Intrinsic value of Grana y Montero ADR - GRAM

Previous Close

$2.96

  Intrinsic Value

$4.92

stock screener

  Rating & Target

str. buy

+66%

Previous close

$2.96

 
Intrinsic value

$4.92

 
Up/down potential

+66%

 
Rating

str. buy

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

We calculate the intrinsic value of GRAM 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
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, %
  -22.69
  12.10
  11.39
  10.75
  10.18
  9.66
  9.19
  8.77
  8.40
  8.06
  7.75
  7.48
  7.23
  7.01
  6.80
  6.62
  6.46
  6.32
  6.18
  6.07
  5.96
  5.86
  5.78
  5.70
  5.63
  5.57
  5.51
  5.46
  5.41
  5.37
  5.33
Revenue, $m
  1,837
  2,059
  2,294
  2,540
  2,799
  3,069
  3,351
  3,645
  3,952
  4,270
  4,601
  4,945
  5,302
  5,674
  6,060
  6,461
  6,879
  7,313
  7,765
  8,236
  8,727
  9,239
  9,772
  10,329
  10,911
  11,518
  12,153
  12,816
  13,510
  14,236
  14,995
Variable operating expenses, $m
 
  1,960
  2,182
  2,416
  2,662
  2,918
  3,186
  3,465
  3,755
  4,057
  4,371
  4,692
  5,031
  5,383
  5,749
  6,130
  6,526
  6,938
  7,368
  7,814
  8,280
  8,766
  9,272
  9,800
  10,352
  10,928
  11,530
  12,160
  12,818
  13,507
  14,227
Fixed operating expenses, $m
 
  12
  13
  13
  13
  14
  14
  14
  15
  15
  15
  16
  16
  17
  17
  17
  18
  18
  19
  19
  20
  20
  21
  21
  22
  22
  23
  23
  24
  25
  25
Total operating expenses, $m
  1,760
  1,972
  2,195
  2,429
  2,675
  2,932
  3,200
  3,479
  3,770
  4,072
  4,386
  4,708
  5,047
  5,400
  5,766
  6,147
  6,544
  6,956
  7,387
  7,833
  8,300
  8,786
  9,293
  9,821
  10,374
  10,950
  11,553
  12,183
  12,842
  13,532
  14,252
Operating income, $m
  77
  87
  99
  111
  124
  138
  152
  167
  182
  198
  214
  237
  255
  274
  293
  314
  334
  356
  379
  403
  427
  453
  480
  508
  537
  568
  600
  633
  668
  704
  743
EBITDA, $m
  165
  145
  163
  182
  201
  222
  243
  265
  288
  312
  337
  363
  390
  418
  447
  478
  509
  542
  576
  612
  649
  688
  728
  770
  814
  860
  908
  959
  1,011
  1,066
  1,124
Interest expense (income), $m
  52
  44
  58
  74
  90
  107
  124
  143
  162
  182
  203
  225
  247
  271
  295
  321
  347
  374
  403
  432
  463
  496
  529
  564
  601
  639
  679
  720
  764
  809
  857
Earnings before tax, $m
  35
  44
  41
  38
  34
  31
  27
  24
  20
  15
  11
  13
  8
  3
  -2
  -7
  -12
  -18
  -24
  -30
  -36
  -43
  -49
  -56
  -64
  -71
  -79
  -87
  -96
  -105
  -114
Tax expense, $m
  13
  12
  11
  10
  9
  8
  7
  6
  5
  4
  3
  3
  2
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  3
  32
  30
  28
  25
  23
  20
  17
  14
  11
  8
  9
  6
  2
  -2
  -7
  -12
  -18
  -24
  -30
  -36
  -43
  -49
  -56
  -64
  -71
  -79
  -87
  -96
  -105
  -114

