Intrinsic value of Kingold Jewelry Inc. - KGJI

Previous Close

$0.64

  Intrinsic Value

$12.16

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  Rating & Target

str. buy

+999%

Previous close

$0.64

 
Intrinsic value

$12.16

 
Up/down potential

+999%

 
Rating

str. buy

We calculate the intrinsic value of KGJI 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 0.0

 

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, %
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
Revenue, $m
  2,153
  2,301
  2,455
  2,616
  2,782
  2,956
  3,137
  3,325
  3,521
  3,726
  3,940
  4,163
  4,396
  4,639
  4,893
  5,159
  5,437
  5,728
  6,032
  6,351
  6,685
  7,034
  7,401
  7,784
  8,187
  8,608
  9,050
  9,514
  10,000
  10,510
Variable operating expenses, $m
  1,948
  2,082
  2,222
  2,367
  2,518
  2,675
  2,838
  3,009
  3,186
  3,372
  3,564
  3,766
  3,976
  4,196
  4,426
  4,667
  4,918
  5,182
  5,457
  5,745
  6,047
  6,364
  6,695
  7,042
  7,406
  7,787
  8,187
  8,607
  9,047
  9,508
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
  1,948
  2,082
  2,222
  2,367
  2,518
  2,675
  2,838
  3,009
  3,186
  3,372
  3,564
  3,766
  3,976
  4,196
  4,426
  4,667
  4,918
  5,182
  5,457
  5,745
  6,047
  6,364
  6,695
  7,042
  7,406
  7,787
  8,187
  8,607
  9,047
  9,508
Operating income, $m
  205
  219
  233
  249
  265
  281
  298
  316
  335
  355
  376
  397
  419
  442
  467
  492
  518
  546
  575
  606
  637
  671
  706
  742
  781
  821
  863
  907
  953
  1,002
EBITDA, $m
  207
  221
  236
  251
  268
  284
  302
  320
  339
  358
  379
  400
  423
  446
  470
  496
  523
  551
  580
  611
  643
  676
  712
  748
  787
  828
  870
  915
  961
  1,011
Interest expense (income), $m
  60
  176
  180
  187
  193
  201
  208
  216
  224
  232
  241
  250
  260
  270
  280
  291
  303
  315
  327
  340
  354
  368
  383
  399
  415
  432
  450
  469
  489
  510
  532
Earnings before tax, $m
  29
  39
  47
  55
  64
  73
  83
  92
  103
  113
  125
  137
  149
  162
  175
  189
  204
  219
  235
  252
  269
  288
  307
  327
  348
  370
  394
  418
  444
  470
Tax expense, $m
  8
  10
  13
  15
  17
  20
  22
  25
  28
  31
  34
  37
  40
  44
  47
  51
  55
  59
  63
  68
  73
  78
  83
  88
  94
  100
  106
  113
  120
  127
Net income, $m
  21
  28
  34
  40
  47
  53
  60
  67
  75
  83
  91
  100
  109
  118
  128
  138
  149
  160
  172
  184
  197
  210
  224
  239
  254
  270
  287
  305
  324
  343

