Intrinsic value of iKang Healthcare Group ADR - KANG

Previous Close

$20.53

  Intrinsic Value

$14.23

stock screener

  Rating & Target

sell

-31%

Previous close

$20.53

 
Intrinsic value

$14.23

 
Up/down potential

-31%

 
Rating

sell

We calculate the intrinsic value of KANG 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 2017), $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 0.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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, %
  17.50
  16.25
  15.13
  14.11
  13.20
  12.38
  11.64
  10.98
  10.38
  9.84
  9.36
  8.92
  8.53
  8.18
  7.86
  7.57
  7.32
  7.08
  6.88
  6.69
  6.52
  6.37
  6.23
  6.11
  6.00
  5.90
  5.81
  5.73
  5.65
  5.59
Revenue, $m
  512
  596
  686
  782
  886
  995
  1,111
  1,233
  1,361
  1,495
  1,635
  1,781
  1,933
  2,091
  2,255
  2,426
  2,604
  2,788
  2,980
  3,179
  3,386
  3,602
  3,827
  4,060
  4,304
  4,558
  4,822
  5,098
  5,387
  5,688
Variable operating expenses, $m
  474
  549
  630
  717
  810
  909
  1,013
  1,123
  1,238
  1,358
  1,471
  1,602
  1,739
  1,881
  2,029
  2,182
  2,342
  2,508
  2,680
  2,860
  3,046
  3,240
  3,442
  3,652
  3,871
  4,100
  4,338
  4,586
  4,845
  5,116
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
  474
  549
  630
  717
  810
  909
  1,013
  1,123
  1,238
  1,358
  1,471
  1,602
  1,739
  1,881
  2,029
  2,182
  2,342
  2,508
  2,680
  2,860
  3,046
  3,240
  3,442
  3,652
  3,871
  4,100
  4,338
  4,586
  4,845
  5,116
Operating income, $m
  38
  47
  56
  65
  76
  87
  98
  111
  124
  137
  164
  179
  194
  210
  227
  244
  262
  280
  299
  320
  340
  362
  385
  408
  433
  458
  485
  512
  541
  572
EBITDA, $m
  85
  99
  114
  130
  147
  165
  185
  205
  226
  249
  272
  296
  321
  348
  375
  403
  433
  463
  495
  528
  563
  599
  636
  675
  715
  757
  801
  847
  895
  945
Interest expense (income), $m
  4
  12
  16
  20
  25
  30
  36
  42
  48
  55
  61
  69
  76
  84
  92
  100
  109
  118
  128
  138
  148
  159
  170
  181
  193
  206
  219
  232
  246
  261
  277
Earnings before tax, $m
  26
  31
  35
  40
  45
  51
  57
  63
  69
  76
  96
  103
  110
  118
  126
  135
  143
  152
  162
  172
  182
  192
  203
  215
  227
  239
  252
  266
  280
  295
Tax expense, $m
  7
  8
  9
  11
  12
  14
  15
  17
  19
  20
  26
  28
  30
  32
  34
  36
  39
  41
  44
  46
  49
  52
  55
  58
  61
  65
  68
  72
  76
  80
Net income, $m
  19
  22
  26
  29
  33
  37
  41
  46
  50
  55
  70
  75
  81
  86
  92
  98
  105
  111
  118
  125
  133
  140
  148
  157
  166
  175
  184
  194
  205
  215

