Intrinsic value of iKang Healthcare Group ADR - KANG

Previous Close

$15.48

  Intrinsic Value

$9.39

stock screener

  Rating & Target

sell

-39%

Previous close

$15.48

 
Intrinsic value

$9.39

 
Up/down potential

-39%

 
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 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 1.1

 

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, %
  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
  595
  685
  782
  885
  995
  1,110
  1,232
  1,360
  1,494
  1,634
  1,780
  1,932
  2,090
  2,254
  2,425
  2,602
  2,786
  2,978
  3,177
  3,384
  3,600
  3,824
  4,058
  4,301
  4,555
  4,819
  5,095
  5,383
  5,684
Variable operating expenses, $m
  473
  548
  629
  716
  809
  907
  1,011
  1,121
  1,236
  1,356
  1,468
  1,599
  1,736
  1,877
  2,025
  2,178
  2,338
  2,503
  2,676
  2,854
  3,041
  3,234
  3,436
  3,646
  3,864
  4,092
  4,330
  4,578
  4,837
  5,107
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
  473
  548
  629
  716
  809
  907
  1,011
  1,121
  1,236
  1,356
  1,468
  1,599
  1,736
  1,877
  2,025
  2,178
  2,338
  2,503
  2,676
  2,854
  3,041
  3,234
  3,436
  3,646
  3,864
  4,092
  4,330
  4,578
  4,837
  5,107
Operating income, $m
  39
  47
  56
  66
  77
  88
  99
  112
  125
  138
  166
  181
  196
  212
  229
  246
  264
  283
  302
  323
  344
  366
  388
  412
  437
  462
  489
  517
  547
  577
EBITDA, $m
  85
  99
  114
  130
  148
  166
  185
  206
  227
  249
  273
  297
  322
  349
  376
  404
  434
  465
  497
  530
  565
  600
  638
  677
  717
  760
  804
  850
  898
  948
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
  276
Earnings before tax, $m
  27
  31
  36
  41
  46
  52
  58
  64
  70
  77
  97
  105
  112
  120
  129
  137
  146
  155
  165
  175
  185
  196
  207
  219
  231
  244
  257
  271
  286
  301
Tax expense, $m
  7
  8
  10
  11
  12
  14
  16
  17
  19
  21
  26
  28
  30
  32
  35
  37
  39
  42
  44
  47
  50
  53
  56
  59
  62
  66
  69
  73
  77
  81
Net income, $m
  20
  23
  26
  30
  34
  38
  42
  47
  51
  56
  71
  76
  82
  88
  94
  100
  107
  113
  120
  128
  135
  143
  151
  160
  169
  178
  188
  198
  208
  220