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
  1,601
  1,711
  1,825
  1,945
  2,069
  2,198
  2,332
  2,472
  2,618
  2,770
  2,929
  3,095
  3,268
  3,449
  3,638
  3,836
  4,042
  4,259
  4,485
  4,722
  4,970
  5,230
  5,502
  5,788
  6,087
  6,400
  6,729
  7,074
  7,435
  7,814
Adjusted assets (=assets-cash), $m
  1,601
  1,711
  1,825
  1,945
  2,069
  2,198
  2,332
  2,472
  2,618
  2,770
  2,929
  3,095
  3,268
  3,449
  3,638
  3,836
  4,042
  4,259
  4,485
  4,722
  4,970
  5,230
  5,502
  5,788
  6,087
  6,400
  6,729
  7,074
  7,435
  7,814
Revenue / Adjusted assets
  1.345
  1.345
  1.345
  1.345
  1.345
  1.345
  1.345
  1.345
  1.345
  1.345
  1.345
  1.345
  1.345
  1.345
  1.345
  1.345
  1.345
  1.345
  1.345
  1.345
  1.345
  1.345
  1.345
  1.345
  1.345
  1.345
  1.345
  1.345
  1.345
  1.345
Average production assets, $m
  9
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  30
  31
  33
  34
  36
  38
  40
  42
Working capital, $m
  497
  532
  567
  604
  643
  683
  725
  768
  813
  861
  910
  962
  1,015
  1,072
  1,130
  1,192
  1,256
  1,323
  1,393
  1,467
  1,544
  1,625
  1,710
  1,798
  1,891
  1,989
  2,091
  2,198
  2,310
  2,428
Total debt, $m
  2,685
  2,784
  2,887
  2,994
  3,106
  3,222
  3,343
  3,469
  3,600
  3,737
  3,880
  4,030
  4,185
  4,348
  4,518
  4,696
  4,882
  5,077
  5,281
  5,494
  5,717
  5,951
  6,196
  6,453
  6,722
  7,004
  7,300
  7,610
  7,936
  8,277
Total liabilities, $m
  1,440
  1,540
  1,643
  1,750
  1,862
  1,978
  2,099
  2,225
  2,356
  2,493
  2,636
  2,785
  2,941
  3,104
  3,274
  3,452
  3,638
  3,833
  4,036
  4,250
  4,473
  4,707
  4,952
  5,209
  5,478
  5,760
  6,056
  6,366
  6,691
  7,033
Total equity, $m
  160
  171
  183
  194
  207
  220
  233
  247
  262
  277
  293
  309
  327
  345
  364
  384
  404
  426
  448
  472
  497
  523
  550
  579
  609
  640
  673
  707
  743
  781
Total liabilities and equity, $m
  1,600
  1,711
  1,826
  1,944
  2,069
  2,198
  2,332
  2,472
  2,618
  2,770
  2,929
  3,094
  3,268
  3,449
  3,638
  3,836
  4,042
  4,259
  4,484
  4,722
  4,970
  5,230
  5,502
  5,788
  6,087
  6,400
  6,729
  7,073
  7,434
  7,814
Debt-to-equity ratio
  16.770
  16.270
  15.820
  15.400
  15.010
  14.660
  14.330
  14.030
  13.750
  13.490
  13.250
  13.020
  12.810
  12.610
  12.420
  12.240
  12.080
  11.920
  11.770
  11.630
  11.500
  11.380
  11.260
  11.150
  11.040
  10.940
  10.850
  10.760
  10.670
  10.590
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
  21
  28
  34
  40
  47
  53
  60
  67
  75
  83
  91
  100
  109
  118
  128
  138
  149
  160
  172
  184
  197
  210
  224
  239
  254
  270
  287
  305
  324
  343
Depreciation, amort., depletion, $m
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
Funds from operations, $m
  23
  31
  37
  43
  50
  56
  63
  71
  78
  86
  95
  103
  112
  122
  132
  142
  153
  164
  176
  189
  202
  216
  230
  245
  261
  277
  295
  313
  332
  352
Change in working capital, $m
  33
  34
  36
  37
  39
  40
  42
  44
  45
  47
  49
  52
  54
  56
  59
  61
  64
  67
  70
  74
  77
  81
  85
  89
  93
  97
  102
  107
  112
  118
Cash from operations, $m
  -10
  -3
  1
  6
  11
  16
  22
  27
  33
  39
  45
  52
  59
  66
  73
  81
  89
  97
  106
  115
  125
  135
  145
  156
  168
  180
  192
  206
  220
  234
Maintenance CAPEX, $m
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
New CAPEX, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
Cash from investing activities, $m
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
Free cash flow, $m
  -12
  -6
  -1
  3
  8
  13
  19
  24
  30
  36
  41
  48
  54
  61
  68
  76
  84
  92
  100
  109
  118
  128
  138
  149
  160
  172
  184
  197
  210
  224
Issuance/(repayment) of debt, $m
  58
  99
  103
  107
  112
  116
  121
  126
  131
  137
  143
  149
  156
  163
  170
  178
  186
  195
  204
  213
  223
  234
  245
  257
  269
  282
  296
  310
  325
  341
Issuance/(repurchase) of shares, $m
  28
  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  
  86
  99
  103
  107
  112
  116
  121
  126
  131
  137
  143
  149
  156
  163
  170
  178
  186
  195
  204
  213
  223
  234
  245
  257
  269
  282
  296
  310
  325
  341
Total cash flow (excl. dividends), $m
  73
  94
  102
  111
  120
  130
  140
  150
  161
  172
  184
  197
  210
  224
  238
  254
  270
  286
  304
  322
  342
  362
  383
  406
  429
  454
  480
  507
  535
  565
Retained Cash Flow (-), $m
  -48
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -34
  -36
  -38
Prev. year cash balance distribution, $m
  279
  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
  303
  83
  91
  99
  108
  117
  126
  136
  146
  157
  168
  180
  193
  206
  220
  234
  249
  265
  281
  299
  317
  336
  356
  377
  399
  422
  447
  472
  499
  527
Discount rate, %
  8.10
  8.51
  8.93
  9.38
  9.85
  10.34
  10.85
  11.40
  11.97
  12.57
  13.19
  13.85
  14.55
  15.27
  16.04
  16.84
  17.68
  18.57
  19.49
  20.47
  21.49
  22.57
  23.69
  24.88
  26.12
  27.43
  28.80
  30.24
  31.75
  33.34
PV of cash for distribution, $m
  281
  70
  70
  69
  67
  65
  61
  57
  53
  48
  43
  38
  33
  28
  24
  19
  16
  12
  10
  7
  5
  4
  3
  2
  1
  1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  73.9
  73.9
  73.9
  73.9
  73.9
  73.9
  73.9
  73.9
  73.9
  73.9
  73.9
  73.9
  73.9
  73.9
  73.9
  73.9
  73.9
  73.9
  73.9
  73.9
  73.9
  73.9
  73.9
  73.9
  73.9
  73.9
  73.9
  73.9
  73.9
  73.9

