Intrinsic value of Internet Initiative Japan ADR - IIJI

Previous Close

$10.45

  Intrinsic Value

$3.24

stock screener

  Rating & Target

str. sell

-69%

Previous close

$10.45

 
Intrinsic value

$3.24

 
Up/down potential

-69%

 
Rating

str. sell

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

We calculate the intrinsic value of IIJI 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.

Please visit our new site that uses elements of artificial intelligence for stock valuation: artificial intelligence value of Internet Initiative Japan ADR (IIJI) stock.

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, %
  12.25
  10.90
  10.31
  9.78
  9.30
  8.87
  8.48
  8.14
  7.82
  7.54
  7.29
  7.06
  6.85
  6.67
  6.50
  6.35
  6.21
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.28
Revenue, $m
  1,374
  1,524
  1,681
  1,845
  2,017
  2,196
  2,382
  2,576
  2,777
  2,987
  3,204
  3,430
  3,666
  3,910
  4,164
  4,428
  4,704
  4,990
  5,289
  5,600
  5,925
  6,264
  6,617
  6,986
  7,372
  7,776
  8,197
  8,638
  9,100
  9,583
  10,089
Variable operating expenses, $m
 
  1,458
  1,607
  1,764
  1,928
  2,098
  2,276
  2,460
  2,652
  2,852
  3,059
  3,270
  3,494
  3,726
  3,969
  4,221
  4,483
  4,756
  5,041
  5,337
  5,647
  5,970
  6,307
  6,659
  7,026
  7,411
  7,813
  8,233
  8,673
  9,133
  9,615
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
  1,329
  1,458
  1,607
  1,764
  1,928
  2,098
  2,276
  2,460
  2,652
  2,852
  3,059
  3,270
  3,494
  3,726
  3,969
  4,221
  4,483
  4,756
  5,041
  5,337
  5,647
  5,970
  6,307
  6,659
  7,026
  7,411
  7,813
  8,233
  8,673
  9,133
  9,615
Operating income, $m
  44
  66
  73
  81
  89
  98
  106
  115
  125
  135
  145
  161
  172
  183
  195
  208
  221
  234
  248
  263
  278
  294
  311
  328
  346
  365
  385
  405
  427
  450
  473
EBITDA, $m
  139
  150
  165
  181
  198
  215
  234
  253
  273
  293
  314
  337
  360
  384
  409
  435
  462
  490
  519
  550
  581
  615
  649
  686
  723
  763
  804
  848
  893
  940
  990
Interest expense (income), $m
  3
  6
  8
  10
  12
  14
  16
  18
  21
  23
  26
  29
  32
  35
  38
  41
  44
  48
  51
  55
  59
  63
  67
  72
  76
  81
  86
  91
  97
  103
  109
Earnings before tax, $m
  47
  60
  66
  72
  78
  84
  90
  97
  104
  111
  119
  132
  140
  149
  158
  167
  177
  187
  197
  208
  219
  231
  243
  256
  270
  284
  299
  314
  330
  347
  365
Tax expense, $m
  19
  16
  18
  19
  21
  23
  24
  26
  28
  30
  32
  36
  38
  40
  43
  45
  48
  50
  53
  56
  59
  62
  66
  69
  73
  77
  81
  85
  89
  94
  98
Net income, $m
  28
  44
  48
  52
  57
  61
  66
  71
  76
  81
  87
  97
  103
  109
  115
  122
  129
  136
  144
  152
  160
  169
  178
  187
  197
  207
  218
  229
  241
  253
  266

