Intrinsic value of Korea Electric Power ADR - KEP

Previous Close

$14.92

  Intrinsic Value

$32.16

stock screener

  Rating & Target

str. buy

+116%

Previous close

$14.92

 
Intrinsic value

$32.16

 
Up/down potential

+116%

 
Rating

str. buy

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

We calculate the intrinsic value of KEP 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, %
  2.09
  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
  47,788
  52,978
  54,196
  55,589
  57,153
  58,886
  60,787
  62,857
  65,098
  67,512
  70,103
  72,875
  75,832
  78,982
  82,328
  85,880
  89,643
  93,627
  97,840
  102,291
  106,992
  111,951
  117,181
  122,694
  128,502
  134,620
  141,061
  147,841
  154,975
  162,480
  170,374
Variable operating expenses, $m
 
  31,734
  32,464
  33,298
  34,235
  35,272
  36,411
  37,651
  38,994
  40,440
  41,992
  43,652
  45,423
  47,310
  49,314
  51,442
  53,696
  56,082
  58,606
  61,272
  64,088
  67,058
  70,191
  73,493
  76,972
  80,637
  84,495
  88,556
  92,829
  97,325
  102,054
Fixed operating expenses, $m
 
  11,079
  11,356
  11,640
  11,931
  12,229
  12,535
  12,849
  13,170
  13,499
  13,836
  14,182
  14,537
  14,900
  15,273
  15,655
  16,046
  16,447
  16,858
  17,280
  17,712
  18,155
  18,608
  19,074
  19,551
  20,039
  20,540
  21,054
  21,580
  22,120
  22,673
Total operating expenses, $m
  41,669
  42,813
  43,820
  44,938
  46,166
  47,501
  48,946
  50,500
  52,164
  53,939
  55,828
  57,834
  59,960
  62,210
  64,587
  67,097
  69,742
  72,529
  75,464
  78,552
  81,800
  85,213
  88,799
  92,567
  96,523
  100,676
  105,035
  109,610
  114,409
  119,445
  124,727
Operating income, $m
  10,271
  10,165
  10,377
  10,651
  10,987
  11,384
  11,840
  12,357
  12,935
  13,573
  14,275
  15,041
  15,872
  16,772
  17,741
  18,783
  19,901
  21,098
  22,376
  23,739
  25,192
  26,738
  28,382
  30,127
  31,979
  33,944
  36,026
  38,231
  40,565
  43,036
  45,648
EBITDA, $m
  18,004
  18,030
  18,423
  18,904
  19,472
  20,126
  20,865
  21,689
  22,599
  23,596
  24,682
  25,859
  27,130
  28,497
  29,963
  31,533
  33,209
  34,997
  36,901
  38,925
  41,076
  43,358
  45,778
  48,342
  51,056
  53,929
  56,967
  60,179
  63,572
  67,157
  70,941
Interest expense (income), $m
  1,762
  1,505
  1,564
  1,637
  1,720
  1,814
  1,918
  2,032
  2,156
  2,290
  2,435
  2,590
  2,757
  2,934
  3,123
  3,324
  3,537
  3,762
  4,001
  4,254
  4,521
  4,803
  5,100
  5,414
  5,744
  6,092
  6,459
  6,846
  7,252
  7,680
  8,130
Earnings before tax, $m
  9,072
  8,660
  8,813
  9,015
  9,267
  9,570
  9,923
  10,325
  10,779
  11,283
  11,840
  12,450
  13,116
  13,838
  14,618
  15,460
  16,365
  17,335
  18,375
  19,486
  20,672
  21,936
  23,282
  24,713
  26,235
  27,851
  29,566
  31,385
  33,313
  35,356
  37,518
Tax expense, $m
  2,904
  2,338
  2,379
  2,434
  2,502
  2,584
  2,679
  2,788
  2,910
  3,046
  3,197
  3,362
  3,541
  3,736
  3,947
  4,174
  4,418
  4,681
  4,961
  5,261
  5,581
  5,923
  6,286
  6,673
  7,084
  7,520
  7,983
  8,474
  8,995
  9,546
  10,130
Net income, $m
  6,082
  6,321
  6,433
  6,581
  6,765
  6,986
  7,243
  7,537
  7,868
  8,237
  8,643
  9,089
  9,574
  10,101
  10,671
  11,286
  11,946
  12,655
  13,414
  14,225
  15,090
  16,013
  16,996
  18,041
  19,152
  20,331
  21,583
  22,911
  24,319
  25,810
  27,388