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
  857
  996
  1,147
  1,308
  1,481
  1,664
  1,858
  2,062
  2,276
  2,500
  2,734
  2,978
  3,232
  3,497
  3,772
  4,057
  4,354
  4,662
  4,983
  5,316
  5,663
  6,024
  6,399
  6,790
  7,197
  7,621
  8,064
  8,526
  9,008
  9,511
Adjusted assets (=assets-cash), $m
  857
  996
  1,147
  1,308
  1,481
  1,664
  1,858
  2,062
  2,276
  2,500
  2,734
  2,978
  3,232
  3,497
  3,772
  4,057
  4,354
  4,662
  4,983
  5,316
  5,663
  6,024
  6,399
  6,790
  7,197
  7,621
  8,064
  8,526
  9,008
  9,511
Revenue / Adjusted assets
  0.597
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
Average production assets, $m
  337
  391
  450
  514
  582
  654
  730
  810
  894
  982
  1,074
  1,170
  1,270
  1,374
  1,482
  1,594
  1,711
  1,832
  1,958
  2,089
  2,225
  2,367
  2,514
  2,668
  2,828
  2,994
  3,168
  3,350
  3,539
  3,737
Working capital, $m
  -39
  -45
  -52
  -59
  -67
  -76
  -84
  -94
  -103
  -114
  -124
  -135
  -147
  -159
  -171
  -184
  -198
  -212
  -226
  -242
  -257
  -274
  -291
  -309
  -327
  -346
  -366
  -387
  -409
  -432
Total debt, $m
  286
  365
  451
  544
  642
  747
  858
  974
  1,096
  1,224
  1,358
  1,497
  1,642
  1,793
  1,950
  2,113
  2,283
  2,459
  2,642
  2,832
  3,030
  3,236
  3,450
  3,673
  3,906
  4,148
  4,401
  4,665
  4,940
  5,227
Total liabilities, $m
  489
  569
  655
  747
  846
  950
  1,061
  1,178
  1,300
  1,428
  1,561
  1,701
  1,846
  1,997
  2,154
  2,317
  2,486
  2,662
  2,845
  3,036
  3,234
  3,439
  3,654
  3,877
  4,109
  4,352
  4,605
  4,868
  5,143
  5,431
Total equity, $m
  368
  427
  492
  561
  635
  714
  797
  885
  977
  1,073
  1,173
  1,278
  1,387
  1,500
  1,618
  1,741
  1,868
  2,000
  2,138
  2,281
  2,429
  2,584
  2,745
  2,913
  3,087
  3,270
  3,459
  3,658
  3,864
  4,080
Total liabilities and equity, $m
  857
  996
  1,147
  1,308
  1,481
  1,664
  1,858
  2,063
  2,277
  2,501
  2,734
  2,979
  3,233
  3,497
  3,772
  4,058
  4,354
  4,662
  4,983
  5,317
  5,663
  6,023
  6,399
  6,790
  7,196
  7,622
  8,064
  8,526
  9,007
  9,511
Debt-to-equity ratio
  0.780
  0.850
  0.920
  0.970
  1.010
  1.050
  1.080
  1.100
  1.120
  1.140
  1.160
  1.170
  1.180
  1.200
  1.210
  1.210
  1.220
  1.230
  1.240
  1.240
  1.250
  1.250
  1.260
  1.260
  1.270
  1.270
  1.270
  1.280
  1.280
  1.280
Adjusted equity ratio
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  19
  22
  26
  29
  33
  37
  41
  46
  50
  55
  70
  75
  81
  86
  92
  98
  105
  111
  118
  125
  133
  140
  148
  157
  166
  175
  184
  194
  205
  215
Depreciation, amort., depletion, $m
  47
  52
  58
  65
  71
  79
  86
  94
  103
  112
  107
  117
  127
  137
  148
  159
  171
  183
  196
  209
  222
  237
  251
  267
  283
  299
  317
  335
  354
  374
Funds from operations, $m
  66
  75
  84
  94
  105
  116
  128
  140
  153
  167
  177
  192
  208
  224
  240
  258
  276
  294
  314
  334
  355
  377
  400
  424
  448
  474
  501
  529
  558
  589
Change in working capital, $m
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
Cash from operations, $m
  72
  81
  91
  101
  112
  124
  136
  149
  163
  177
  188
  203
  219
  236
  253
  271
  289
  308
  328
  349
  371
  393
  417
  441
  467
  493
  521
  550
  580
  612
Maintenance CAPEX, $m
  -29
  -34
  -39
  -45
  -51
  -58
  -65
  -73
  -81
  -89
  -98
  -107
  -117
  -127
  -137
  -148
  -159
  -171
  -183
  -196
  -209
  -222
  -237
  -251
  -267
  -283
  -299
  -317
  -335
  -354
New CAPEX, $m
  -50
  -55
  -59
  -64
  -68
  -72
  -76
  -80
  -84
  -88
  -92
  -96
  -100
  -104
  -108
  -112
  -117
  -121
  -126
  -131
  -136
  -142
  -147
  -154
  -160
  -167
  -174
  -181
  -189
  -198
Cash from investing activities, $m
  -79
  -89
  -98
  -109
  -119
  -130
  -141
  -153
  -165
  -177
  -190
  -203
  -217
  -231
  -245
  -260
  -276
  -292
  -309
  -327
  -345
  -364
  -384
  -405
  -427
  -450
  -473
  -498
  -524
  -552
Free cash flow, $m
  -7
  -7
  -7
  -7
  -7
  -6
  -5
  -4
  -2
  -1
  -2
  0
  2
  5
  7
  10
  13
  16
  19
  23
  26
  29
  33
  36
  40
  44
  48
  52
  56
  60
Issuance/(repayment) of debt, $m
  73
  79
  86
  92
  99
  105
  111
  116
  122
  128
  134
  139
  145
  151
  157
  163
  169
  176
  183
  190
  198
  206
  214
  223
  233
  242
  253
  264
  275
  287
Issuance/(repurchase) of shares, $m
  36
  37
  39
  40
  41
  42
  42
  42
  41
  41
  30
  30
  28
  27
  26
  24
  23
  21
  19
  18
  16
  14
  13
  11
  9
  7
  6
  4
  2
  1
Cash from financing (excl. dividends), $m  
  109
  116
  125
  132
  140
  147
  153
  158
  163
  169
  164
  169
  173
  178
  183
  187
  192
  197
  202
  208
  214
  220
  227
  234
  242
  249
  259
  268
  277
  288
Total cash flow (excl. dividends), $m
  102
  110
  118
  125
  133
  140
  147
  154
  161
  168
  162
  169
  176
  183
  190
  198
  205
  213
  222
  231
  240
  249
  260
  270
  282
  294
  306
  320
  334
  348
Retained Cash Flow (-), $m
  -56
  -60
  -65
  -69
  -74
  -79
  -83
  -88
  -92
  -96
  -100
  -105
  -109
  -113
  -118
  -123
  -127
  -132
  -138
  -143
  -149
  -155
  -161
  -168
  -175
  -182
  -190
  -198
  -207
  -216
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
  2
  2
  2
  3
  3
  4
  4
  4
  5
  5
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  22
Cash available for distribution, $m
  46
  50
  53
  56
  59
  61
  64
  67
  70
  72
  62
  64
  67
  69
  72
  75
  78
  81
  84
  88
  91
  95
  99
  103
  107
  112
  116
  121
  127
  132
Discount rate, %
  4.90
  5.15
  5.40
  5.67
  5.96
  6.25
  6.57
  6.89
  7.24
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.19
  10.70
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.21
  20.17
PV of cash for distribution, $m
  44
  45
  45
  45
  44
  43
  41
  39
  37
  35
  26
  24
  22
  20
  18
  16
  14
  12
  10
  8
  7
  6
  5
  4
  3
  2
  2
  1
  1
  1
Current shareholders' claim on cash, %
  95.1
  90.9
  87.4
  84.3
  81.6
  79.3
  77.3
  75.5
  73.9
  72.6
  71.7
  70.9
  70.2
  69.6
  69.0
  68.6
  68.2
  67.8
  67.6
  67.3
  67.1
  66.9
  66.8
  66.7
  66.6
  66.5
  66.4
  66.4
  66.4
  66.4

