Intrinsic value of Hi-Crush Partners LP - HCLP

Previous Close

$4.08

  Intrinsic Value

$10.26

stock screener

  Rating & Target

str. buy

+151%

Previous close

$4.08

 
Intrinsic value

$10.26

 
Up/down potential

+151%

 
Rating

str. buy

We calculate the intrinsic value of HCLP 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 0.4

 

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
  860
  880
  902
  928
  956
  987
  1,020
  1,057
  1,096
  1,138
  1,183
  1,231
  1,282
  1,336
  1,394
  1,455
  1,520
  1,588
  1,660
  1,737
  1,817
  1,902
  1,991
  2,086
  2,185
  2,290
  2,400
  2,515
  2,637
  2,765
Variable operating expenses, $m
  607
  621
  636
  654
  674
  695
  719
  744
  771
  801
  825
  858
  894
  932
  972
  1,015
  1,060
  1,108
  1,158
  1,211
  1,267
  1,327
  1,389
  1,455
  1,524
  1,597
  1,674
  1,754
  1,839
  1,929
Fixed operating expenses, $m
  88
  90
  92
  94
  96
  98
  100
  102
  105
  107
  109
  112
  114
  117
  119
  122
  124
  127
  130
  133
  136
  139
  142
  145
  148
  151
  155
  158
  162
  165
Total operating expenses, $m
  695
  711
  728
  748
  770
  793
  819
  846
  876
  908
  934
  970
  1,008
  1,049
  1,091
  1,137
  1,184
  1,235
  1,288
  1,344
  1,403
  1,466
  1,531
  1,600
  1,672
  1,748
  1,829
  1,912
  2,001
  2,094
Operating income, $m
  165
  169
  174
  180
  186
  193
  201
  210
  220
  230
  249
  261
  274
  288
  303
  318
  335
  353
  372
  392
  414
  437
  461
  486
  513
  541
  571
  603
  636
  671
EBITDA, $m
  214
  219
  225
  232
  240
  249
  258
  269
  281
  293
  306
  321
  336
  353
  371
  390
  410
  431
  453
  477
  503
  530
  558
  588
  620
  653
  689
  726
  765
  807
Interest expense (income), $m
  11
  35
  29
  31
  34
  37
  40
  44
  48
  53
  57
  62
  68
  74
  80
  86
  93
  101
  109
  117
  126
  135
  145
  155
  166
  177
  189
  202
  215
  229
  244
Earnings before tax, $m
  130
  140
  143
  146
  149
  153
  157
  162
  167
  173
  186
  193
  200
  208
  216
  225
  234
  245
  255
  267
  279
  292
  306
  320
  336
  352
  369
  388
  407
  428
Tax expense, $m
  35
  38
  39
  39
  40
  41
  42
  44
  45
  47
  50
  52
  54
  56
  58
  61
  63
  66
  69
  72
  75
  79
  83
  86
  91
  95
  100
  105
  110
  115
Net income, $m
  95
  102
  104
  106
  109
  112
  115
  118
  122
  126
  136
  141
  146
  152
  158
  164
  171
  179
  186
  195
  204
  213
  223
  234
  245
  257
  270
  283
  297
  312