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  4,939
  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
  153,459
  151,365
  154,846
  158,826
  163,294
  168,244
  173,676
  179,591
  185,994
  192,891
  200,294
  208,214
  216,664
  225,662
  235,224
  245,371
  256,124
  267,506
  279,543
  292,261
  305,690
  319,860
  334,803
  350,554
  367,149
  384,628
  403,031
  422,402
  442,785
  464,229
  486,784
Adjusted assets (=assets-cash), $m
  148,520
  151,365
  154,846
  158,826
  163,294
  168,244
  173,676
  179,591
  185,994
  192,891
  200,294
  208,214
  216,664
  225,662
  235,224
  245,371
  256,124
  267,506
  279,543
  292,261
  305,690
  319,860
  334,803
  350,554
  367,149
  384,628
  403,031
  422,402
  442,785
  464,229
  486,784
Revenue / Adjusted assets
  0.322
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
Average production assets, $m
  124,936
  127,412
  130,342
  133,692
  137,453
  141,620
  146,192
  151,171
  156,560
  162,366
  168,598
  175,264
  182,377
  189,951
  198,000
  206,541
  215,592
  225,173
  235,305
  246,011
  257,315
  269,242
  281,820
  295,079
  309,048
  323,761
  339,251
  355,556
  372,714
  390,765
  409,751
Working capital, $m
  -4,341
  -1,483
  -1,517
  -1,556
  -1,600
  -1,649
  -1,702
  -1,760
  -1,823
  -1,890
  -1,963
  -2,040
  -2,123
  -2,211
  -2,305
  -2,405
  -2,510
  -2,622
  -2,740
  -2,864
  -2,996
  -3,135
  -3,281
  -3,435
  -3,598
  -3,769
  -3,950
  -4,140
  -4,339
  -4,549
  -4,770
Total debt, $m
  46,753
  43,432
  45,461
  47,782
  50,386
  53,272
  56,439
  59,888
  63,620
  67,642
  71,957
  76,575
  81,501
  86,747
  92,322
  98,237
  104,506
  111,142
  118,160
  125,574
  133,403
  141,664
  150,376
  159,559
  169,234
  179,424
  190,153
  201,446
  213,329
  225,831
  238,981
Total liabilities, $m
  91,567
  88,246
  90,275
  92,596
  95,200
  98,086
  101,253
  104,702
  108,434
  112,456
  116,771
  121,389
  126,315
  131,561
  137,136
  143,051
  149,320
  155,956
  162,974
  170,388
  178,217
  186,478
  195,190
  204,373
  214,048
  224,238
  234,967
  246,260
  258,143
  270,645
  283,795
Total equity, $m
  61,892
  63,119
  64,571
  66,230
  68,094
  70,158
  72,423
  74,889
  77,559
  80,436
  83,523
  86,825
  90,349
  94,101
  98,088
  102,320
  106,804
  111,550
  116,569
  121,873
  127,473
  133,381
  139,613
  146,181
  153,101
  160,390
  168,064
  176,141
  184,641
  193,583
  202,989
Total liabilities and equity, $m
  153,459
  151,365
  154,846
  158,826
  163,294
  168,244
  173,676
  179,591
  185,993
  192,892
  200,294
  208,214
  216,664
  225,662
  235,224
  245,371
  256,124
  267,506
  279,543
  292,261
  305,690
  319,859
  334,803
  350,554
  367,149
  384,628
  403,031
  422,401
  442,784
  464,228
  486,784
Debt-to-equity ratio
  0.755
  0.690
  0.700
  0.720
  0.740
  0.760
  0.780
  0.800
  0.820
  0.840
  0.860
  0.880
  0.900
  0.920
  0.940
  0.960
  0.980
  1.000
  1.010
  1.030
  1.050
  1.060
  1.080
  1.090
  1.110
  1.120
  1.130
  1.140
  1.160
  1.170
  1.180
Adjusted equity ratio
  0.388
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  6,082
  6,321
  6,433
  6,581
  6,765
  6,986
  7,243
  7,537
  7,868
  8,237
  8,643
  9,089
  9,574
  10,101
  10,671
  11,286
  11,946
  12,655
  13,414
  14,225
  15,090
  16,013
  16,996
  18,041
  19,152
  20,331
  21,583
  22,911
  24,319
  25,810
  27,388
Depreciation, amort., depletion, $m
  7,733
  7,865
  8,046
  8,253
  8,485
  8,742
  9,024
  9,332
  9,664
  10,023
  10,407
  10,819
  11,258
  11,725
  12,222