iKang Healthcare Group, Inc. provides preventive healthcare solutions, including a range of medical examinations services and value-added services, including disease screening, dental services and other services in China. The Company's segments include medical examinations and other medical services, and dental services. The Company, through its integrated service platform, offers healthcare management solutions, including medical examinations, which cover basic examination items, such as internal, gynecology, ophthalmology, dental and X-ray, and value-added services at selected medical centers, including disease screening focusing on cancer screening, cardiovascular disease screening, certain chronic disease screening and functional medicine testing; dental care, including oral health, pediatric dentistry and cosmetic dentistry; outpatient services, such as acupuncture, obstetrics, gynecology and minor surgery, and on-site healthcare management or clinics at certain locations.

FINANCIAL RATIOS  of  iKang Healthcare Group ADR (KANG)

Valuation Ratios
P/E Ratio -64.8
Price to Sales 1.6
Price to Book 2.3
Price to Tangible Book
Price to Cash Flow 14.3
Price to Free Cash Flow -54.8
Growth Rates
Sales Growth Rate 17.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 70.3%
Cap. Spend. - 3 Yr. Gr. Rate 11.8%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 32.7%
Total Debt to Equity 68.3%
Interest Coverage 1
Management Effectiveness
Return On Assets -0.9%
Ret/ On Assets - 3 Yr. Avg. 3.2%
Return On Total Capital -1.9%
Ret/ On T. Cap. - 3 Yr. Avg. 3.9%
Return On Equity -3.4%
Return On Equity - 3 Yr. Avg. 4.6%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 39.9%
Gross Margin - 3 Yr. Avg. 43.3%
EBITDA Margin 9.4%
EBITDA Margin - 3 Yr. Avg. 15.3%
Operating Margin 3.2%
Oper. Margin - 3 Yr. Avg. 8.1%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 6.7%
Net Profit Margin -2.5%
Net Profit Margin - 3 Yr. Avg. 3.9%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 19.2%
Payout Ratio 0%

KANG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KANG stock intrinsic value calculation we used $436 million for the last fiscal year's total revenue generated by iKang Healthcare Group ADR. The default revenue input number comes from 2017 income statement of iKang Healthcare 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 KANG stock valuation model: a) initial revenue growth rate of 17.5% 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 4.9%, whose default value for KANG is calculated based on our internal credit rating of iKang Healthcare 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 iKang Healthcare 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 KANG stock the variable cost ratio is equal to 93%.

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 KANG 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 5.6% for iKang Healthcare Group ADR.

Corporate tax rate of 27% is the nominal tax rate for iKang Healthcare 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 KANG stock is equal to 0.4%.

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 KANG are equal to 65.7%.

Life of production assets of 10 years is the average useful life of capital assets used in iKang Healthcare 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 KANG is equal to -7.6%. 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 - $312 million for iKang Healthcare 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 34 million for iKang Healthcare 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 iKang Healthcare Group ADR at the current share price and the inputted number of shares is $0.7 billion.

RELATED COMPANIES Price Int.Val. Rating
SGRY Surgery Partne 14.15 23.80  buy
CCM Concord Medica 4.05 0.32  str.sell

COMPANY NEWS

▶ iKang Filed 2015 Annual Report on Form 20-F   [Aug-01-16 07:45AM  GlobeNewswire]
▶ Is iKang Healthcare Group Inc (ADR) (KANG) A Good Stock To Buy?   [Dec-10  01:42PM  at Insider Monkey]
▶ Meinian Responds to iKang's "Poison Pill" Rights Plan   [Dec-03  01:26PM  PR Newswire]
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.