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
  1,462
  1,496
  1,534
  1,578
  1,625
  1,678
  1,735
  1,797
  1,864
  1,935
  2,012
  2,093
  2,180
  2,273
  2,371
  2,474
  2,584
  2,701
  2,824
  2,953
  3,090
  3,235
  3,387
  3,547
  3,716
  3,894
  4,081
  4,278
  4,485
  4,703
Adjusted assets (=assets-cash), $m
  1,462
  1,496
  1,534
  1,578
  1,625
  1,678
  1,735
  1,797
  1,864
  1,935
  2,012
  2,093
  2,180
  2,273
  2,371
  2,474
  2,584
  2,701
  2,824
  2,953
  3,090
  3,235
  3,387
  3,547
  3,716
  3,894
  4,081
  4,278
  4,485
  4,703
Revenue / Adjusted assets
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
Average production assets, $m
  1,005
  1,028
  1,055
  1,084
  1,117
  1,153
  1,193
  1,235
  1,281
  1,330
  1,383
  1,439
  1,499
  1,562
  1,629
  1,701
  1,776
  1,856
  1,941
  2,030
  2,124
  2,223
  2,328
  2,438
  2,554
  2,676
  2,805
  2,940
  3,083
  3,233
Working capital, $m
  20
  20
  21
  21
  22
  23
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  37
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
  61
  64
Total debt, $m
  365
  395
  430
  469
  512
  559
  611
  666
  726
  791
  859
  933
  1,011
  1,094
  1,182
  1,276
  1,375
  1,480
  1,590
  1,707
  1,830
  1,960
  2,097
  2,241
  2,393
  2,553
  2,722
  2,899
  3,085
  3,282
Total liabilities, $m
  1,316
  1,346
  1,381
  1,420
  1,463
  1,510
  1,562
  1,617
  1,677
  1,742
  1,810
  1,884
  1,962
  2,045
  2,133
  2,227
  2,326
  2,431
  2,541
  2,658
  2,781
  2,911
  3,048
  3,192
  3,344
  3,504
  3,673
  3,850
  4,036
  4,233
Total equity, $m
  146
  150
  153
  158
  163
  168
  174
  180
  186
  194
  201
  209
  218
  227
  237
  247
  258
  270
  282
  295
  309
  323
  339
  355
  372
  389
  408
  428
  448
  470
Total liabilities and equity, $m
  1,462
  1,496
  1,534
  1,578
  1,626
  1,678
  1,736
  1,797
  1,863
  1,936
  2,011
  2,093
  2,180
  2,272
  2,370
  2,474
  2,584
  2,701
  2,823
  2,953
  3,090
  3,234
  3,387
  3,547
  3,716
  3,893
  4,081
  4,278
  4,484
  4,703
Debt-to-equity ratio
  2.500
  2.640
  2.800
  2.970
  3.150
  3.330
  3.520
  3.710
  3.900
  4.090
  4.270
  4.460
  4.640
  4.820
  4.990
  5.160
  5.320
  5.480
  5.630
  5.780
  5.920
  6.060
  6.190
  6.320
  6.440
  6.560
  6.670
  6.780
  6.880
  6.980
Adjusted equity ratio
  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
  95
  102
  104
  106
  109
  112
  115
  118
  122
  126
  136
  141
  146
  152
  158
  164
  171
  179
  186
  195
  204
  213
  223
  234
  245
  257
  270
  283
  297
  312
Depreciation, amort., depletion, $m
  49
  50
  51
  53
  54
  55
  57
  59
  61
  63
  58
  60
  63
  65
  68
  71
  74
  78
  81
  85
  89
  93
  97
  102
  107
  112
  117
  123
  129
  135
Funds from operations, $m
  144
  153
  156
  159
  163
  167
  172
  177
  183
  189
  194
  201
  209
  217
  226
  235
  245
  256
  268
  280
  293
  306
  321
  336
  352
  369
  387
  406
  426
  447
Change in working capital, $m
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
Cash from operations, $m
  144
  152
  155
  158
  162
  166
  171
  176
  182
  188
  193
  200
  208
  216
  225
  234
  244
  255
  266
  278
  291
  304
  319
  334
  350
  367
  385
  403
  423
  444
Maintenance CAPEX, $m
  -41
  -42
  -43
  -44
  -45
  -47
  -48
  -50
  -52
  -54
  -56
  -58
  -60
  -63
  -65
  -68
  -71
  -74
  -78
  -81
  -85
  -89
  -93
  -97
  -102
  -107
  -112
  -117
  -123
  -129
New CAPEX, $m
  -20
  -23
  -26
  -30
  -33
  -36
  -39
  -43
  -46
  -49
  -53
  -56
  -60
  -64
  -67
  -71
  -76
  -80
  -84
  -89
  -94
  -99
  -105
  -110
  -116
  -122
  -129
  -135
  -142
  -150
Cash from investing activities, $m
  -61
  -65
  -69
  -74
  -78
  -83
  -87
  -93
  -98
  -103
  -109
  -114
  -120
  -127
  -132
  -139
  -147
  -154
  -162
  -170
  -179
  -188
  -198
  -207
  -218
  -229
  -241
  -252
  -265
  -279
Free cash flow, $m
  83
  87
  86
  85
  84
  84
  83
  84
  84
  85
  84
  86
  88
  90
  92
  94
  97
  100
  104
  108
  112
  116
  121
  126
  132
  138
  144
  151
  158
  166
Issuance/(repayment) of debt, $m
  -80
  30
  35
  39
  43
  47
  51
  56
  60
  64
  69
  73
  78
  83
  88
  93
  99
  105
  111
  117
  123
  130
  137
  144
  152
  160
  168
  177
  186
  196
Issuance/(repurchase) of shares, $m
  14
  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  
  -66
  30
  35
  39
  43
  47
  51
  56
  60
  64
  69
  73
  78
  83
  88
  93
  99
  105
  111
  117
  123
  130
  137
  144
  152
  160
  168
  177
  186
  196
Total cash flow (excl. dividends), $m
  17
  117
  120
  123
  127
  131
  135
  139
  144
  150
  153
  159
  166
  173
  180
  188
  196
  205
  214
  224
  235
  246
  258
  270
  284
  298
  312
  328
  344
  362
Retained Cash Flow (-), $m
  -109
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
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
  -92
  114
  116
  119
  122
  125
  129
  133
  138
  142
  146
  151
  157
  163
  170
  177
  185
  193
  202
  211
  221
  232
  243
  254
  267
  280
  294
  308
  324
  340
Discount rate, %
  5.40
  5.67
  5.95
  6.25
  6.56
  6.89
  7.24
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.18
  10.69
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.04
  15.80
  16.59
  17.42
  18.29
  19.20
  20.16
  21.17
  22.23
PV of cash for distribution, $m
  -88
  102
  98
  93
  89
  84
  79
  74
  69
  64
  58
  52
  47
  42
  37
  32
  28
  24
  20
  16
  13
  11
  8
  6
  5
  4
  3
  2
  1
  1
Current shareholders' claim on cash, %
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4