  12,749
  13,308
  13,900
  14,525
  15,186
  15,884
  16,620
  17,396
  18,215
  19,077
  19,985
  20,941
  21,948
  23,007
  24,121
  25,293
Funds from operations, $m
  7,926
  14,187
  14,479
  14,833
  15,250
  15,728
  16,268
  16,869
  17,533
  18,259
  19,051
  19,907
  20,832
  21,827
  22,894
  24,035
  25,254
  26,554
  27,939
  29,410
  30,974
  32,633
  34,392
  36,256
  38,229
  40,317
  42,525
  44,859
  47,326
  49,931
  52,682
Change in working capital, $m
  -6,357
  -29
  -34
  -39
  -44
  -49
  -53
  -58
  -63
  -68
  -73
  -78
  -83
  -88
  -94
  -99
  -105
  -112
  -118
  -125
  -132
  -139
  -146
  -154
  -163
  -171
  -180
  -190
  -200
  -210
  -221
Cash from operations, $m
  14,283
  14,216
  14,514
  14,872
  15,294
  15,777
  16,321
  16,927
  17,596
  18,327
  19,123
  19,985
  20,915
  21,915
  22,987
  24,135
  25,360
  26,666
  28,057
  29,535
  31,105
  32,772
  34,538
  36,410
  38,391
  40,488
  42,705
  45,049
  47,525
  50,141
  52,903
Maintenance CAPEX, $m
  0
  -7,712
  -7,865
  -8,046
  -8,253
  -8,485
  -8,742
  -9,024
  -9,332
  -9,664
  -10,023
  -10,407
  -10,819
  -11,258
  -11,725
  -12,222
  -12,749
  -13,308
  -13,900
  -14,525
  -15,186
  -15,884
  -16,620
  -17,396
  -18,215
  -19,077
  -19,985
  -20,941
  -21,948
  -23,007
  -24,121
New CAPEX, $m
  -10,487
  -2,476
  -2,930
  -3,350
  -3,761
  -4,167
  -4,572
  -4,979
  -5,389
  -5,806
  -6,231
  -6,666
  -7,113
  -7,574
  -8,049
  -8,541
  -9,051
  -9,581
  -10,132
  -10,706
  -11,304
  -11,927
  -12,578
  -13,258
  -13,969
  -14,713
  -15,491
  -16,305
  -17,158
  -18,051
  -18,986
Cash from investing activities, $m
  -8,324
  -10,188
  -10,795
  -11,396
  -12,014
  -12,652
  -13,314
  -14,003
  -14,721
  -15,470
  -16,254
  -17,073
  -17,932
  -18,832
  -19,774
  -20,763
  -21,800
  -22,889
  -24,032
  -25,231
  -26,490
  -27,811
  -29,198
  -30,654
  -32,184
  -33,790
  -35,476
  -37,246
  -39,106
  -41,058
  -43,107
Free cash flow, $m
  5,959
  4,028
  3,718
  3,477
  3,280
  3,125
  3,007
  2,924
  2,875
  2,857
  2,869
  2,912
  2,983
  3,083
  3,213
  3,371
  3,559
  3,777
  4,025
  4,304
  4,616
  4,961
  5,340
  5,755
  6,207
  6,698
  7,229
  7,803
  8,420
  9,083
  9,795
Issuance/(repayment) of debt, $m
  -4,846
  1,618
  2,030
  2,320
  2,605
  2,886
  3,167
  3,448
  3,733
  4,021
  4,316
  4,617
  4,927
  5,246
  5,575
  5,916
  6,269
  6,636
  7,018
  7,415
  7,829
  8,261
  8,712
  9,183
  9,675
  10,190
  10,729
  11,293
  11,883
  12,502
  13,150
Issuance/(repurchase) of shares, $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
  0
Cash from financing (excl. dividends), $m  
  -4,775
  1,618
  2,030
  2,320
  2,605
  2,886
  3,167
  3,448
  3,733
  4,021
  4,316
  4,617
  4,927
  5,246
  5,575
  5,916
  6,269
  6,636
  7,018
  7,415
  7,829
  8,261
  8,712
  9,183
  9,675
  10,190
  10,729
  11,293
  11,883
  12,502
  13,150
Total cash flow (excl. dividends), $m
  1,185
  5,645
  5,748
  5,797
  5,885
  6,011
  6,174
  6,373
  6,607
  6,878
  7,185
  7,529
  7,910
  8,329
  8,788
  9,287
  9,828
  10,413
  11,042
  11,719
  12,445
  13,222
  14,052
  14,938
  15,883
  16,888
  17,958
  19,096
  20,303
  21,585
  22,945
Retained Cash Flow (-), $m
  -4,392
  -1,227
  -1,452
  -1,659
  -1,863
  -2,064
  -2,265
  -2,466
  -2,670
  -2,876
  -3,087
  -3,302
  -3,524
  -3,752
  -3,987
  -4,231
  -4,484
  -4,746
  -5,019
  -5,304
  -5,600
  -5,909
  -6,231
  -6,568
  -6,920
  -7,289
  -7,674
  -8,077
  -8,500
  -8,942
  -9,406
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
 