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  188
  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
  2,891
  3,028
  3,373
  3,736
  4,116
  4,514
  4,929
  5,361
  5,811
  6,279
  6,766
  7,272
  7,797
  8,344
  8,911
  9,502
  10,116
  10,754
  11,419
  12,112
  12,834
  13,586
  14,371
  15,190
  16,045
  16,939
  17,872
  18,847
  19,868
  20,935
  22,052
Adjusted assets (=assets-cash), $m
  2,703
  3,028
  3,373
  3,736
  4,116
  4,514
  4,929
  5,361
  5,811
  6,279
  6,766
  7,272
  7,797
  8,344
  8,911
  9,502
  10,116
  10,754
  11,419
  12,112
  12,834
  13,586
  14,371
  15,190
  16,045
  16,939
  17,872
  18,847
  19,868
  20,935
  22,052
Revenue / Adjusted assets
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
Average production assets, $m
  233
  262
  291
  323
  355
  390
  426
  463
  502
  542
  584
  628
  673
  721
  770
  821
  874
  929
  986
  1,046
  1,108
  1,173
  1,241
  1,312
  1,386
  1,463
  1,543
  1,628
  1,716
  1,808
  1,904
Working capital, $m
  555
  805
  897
  993
  1,094
  1,200
  1,310
  1,425
  1,545
  1,670
  1,799
  1,933
  2,073
  2,218
  2,369
  2,526
  2,690
  2,859
  3,036
  3,220
  3,412
  3,612
  3,821
  4,039
  4,266
  4,504
  4,752
  5,011
  5,282
  5,566
  5,863
Total debt, $m
  882
  924
  1,168
  1,425
  1,694
  1,976
  2,269
  2,576
  2,894
  3,226
  3,570
  3,928
  4,300
  4,687
  5,089
  5,507
  5,942
  6,394
  6,865
  7,355
  7,866
  8,399
  8,955
  9,535
  10,140
  10,772
  11,433
  12,124
  12,846
  13,602
  14,392
Total liabilities, $m
  2,102
  2,144
  2,388
  2,645
  2,914
  3,196
  3,489
  3,796
  4,114
  4,446
  4,790
  5,148
  5,520
  5,907
  6,309
  6,727
  7,162
  7,614
  8,085
  8,575
  9,086
  9,619
  10,175
  10,755
  11,360
  11,992
  12,653
  13,344
  14,066
  14,822
  15,612
Total equity, $m
  789
  884
  985
  1,091
  1,202
  1,318
  1,439
  1,565
  1,697
  1,834
  1,976
  2,123
  2,277
  2,436
  2,602
  2,774
  2,954
  3,140
  3,334
  3,537
  3,748
  3,967
  4,196
  4,436
  4,685
  4,946
  5,219
  5,503
  5,801
  6,113
  6,439
Total liabilities and equity, $m
  2,891
  3,028
  3,373
  3,736
  4,116
  4,514
  4,928
  5,361
  5,811
  6,280
  6,766
  7,271
  7,797
  8,343
  8,911
  9,501
  10,116
  10,754
  11,419
  12,112
  12,834
  13,586
  14,371
  15,191
  16,045
  16,938
  17,872
  18,847
  19,867
  20,935
  22,051
Debt-to-equity ratio
  1.118
  1.050
  1.190
  1.310
  1.410
  1.500
  1.580
  1.650
  1.710
  1.760
  1.810
  1.850
  1.890
  1.920
  1.960
  1.980
  2.010
  2.040
  2.060
  2.080
  2.100
  2.120
  2.130
  2.150
  2.160
  2.180
  2.190
  2.200
  2.210
  2.230
  2.240
Adjusted equity ratio
  0.222
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3
  32
  30
  28
  25
  23
  20
  17
  14
  11
  8
  9
  6
  2
  -2
  -7
  -12
  -18
  -24
  -30
  -36
  -43
  -49
  -56
  -64
  -71
  -79
  -87
  -96
  -105
  -114