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
  856
  995
  1,146
  1,307
  1,480
  1,663
  1,857
  2,061
  2,275
  2,499
  2,733
  2,976
  3,230
  3,494
  3,769
  4,054
  4,351
  4,659
  4,980
  5,313
  5,659
  6,020
  6,395
  6,785
  7,192
  7,616
  8,059
  8,520
  9,002
  9,505
Adjusted assets (=assets-cash), $m
  856
  995
  1,146
  1,307
  1,480
  1,663
  1,857
  2,061
  2,275
  2,499
  2,733
  2,976
  3,230
  3,494
  3,769
  4,054
  4,351
  4,659
  4,980
  5,313
  5,659
  6,020
  6,395
  6,785
  7,192
  7,616
  8,059
  8,520
  9,002
  9,505
Revenue / Adjusted assets
  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
  0.598
Average production assets, $m
  254
  295
  340
  388
  439
  493
  551
  611
  675
  741
  810
  883
  958
  1,036
  1,118
  1,203
  1,291
  1,382
  1,477
  1,576
  1,679
  1,785
  1,897
  2,013
  2,133
  2,259
  2,390
  2,527
  2,670
  2,819
Working capital, $m
  -30
  -35
  -40
  -46
  -52
  -59
  -66
  -73
  -80
  -88
  -96
  -105
  -114
  -123
  -133
  -143
  -154
  -164
  -176
  -187
  -200
  -212
  -226
  -239
  -254
  -269
  -284
  -301
  -318
  -335
Total debt, $m
  286
  365
  451
  544
  642
  747
  857
  974
  1,096
  1,224
  1,357
  1,496
  1,641
  1,792
  1,949
  2,112
  2,281
  2,457
  2,640
  2,831
  3,028
  3,234
  3,448
  3,671
  3,904
  4,146
  4,398
  4,662
  4,937
  5,224
Total liabilities, $m
  489
  568
  654
  747
  845
  950
  1,060
  1,177
  1,299
  1,427
  1,560
  1,699
  1,844
  1,995
  2,152
  2,315
  2,484
  2,661
  2,843
  3,034
  3,231
  3,437
  3,651
  3,874
  4,107
  4,349
  4,601
  4,865
  5,140
  5,427
Total equity, $m
  367
  427
  492
  561
  635
  714
  797
  884
  976
  1,072
  1,172
  1,277
  1,386
  1,499
  1,617
  1,739
  1,867
  1,999
  2,136
  2,279
  2,428
  2,582
  2,743
  2,911
  3,085
  3,267
  3,457
  3,655
  3,862
  4,078
Total liabilities and equity, $m
  856
  995
  1,146
  1,308
  1,480
  1,664
  1,857
  2,061
  2,275
  2,499
  2,732
  2,976
  3,230
  3,494
  3,769
  4,054
  4,351
  4,660
  4,979
  5,313
  5,659
  6,019
  6,394
  6,785
  7,192
  7,616
  8,058
  8,520
  9,002
  9,505
Debt-to-equity ratio
  0.780
  0.860
  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
  20
  23
  26
  30
  34
  38
  42
  47
  51
  56
  71
  76
  82
  88
  94
  100
  107
  113
  120
  128
  135
  143
  151
  160
  169
  178
  188
  198
  208
  220
Depreciation, amort., depletion, $m
  47
  52
  58
  64
  71
  78
  86
  94
  102
  111
  107
  116
  126
  136
  147
  158
  170
  182
  194
  207
  221
  235
  250
  265
  281
  297
  315
  333
  351
  371
Funds from operations, $m
  66
  75
  84
  94
  105
  116
  128
  140
  153
  167
  178
  193
  208
  224
  241
  258
  276
  295
  315
  335
  356
  378
  401
  425
  449
  475
  502
  530
  560
  590
Change in working capital, $m
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
Cash from operations, $m
  71
  80
  89
  100
  111
  122
  135
  148
  161
  175
  186
  201
  217
  233
  251
  268
  287
  306
  326
  347
  368
  391
  414
  438
  464
  490
  518
  547
  577
  608
Maintenance CAPEX, $m
  -28
  -33
  -39
  -45
  -51
  -58
  -65
  -72
  -80
  -89
  -98
  -107
  -116
  -126
  -136
  -147
  -158
  -170
  -182
  -194
  -207
  -221
  -235
  -250
  -265
  -281
  -297
  -315
  -333
  -351
New CAPEX, $m
  -38
  -41
  -45
  -48
  -51
  -54
  -57
  -60
  -63
  -66
  -69
  -72
  -75
  -78
  -81
  -85
  -88
  -91
  -95
  -99
  -103
  -107
  -111
  -116
  -121
  -126
  -131
  -137
  -143
  -149
Cash from investing activities, $m
  -66
  -74
  -84
  -93
  -102
  -112
  -122
  -132
  -143
  -155
  -167
  -179
  -191
  -204
  -217
  -232
  -246
  -261
  -277
  -293
  -310
  -328
  -346
  -366
  -386
  -407
  -428
  -452
  -476
  -500
Free cash flow, $m
  5
  5
  6
  7
  9
  10
  12
  15
  17
  20
  19
  22
  26
  29
  33
  37
  41
  45
  49
  54
  58
  63
  68
  73
  78
  84
  89
  95
  101
  108
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
  232
  242
  253
  264
  275
  287
Issuance/(repurchase) of shares, $m
  35
  37
  38
  40
  40
  41
  41
  41
  40
  40
  29
  28
  27
  26
  24
  22
  21
  19
  17
  15
  13
  12
  10
  8
  6
  4
  2
  0
  0
  0
Cash from financing (excl. dividends), $m  
  108
  116
  124
  132
  139
  146
  152
  157
  162
  168
  163
  167
  172
  177
  181
  185
  190
  195
  200
  205
  211
  218
  224
  231
  238
  246
  255
  264
  275
  287
Total cash flow (excl. dividends), $m
  113
  122
  130
  139
  148
  156
  164
  172
  180
  187
  182
  190
  197
  205
  214
  222
  231
  240
  249
  259
  269
  280
  292
  304
  316
  330
  344
  359
  376
  395
Retained Cash Flow (-), $m
  -55
  -60
  -65
  -69
  -74
  -79
  -83
  -87
  -92
  -96
  -100
  -105
  -109
  -113
  -118
  -122
  -127
  -132
  -137
  -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
  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
  58
  62
  66
  70
  73
  77
  81
  84
  88
  91
  82
  85
  89
  92
  96
  100
  103
  107
  112
  116
  121
  126
  131
  136
  142
  148
  154
  161
  170
  179
Discount rate, %
  5.20
  5.46
  5.73
  6.02
  6.32
  6.64
  6.97
  7.32
  7.68
  8.07
  8.47
  8.89
  9.34
  9.81
  10.30
  10.81
  11.35
  11.92
  12.51
  13.14
  13.80
  14.49
  15.21
  15.97
  16.77
  17.61
  18.49
  19.41
  20.38
  21.40
PV of cash for distribution, $m
  55
  56
  56
  55
  54
  53
  50
  48
  45
  42
  33
  31
  28
  25
  22
  19
  17
  14
  12
  10
  8
  6
  5
  4
  3
  2
  2
  1
  1
  1
Current shareholders' claim on cash, %
  96.8
  94.0
  91.6
  89.5
  87.6
  86.0
  84.5
  83.3
  82.2
  81.2
  80.6
  80.0
  79.5
  79.1
  78.7
  78.4
  78.1
  77.9
  77.7
  77.5
  77.4
  77.3
  77.2
  77.1
  77.1
  77.1
  77.0
  77.0
  77.0
  77.0

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 -48.9
Price to Sales 1.2
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 10.7
Price to Free Cash Flow -41.3
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 $435.713 million for the last fiscal year's total revenue generated by iKang Healthcare Group ADR. The default revenue input number comes from 0001 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 5.2%, 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 92.9%.

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%.

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 49.6%.

Life of production assets of 7.6 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 -5.9%. 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 - $312.437 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 68.612 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 $1.1 billion.

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COMPANY NEWS

▶ iKang Announces Update on Going Private Transaction   [Nov-01-18 07:06AM  GlobeNewswire]
▶ iKang Announces Further Update on Going Private Transaction   [Aug-14-18 04:05PM  GlobeNewswire]
▶ iKang Filed 2015 Annual Report on Form 20-F   [Aug-01-16 07:45AM  GlobeNewswire]

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