  4,418
  4,296
  4,137
  4,022
  3,947
  3,909
  3,906
  3,937
  4,002
  4,098
  4,226
  4,386
  4,577
  4,800
  5,056
  5,344
  5,666
  6,023
  6,416
  6,845
  7,313
  7,821
  8,370
  8,962
  9,600
  10,284
  11,018
  11,804
  12,643
  13,540
Discount rate, %
 
  5.30
  5.57
  5.84
  6.14
  6.44
  6.76
  7.10
  7.46
  7.83
  8.22
  8.63
  9.06
  9.52
  9.99
  10.49
  11.02
  11.57
  12.15
  12.76
  13.39
  14.06
  14.77
  15.50
  16.28
  17.09
  17.95
  18.85
  19.79
  20.78
  21.82
PV of cash for distribution, $m
 
  4,196
  3,855
  3,489
  3,170
  2,888
  2,639
  2,416
  2,215
  2,030
  1,860
  1,700
  1,548
  1,404
  1,265
  1,132
  1,004
  881
  765
  656
  554
  461
  378
  304
  240
  186
  141
  104
  75
  53
  36
Current shareholders' claim on cash, %
  100
  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
  100.0

Korea Electric Power Corporation (KEPCO) is an integrated electric utility company engaged in the transmission and distribution of electricity in the Republic of Korea. Its segments include transmission and distribution, nuclear power generation and thermal power generation and all others . The transmission and distribution segment, which is operated by KEPCO, comprise operations related to the transmission, distribution and sale to end-users of electricity. The nuclear power generation segment, which is engaged in the nuclear, hydro, pumping-up power generation. The thermal power generation segment, which is engaged in bituminous coal, anthracite, liquefied natural gas (LNG) power generation. And the Other Segment comprises operations related to the plant design, power generation equipment assembly, nuclear raw materials supplement, electricity IT service, renewable source power generation and financial investment on overseas businesses.

FINANCIAL RATIOS  of  Korea Electric Power ADR (KEP)

Valuation Ratios
P/E Ratio 1.6
Price to Sales 0.2
Price to Book 0.2
Price to Tangible Book
Price to Cash Flow 0.7
Price to Free Cash Flow 2.5
Growth Rates
Sales Growth Rate 2.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -14%
Cap. Spend. - 3 Yr. Gr. Rate -3.2%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 62.9%
Total Debt to Equity 75.5%
Interest Coverage 6
Management Effectiveness
Return On Assets 4.8%
Ret/ On Assets - 3 Yr. Avg. 5.4%
Return On Total Capital 5.6%
Ret/ On T. Cap. - 3 Yr. Avg. 6.3%
Return On Equity 10.2%
Return On Equity - 3 Yr. Avg. 12.5%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 35.7%
EBITDA Margin - 3 Yr. Avg. 36.9%
Operating Margin 19.8%
Oper. Margin - 3 Yr. Avg. 16.6%
Pre-Tax Margin 17.5%
Pre-Tax Margin - 3 Yr. Avg. 18.8%
Net Profit Margin 11.7%
Net Profit Margin - 3 Yr. Avg. 13%
Effective Tax Rate 32%
Eff/ Tax Rate - 3 Yr. Avg. 31.3%
Payout Ratio 29.9%

KEP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KEP stock intrinsic value calculation we used $51939 million for the last fiscal year's total revenue generated by Korea Electric Power ADR. The default revenue input number comes from 2016 income statement of Korea Electric Power 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 KEP 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 5.3%, whose default value for KEP is calculated based on our internal credit rating of Korea Electric Power 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 Korea Electric Power 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 KEP stock the variable cost ratio is equal to 59.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $10809 million in the base year in the intrinsic value calculation for KEP 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 3.6% for Korea Electric Power ADR.

Corporate tax rate of 27% is the nominal tax rate for Korea Electric Power 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 KEP 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 KEP are equal to 240.5%.

Life of production assets of 16.2 years is the average useful life of capital assets used in Korea Electric Power 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 KEP is equal to -2.8%. 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 - $61892 million for Korea Electric Power 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 1297.01 million for Korea Electric Power 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 Korea Electric Power ADR at the current share price and the inputted number of shares is $19.4 billion.

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Financial statements of KEP
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