Depreciation, amort., depletion, $m
  88
  58
  64
  70
  77
  84
  91
  98
  106
  114
  123
  126
  135
  144
  154
  164
  175
  186
  197
  209
  222
  235
  248
  262
  277
  293
  309
  326
  343
  362
  381
Funds from operations, $m
  155
  90
  94
  98
  102
  106
  111
  116
  121
  126
  131
  135
  140
  146
  152
  157
  162
  168
  173
  179
  186
  192
  199
  206
  214
  221
  230
  238
  247
  257
  267
Change in working capital, $m
  28
  87
  92
  96
  101
  106
  110
  115
  120
  124
  129
  134
  140
  145
  151
  157
  163
  170
  177
  184
  192
  200
  209
  218
  227
  237
  248
  259
  271
  284
  297
Cash from operations, $m
  127
  3
  2
  2
  1
  1
  1
  1
  1
  1
  1
  0
  1
  1
  1
  0
  -1
  -2
  -3
  -5
  -6
  -8
  -10
  -12
  -14
  -16
  -19
  -21
  -24
  -27
  -30
Maintenance CAPEX, $m
  0
  -47
  -52
  -58
  -65
  -71
  -78
  -85
  -93
  -100
  -108
  -117
  -126
  -135
  -144
  -154
  -164
  -175
  -186
  -197
  -209
  -222
  -235
  -248
  -262
  -277
  -293
  -309
  -326
  -343
  -362
New CAPEX, $m
  -68
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -44
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -65
  -68
  -71
  -74
  -77
  -81
  -84
  -88
  -92
  -96
Cash from investing activities, $m
  -126
  -76
  -82
  -89
  -98
  -105
  -114
  -122
  -132
  -140
  -150
  -161
  -171
  -182
  -193
  -205
  -217
  -230
  -243
  -257
  -271
  -287
  -303
  -319
  -336
  -354
  -374
  -393
  -414
  -435
  -458
Free cash flow, $m
  1
  -72
  -80
  -88
  -96
  -105
  -113
  -122
  -131
  -140
  -149
  -160
  -170
  -181
  -192
  -205
  -218
  -232
  -247
  -262
  -278
  -295
  -312
  -331
  -350
  -370
  -392
  -414
  -438
  -462
  -488
Issuance/(repayment) of debt, $m
  4
  230
  244
  257
  269
  281
  294
  306
  319
  331
  345
  358
  372
  387
  402
  418
  435
  452
  471
  490
  511
  533
  556
  580
  605
  632
  661
  691
  722
  756
  791
Issuance/(repurchase) of shares, $m
  0
  63
  71
  78
  86
  93
  101
  109
  117
  125
  134
  139
  148
  157
  168
  179
  192
  205
  218
  232
  247
  262
  279
  296
  313
  332
  352
  372
  394
  416
  440
Cash from financing (excl. dividends), $m  
  29
  293
  315
  335
  355
  374
  395
  415
  436
  456
  479
  497
  520
  544
  570
  597
  627
  657
  689
  722
  758
  795
  835
  876
  918
  964
  1,013
  1,063
  1,116
  1,172
  1,231
Total cash flow (excl. dividends), $m
  29
  221
  235
  247
  259
  270
  282
  293
  305
  317
  330
  336
  350
  363
  378
  393
  408
  425
  442
  461
  480
  500
  522
  545
  569
  594
  621
  649
  678
  710
  743
Retained Cash Flow (-), $m
  16
  -95
  -101
  -106
  -111
  -116
  -121
  -126
  -131
  -137
  -142
  -148
  -153
  -159
  -168
  -179
  -192
  -205
  -218
  -232
  -247
  -262
  -279
  -296
  -313
  -332
  -352
  -372
  -394
  -416
  -440
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
 