Kingold Jewelry, Inc. designs and manufactures 24-karat gold jewelry and Chinese ornaments, through a variable interest entity relationship with Wuhan Kingold Jewelry Company Limited (Wuhan Kingold). The Company develops, promotes and sells a range of products to the jewelry market across the People's Republic of China (PRC). The Company offers a range of in-house designed products, including, but not limited to, gold necklaces, rings, earrings, bracelets and pendants. The Company also sells gold bars and coins and other products through agreements with various banks in China. The Company sells its products directly to distributors, retailers and other wholesalers, who then sell its products to consumers through retail counters located in both department stores and other traditional stand-alone jewelry stores. The Company's subsidiary, Wuhan Kingold Internet Co., Ltd., is engaged in online sales of jewelry products.

FINANCIAL RATIOS  of  Kingold Jewelry Inc. (KGJI)

Valuation Ratios
P/E Ratio 0.5
Price to Sales 0
Price to Book 0.1
Price to Tangible Book
Price to Cash Flow -0.6
Price to Free Cash Flow -0.6
Growth Rates
Sales Growth Rate 42.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 1
Current Ratio 0.2
LT Debt to Equity 597.9%
Total Debt to Equity 691.1%
Interest Coverage 3
Management Effectiveness
Return On Assets 10.1%
Ret/ On Assets - 3 Yr. Avg. 11.6%
Return On Total Capital 7%
Ret/ On T. Cap. - 3 Yr. Avg. 9.6%
Return On Equity 33.9%
Return On Equity - 3 Yr. Avg. 20.7%
Asset Turnover 1
Profitability Ratios
Gross Margin 10.3%
Gross Margin - 3 Yr. Avg. 7%
EBITDA Margin 13.2%
EBITDA Margin - 3 Yr. Avg. 7.8%
Operating Margin 13.9%
Oper. Margin - 3 Yr. Avg. 7.6%
Pre-Tax Margin 8.9%
Pre-Tax Margin - 3 Yr. Avg. 5.8%
Net Profit Margin 6.5%
Net Profit Margin - 3 Yr. Avg. 4.3%
Effective Tax Rate 26.2%
Eff/ Tax Rate - 3 Yr. Avg. 24.7%
Payout Ratio 0%

KGJI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KGJI stock intrinsic value calculation we used $2010 million for the last fiscal year's total revenue generated by Kingold Jewelry Inc.. The default revenue input number comes from 0001 income statement of Kingold Jewelry Inc.. 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 KGJI stock valuation model: a) initial revenue growth rate of 7.1% 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 8.1%, whose default value for KGJI is calculated based on our internal credit rating of Kingold Jewelry Inc., 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 Kingold Jewelry Inc..
    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 KGJI stock the variable cost ratio is equal to 90.5%.

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 KGJI 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 6.7% for Kingold Jewelry Inc..

Corporate tax rate of 27% is the nominal tax rate for Kingold Jewelry Inc.. 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 KGJI 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 KGJI are equal to 0.4%.

Life of production assets of 4.7 years is the average useful life of capital assets used in Kingold Jewelry Inc. 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 KGJI is equal to 23.1%. 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 - $390.232387 million for Kingold Jewelry Inc. - 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 66.117 million for Kingold Jewelry Inc. 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 Kingold Jewelry Inc. at the current share price and the inputted number of shares is $0.0 billion.

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