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  191
  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
  1,196
  1,115
  1,230
  1,350
  1,475
  1,606
  1,743
  1,884
  2,032
  2,185
  2,344
  2,510
  2,681
  2,860
  3,046
  3,240
  3,441
  3,651
  3,869
  4,097
  4,334
  4,582
  4,841
  5,111
  5,393
  5,688
  5,997
  6,319
  6,657
  7,010
  7,380
Adjusted assets (=assets-cash), $m
  1,005
  1,115
  1,230
  1,350
  1,475
  1,606
  1,743
  1,884
  2,032
  2,185
  2,344
  2,510
  2,681
  2,860
  3,046
  3,240
  3,441
  3,651
  3,869
  4,097
  4,334
  4,582
  4,841
  5,111
  5,393
  5,688
  5,997
  6,319
  6,657
  7,010
  7,380
Revenue / Adjusted assets
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
  1.367
Average production assets, $m
  352
  390
  430
  472
  516
  562
  610
  659
  711
  765
  820
  878
  938
  1,001
  1,066
  1,134
  1,204
  1,278
  1,354
  1,434
  1,517
  1,603
  1,694
  1,789
  1,887
  1,991
  2,099
  2,211
  2,330
  2,453
  2,583
Working capital, $m
  207
  154
  170
  186
  204
  222
  241
  260
  281
  302
  324
  346
  370
  395
  421
  447
  475
  504
  534
  566
  598
  633
  668
  706
  745
  785
  828
  872
  919
  968
  1,019
Total debt, $m
  287
  218
  275
  333
  395
  459
  526
  595
  668
  743
  821
  902
  986
  1,073
  1,165
  1,259
  1,358
  1,461
  1,568
  1,679
  1,796
  1,917
  2,044
  2,176
  2,315
  2,459
  2,610
  2,768
  2,934
  3,107
  3,288
Total liabilities, $m
  615
  546
  603
  661
  723
  787
  854
  923
  996
  1,071
  1,149
  1,230
  1,314
  1,401
  1,493
  1,587
  1,686
  1,789
  1,896
  2,007
  2,124
  2,245
  2,372
  2,504
  2,643
  2,787
  2,938
  3,096
  3,262
  3,435
  3,616
Total equity, $m
  581
  568
  627
  688
  752
  819
  889
  961
  1,036
  1,114
  1,195
  1,280
  1,368
  1,459
  1,554
  1,652
  1,755
  1,862
  1,973
  2,089
  2,210
  2,337
  2,469
  2,606
  2,750
  2,901
  3,058
  3,223
  3,395
  3,575
  3,764
Total liabilities and equity, $m
  1,196
  1,114
  1,230
  1,349
  1,475
  1,606
  1,743
  1,884
  2,032
  2,185
  2,344
  2,510
  2,682
  2,860
  3,047
  3,239
  3,441
  3,651
  3,869
  4,096
  4,334
  4,582
  4,841
  5,110
  5,393
  5,688
  5,996
  6,319
  6,657
  7,010
  7,380
Debt-to-equity ratio
  0.494
  0.380
  0.440
  0.480
  0.520
  0.560
  0.590
  0.620
  0.640
  0.670
  0.690
  0.700
  0.720
  0.740
  0.750
  0.760
  0.770
  0.780
  0.790
  0.800
  0.810
  0.820
  0.830
  0.830
  0.840
  0.850
  0.850
  0.860
  0.860
  0.870
  0.870
Adjusted equity ratio
  0.469
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  28
  44
  48
  52
  57
  61
  66
  71
  76
  81
  87
  97
  103
  109
  115
  122
  129
  136
  144
  152
  160
  169
  178
  187
  197
  207
  218
  229
  241
  253
  266
Depreciation, amort., depletion, $m
  95
  83
  91
  100
  109
  118
  127
  137
  148
  158
  169
  176
  188
  200
  213
  227
  241
  256
  271
  287
  303
  321
  339
  358
  377
  398
  420
  442
  466
  491
  517
Funds from operations, $m
  -3
  127
  140
  152
  165
  179
  193
  208
  224
  240
  256
  272
  290
  309
  328
  349
  370
  392
  415
  439
  463
  489
  517
  545
  574
  605
  638
  672
  707
  744
  783
Change in working capital, $m
  -67
  15
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  51
Cash from operations, $m
  64
  112
  124
  136
  148
  161
  174
  189
  203
  218
  234
  249
  266
  284
  303
  322
  342
  363
  384
  407
  431
  455
  481
  508
  535
  565
  595
  627
  660
  695
  732
Maintenance CAPEX, $m
  0
  -70
  -78
  -86
  -94
  -103
  -112
  -122
  -132
  -142
  -153
  -164
  -176
  -188
  -200
  -213
  -227
  -241
  -256
  -271
  -287
  -303
  -321
  -339
  -358
  -377
  -398
  -420
  -442
  -466
  -491
New CAPEX, $m
  -92
  -39
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -60
  -63
  -65
  -68
  -70
  -73
  -76
  -80
  -83
  -87
  -91
  -95
  -99
  -103
  -108
  -113
  -118
  -124
  -129
Cash from investing activities, $m
  -64
  -109
  -118
  -128
  -138
  -149
  -160
  -172
  -184
  -196
  -209
  -222
  -236
  -251
  -265
  -281
  -297
  -314
  -332
  -351
  -370
  -390
  -412
  -434
  -457
  -480
  -506
  -533
  -560
  -590
  -620
Free cash flow, $m
  0
  3
  5
  7
  10
  12
  14
  17
  20
  23
  26
  27
  31
  34
  38
  41
  45
  49
  53
  57
  61
  65
  70
  74
  79
  84
  89
  94
  100
  106
  112
Issuance/(repayment) of debt, $m
  32
  54
  56
  59
  62
  64
  67
  69
  72
  75
  78
  81
  84
  88
  91
  95
  99
  103
  107
  112
  116
  121
  127
  132
  138
  145
  151
  158
  165
  173
  181
Issuance/(repurchase) of shares, $m
  -13
  11
  11
  9
  7
  6
  4
  1
  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
  65
  67
  68
  69
  70
  71
  70
  72
  75
  78
  81
  84
  88
  91
  95
  99
  103
  107
  112
  116
  121
  127
  132
  138
  145
  151
  158
  165
  173
  181
Total cash flow (excl. dividends), $m
  31
  69
  72
  75
  78
  82
  85
  88
  92
  98
  104
  108
  115
  122
  129
  136
  143
  151
  160
  168
  177
  187
  196
  207
  217
  228
  240
  252
  265
  279
  293
Retained Cash Flow (-), $m
  -16
  -55
  -59
  -61
  -64
  -67
  -70
  -72
  -75
  -78
  -81
  -84
  -88
  -91
  -95
  -99
  -103
  -107
  -111
  -116
  -121
  -126
  -132
  -138
  -144
  -150
  -157
  -165
  -172
  -180
  -189
Prev. year cash balance distribution, $m
 
