funds from operations, $m
  60
  74
  90
  108
  128
  150
  174
  200
  228
  258
  290
  323
  358
  395
  433
  473
  515
  559
  604
  651
  700
  751
  804
  859
  916
  976
  1,038
  1,102
  1,169
  1,239
Change in working capital, $m
  -17
  -20
  -23
  -26
  -29
  -32
  -34
  -37
  -40
  -43
  -45
  -48
  -50
  -53
  -55
  -58
  -60
  -63
  -65
  -68
  -70
  -73
  -76
  -79
  -82
  -85
  -89
  -93
  -96
  -100
Cash from operations, $m
  78
  94
  113
  134
  157
  182
  209
  238
  268
  301
  335
  371
  408
  447
  488
  531
  575
  621
  669
  719
  771
  824
  880
  938
  998
  1,061
  1,127
  1,195
  1,266
  1,339
Maintenance CAPEX, $m
  -3
  -4
  -5
  -6
  -7
  -9
  -10
  -12
  -14
  -15
  -17
  -20
  -22
  -24
  -27
  -29
  -32
  -35
  -38
  -41
  -44
  -48
  -51
  -55
  -59
  -63
  -67
  -71
  -75
  -80
New CAPEX, $m
  -4
  -5
  -5
  -6
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
Cash from investing activities, $m
  -7
  -9
  -10
  -12
  -14
  -17
  -18
  -21
  -24
  -25
  -28
  -31
  -34
  -37
  -40
  -43
  -46
  -50
  -54
  -57
  -61
  -65
  -69
  -74
  -79
  -83
  -88
  -93
  -98
  -104
Free cash flow, $m
  70
  86
  103
  122
  143
  166
  191
  217
  245
  275
  307
  340
  374
  411
  448
  488
  529
  571
  616
  662
  709
  759
  811
  864
  920
  978
  1,039
  1,102
  1,167
  1,236
Issuance/(repayment) of debt, $m
  40
  47
  53
  60
  67
  74
  80
  87
  93
  99
  106
  112
  117
  123
  129
  135
  140
  146
  152
  158
  164
  171
  178
  185
  192
  199
  208
  216
  225
  234
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  
  40
  47
  53
  60
  67
  74
  80
  87
  93
  99
  106
  112
  117
  123
  129
  135
  140
  146
  152
  158
  164
  171
  178
  185
  192
  199
  208
  216
  225
  234
Total cash flow (excl. dividends), $m
  111
  132
  156
  182
  210
  239
  271
  304
  338
  375
  412
  451
  492
  534
  577
  622
  669
  718
  768
  820
  874
  930
  988
  1,049
  1,112
  1,178
  1,246
  1,318
  1,392
  1,470
Retained Cash Flow (-), $m
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
Prev. year cash balance distribution, $m
  90
  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
  195
  126
  149
  174
  201
  230
  260
  292
  326
  361
  398
  437
  476
  518
  560
  605
  651
  698
  748
  799
  852
  908
  965
  1,025
  1,087
  1,152
  1,219
  1,289
  1,363
  1,439
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
  187
  116
  130
  143
  156
  167
  176
  183
  187
  190
  189
  186
  181
  174
  165
  154
  142
  129
  115
  102
  88
  75
  63
  52
  42
  34
  26
  20
  15
  11
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

FINANCIAL RATIOS  of  Greentree Hospitality Group ADR (GHG)

Valuation Ratios
P/E Ratio 0
Price to Sales 0
Price to Book 0
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 0%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 0%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 0%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

GHG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GHG stock intrinsic value calculation we used $117.61363558 million for the last fiscal year's total revenue generated by Greentree Hospitality Group ADR. The default revenue input number comes from 0001 income statement of Greentree Hospitality Group 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 GHG stock valuation model: a) initial revenue growth rate of 26.1% 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 GHG is calculated based on our internal credit rating of Greentree Hospitality Group 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 Greentree Hospitality Group 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 GHG stock the variable cost ratio is equal to 43.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $7 million in the base year in the intrinsic value calculation for GHG 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 Greentree Hospitality Group ADR.

Corporate tax rate of 27% is the nominal tax rate for Greentree Hospitality Group 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 GHG 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 GHG are equal to 13.4%.

Life of production assets of 4.3 years is the average useful life of capital assets used in Greentree Hospitality Group 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 GHG is equal to -56.2%. 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 - $110.677938482 million for Greentree Hospitality Group 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 10.2 million for Greentree Hospitality Group 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 Greentree Hospitality Group ADR at the current share price and the inputted number of shares is $0.1 billion.

COMPANY NEWS

▶ Chinese hospitality company to set up headquarters in Tempe   [Oct-18-18 05:09PM  American City Business Journals]

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