  126
  135
  141
  148
  154
  161
  167
  174
  181
  187
  189
  196
  204
  210
  213
  217
  220
  224
  229
  233
  238
  243
  249
  255
  262
  269
  277
  285
  293
  302
Discount rate, %
 
  7.80
  8.19
  8.60
  9.03
  9.48
  9.95
  10.45
  10.98
  11.52
  12.10
  12.71
  13.34
  14.01
  14.71
  15.44
  16.22
  17.03
  17.88
  18.77
  19.71
  20.70
  21.73
  22.82
  23.96
  25.16
  26.41
  27.73
  29.12
  30.58
  32.11
PV of cash for distribution, $m
 
  117
  115
  110
  105
  98
  91
  83
  76
  68
  60
  51
  44
  37
  31
  25
  20
  15
  12
  9
  6
  5
  3
  2
  1
  1
  1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  89.7
  80.5
  72.2
  64.9
  58.5
  52.7
  47.5
  42.9
  38.8
  35.2
  32.0
  29.1
  26.5
  24.1
  21.9
  20.0
  18.2
  16.5
  15.0
  13.7
  12.4
  11.3
  10.3
  9.3
  8.5
  7.7
  7.0
  6.3
  5.7
  5.2

Grana y Montero SAA is a Peru-based holding company primarily engaged in the four business areas: Construction and Engineering Industry, Real Estate, Oil Services, and Operation of Public Concessions and Business Support Services. Through its subsidiaries, the Company provides such services as the development and management of real estate properties and leisure facilities; the exploration, production and sale of oil, natural gas and its derivates; the storage and distribution of combustibles; information technology services; engineering consultancy; the operation and maintenance of rails and roads concessions; as well as the execution and management of projects related to the generation of electric power; among others. The Company owns such subsidiaries as GMD SA, Adexus SA, Concar SA, Survial SA, Norvial SA and Promotores Asociados de Inmobiliarios SA, among others.

FINANCIAL RATIOS  of  Grana y Montero ADR (GRAM)

Valuation Ratios
P/E Ratio 651.2
Price to Sales 1.1
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 15.4
Price to Free Cash Flow 33.1
Growth Rates
Sales Growth Rate -22.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -1.4%
Cap. Spend. - 3 Yr. Gr. Rate 0.3%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 67.2%
Total Debt to Equity 111.8%
Interest Coverage 2
Management Effectiveness
Return On Assets 1.3%
Ret/ On Assets - 3 Yr. Avg. 2.7%
Return On Total Capital 0.2%
Ret/ On T. Cap. - 3 Yr. Avg. 3.2%
Return On Equity 0.4%
Return On Equity - 3 Yr. Avg. 4.9%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 10.6%
Gross Margin - 3 Yr. Avg. 11.1%
EBITDA Margin 9.5%
EBITDA Margin - 3 Yr. Avg. 9.8%
Operating Margin 4.2%
Oper. Margin - 3 Yr. Avg. 5.4%
Pre-Tax Margin 1.9%
Pre-Tax Margin - 3 Yr. Avg. 4%
Net Profit Margin 0.2%
Net Profit Margin - 3 Yr. Avg. 1.9%
Effective Tax Rate 37.1%
Eff/ Tax Rate - 3 Yr. Avg. 33.5%
Payout Ratio 300%

GRAM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GRAM stock intrinsic value calculation we used $1837 million for the last fiscal year's total revenue generated by Grana y Montero ADR. The default revenue input number comes from 2016 income statement of Grana y Montero 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 GRAM stock valuation model: a) initial revenue growth rate of 12.1% 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 7.8%, whose default value for GRAM is calculated based on our internal credit rating of Grana y Montero 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 Grana y Montero 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 GRAM stock the variable cost ratio is equal to 95.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $12 million in the base year in the intrinsic value calculation for GRAM 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 6.3% for Grana y Montero ADR.

Corporate tax rate of 27% is the nominal tax rate for Grana y Montero 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 GRAM 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 GRAM are equal to 12.7%.

Life of production assets of 3.3 years is the average useful life of capital assets used in Grana y Montero 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 GRAM is equal to 39.1%. 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 - $789 million for Grana y Montero 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 128.786 million for Grana y Montero 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 Grana y Montero ADR at the current share price and the inputted number of shares is $0.4 billion.

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COMPANY NEWS

▶ Graña y Montero Announces Consolidated Results for 3Q2017   [Oct-30-17 10:56PM  Business Wire]
Financial statements of GRAM
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