  68
  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
 
  82
  14
  14
  14
  15
  15
  16
  17
  20
  23
  24
  27
  30
  34
  37
  41
  44
  48
  52
  56
  60
  64
  69
  73
  78
  83
  88
  93
  99
  104
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
 
  78
  13
  12
  12
  11
  11
  11
  11
  11
  12
  11
  12
  12
  11
  11
  10
  10
  9
  8
  7
  6
  5
  5
  4
  3
  2
  2
  1
  1
  1
Current shareholders' claim on cash, %
  100
  98.7
  97.6
  96.8
  96.2
  95.8
  95.5
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4

Internet Initiative Japan Inc. (IIJ) is an Internet service provider (ISP) in Japan that offers Internet connectivity services for both enterprises and consumers. The Company provides Internet connectivity services, wide area network (WAN) services, outsourcing services, systems integration and equipment sales as total network solutions to Japanese corporate clients and governmental organizations. The Company operates through two segments: a network services and systems integration business segment and an ATM operation business segment. The network services and systems integration business segment consist of its Internet connectivity services for enterprise and consumers, WAN services, outsourcing services, systems integration and equipment sales. The ATM operation business is conducted by its subsidiary, Trust Networks Inc. (Trust Networks), which operates automated teller machines (ATMs) and its network systems.

FINANCIAL RATIOS  of  Internet Initiative Japan ADR (IIJI)

Valuation Ratios
P/E Ratio 16.8
Price to Sales 0.3
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow 7.4
Price to Free Cash Flow -16.8
Growth Rates
Sales Growth Rate 12.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -3.2%
Cap. Spend. - 3 Yr. Gr. Rate 3.1%
Financial Strength
Quick Ratio 2
Current Ratio 0.1
LT Debt to Equity 28.2%
Total Debt to Equity 49.4%
Interest Coverage 17
Management Effectiveness
Return On Assets 2.7%
Ret/ On Assets - 3 Yr. Avg. 3.2%
Return On Total Capital 3.5%
Ret/ On T. Cap. - 3 Yr. Avg. 4.2%
Return On Equity 4.9%
Return On Equity - 3 Yr. Avg. 5.5%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 16%
Gross Margin - 3 Yr. Avg. 17.2%
EBITDA Margin 10.6%
EBITDA Margin - 3 Yr. Avg. 11.5%
Operating Margin 3.3%
Oper. Margin - 3 Yr. Avg. 3.9%
Pre-Tax Margin 3.4%
Pre-Tax Margin - 3 Yr. Avg. 4%
Net Profit Margin 2%
Net Profit Margin - 3 Yr. Avg. 2.5%
Effective Tax Rate 40.4%
Eff/ Tax Rate - 3 Yr. Avg. 37.8%
Payout Ratio 35.7%

IIJI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IIJI stock intrinsic value calculation we used $1374 million for the last fiscal year's total revenue generated by Internet Initiative Japan ADR. The default revenue input number comes from 2017 income statement of Internet Initiative Japan 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 IIJI stock valuation model: a) initial revenue growth rate of 10.9% 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 IIJI is calculated based on our internal credit rating of Internet Initiative Japan 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 Internet Initiative Japan 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 IIJI stock the variable cost ratio is equal to 95.7%.

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 IIJI 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 Internet Initiative Japan ADR.

Corporate tax rate of 27% is the nominal tax rate for Internet Initiative Japan 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 IIJI 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 IIJI are equal to 25.6%.

Life of production assets of 4.3 years is the average useful life of capital assets used in Internet Initiative Japan 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 IIJI is equal to 10.1%. 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 - $581 million for Internet Initiative Japan 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 93.708 million for Internet Initiative Japan 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 Internet Initiative Japan ADR at the current share price and the inputted number of shares is $1.0 billion.

RELATED COMPANIES Price Int.Val. Rating
MSFT Microsoft 92.00 55.03  sell
DCM NTT DoCoMo ADR 25.34 11.62  str.sell

COMPANY NEWS

▶ Internet Initiative posts 3Q profit   [Feb-08-18 05:01AM  Associated Press]
▶ Internet Initiative posts 2Q profit   [Nov-08-17 05:03AM  Associated Press]
▶ Internet Initiative posts 4Q profit   [May-15-17 05:36AM  Associated Press]
▶ Internet Initiative posts 3Q profit   [Feb-08-17 02:14PM  Associated Press]
▶ Internet Initiative posts 1Q profit   [Aug-05-16 07:01AM  AP]
▶ IIJ Appoints New Executive Officer   [Mar-24-16 11:21PM  at noodls]
▶ IIJ Acquires RYUKOSHA NETWARE Inc.   [Dec-01  01:10AM  at noodls]
Financial statements of IIJI
Follow us on:   twitter   twitter   twitter   twitter

ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2018. All rigths reserved.