Hi-Crush Partners LP is an integrated producer, transporter, marketer and distributor of monocrystalline sand, a specialized mineral that is used as a proppant to manage the recovery rates of hydrocarbons from oil and natural gas wells. Its reserves consist of northern white sand, a resource in Wisconsin and limited portions of the upper Midwest region of the United States. It owns and operates a portfolio of sand facilities with on-site wet and dry plant assets, including direct access to the United States railroads for distribution to in-basin terminals. It owns and operates a network of strategically located terminals and an integrated distribution system throughout North America, including its PropStream integrated logistics solution, which delivers proppant into the blender at the well site. The Company's Blair facility, as of December 31, 2016, contained 117.7 million tons of proven recoverable reserves of frac sand meeting API specifications.

FINANCIAL RATIOS  of  Hi-Crush Partners LP (HCLP)

Valuation Ratios
P/E Ratio -3.2
Price to Sales 1.3
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow -9.6
Price to Free Cash Flow -3.7
Growth Rates
Sales Growth Rate -40%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -64.5%
Cap. Spend. - 3 Yr. Gr. Rate 31.3%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 64.3%
Total Debt to Equity 65.3%
Interest Coverage -6
Management Effectiveness
Return On Assets -11.7%
Ret/ On Assets - 3 Yr. Avg. 9.8%
Return On Total Capital -18.4%
Ret/ On T. Cap. - 3 Yr. Avg. 8.5%
Return On Equity -37.3%
Return On Equity - 3 Yr. Avg. 18.5%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 21.5%
EBITDA Margin -26%
EBITDA Margin - 3 Yr. Avg. 9.2%
Operating Margin -33.3%
Oper. Margin - 3 Yr. Avg. 4.4%
Pre-Tax Margin -39.7%
Pre-Tax Margin - 3 Yr. Avg. -0%
Net Profit Margin -39.7%
Net Profit Margin - 3 Yr. Avg. -0.1%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

HCLP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HCLP stock intrinsic value calculation we used $843 million for the last fiscal year's total revenue generated by Hi-Crush Partners LP. The default revenue input number comes from 0001 income statement of Hi-Crush Partners LP. 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 HCLP 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 5.4%, whose default value for HCLP is calculated based on our internal credit rating of Hi-Crush Partners LP, 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 Hi-Crush Partners LP.
    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 HCLP stock the variable cost ratio is equal to 70.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $86 million in the base year in the intrinsic value calculation for HCLP 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 7.9% for Hi-Crush Partners LP.

Corporate tax rate of 27% is the nominal tax rate for Hi-Crush Partners LP. 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 HCLP 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 HCLP are equal to 116.9%.

Life of production assets of 23.9 years is the average useful life of capital assets used in Hi-Crush Partners LP 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 HCLP is equal to 2.3%. 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 - $37.354 million for Hi-Crush Partners LP - 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 101.061 million for Hi-Crush Partners LP 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 Hi-Crush Partners LP at the current share price and the inputted number of shares is $0.4 billion.

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