Intrinsic value of LINE Corporation - LN

Previous Close

$33.94

  Intrinsic Value

$30.07

stock screener

  Rating & Target

hold

-11%

Previous close

$33.94

 
Intrinsic value

$30.07

 
Up/down potential

-11%

 
Rating

hold

We calculate the intrinsic value of LN 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 8.1

 

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, %
  26.90
  24.71
  22.74
  20.97
  19.37
  17.93
  16.64
  15.47
  14.43
  13.48
  12.64
  11.87
  11.19
  10.57
  10.01
  9.51
  9.06
  8.65
  8.29
  7.96
  7.66
  7.40
  7.16
  6.94
  6.75
  6.57
  6.41
  6.27
  6.15
  6.03
Revenue, $m
  2,018
  2,516
  3,088
  3,736
  4,460
  5,259
  6,134
  7,084
  8,106
  9,199
  10,361
  11,591
  12,887
  14,249
  15,676
  17,166
  18,721
  20,341
  22,027
  23,779
  25,602
  27,495
  29,463
  31,508
  33,634
  35,844
  38,144
  40,536
  43,028
  45,623
Variable operating expenses, $m
  1,697
  2,112
  2,587
  3,125
  3,727
  4,391
  5,118
  5,907
  6,757
  7,665
  8,610
  9,633
  10,710
  11,842
  13,027
  14,266
  15,558
  16,904
  18,305
  19,762
  21,276
  22,850
  24,485
  26,184
  27,951
  29,788
  31,699
  33,688
  35,758
  37,915
Fixed operating expenses, $m
  28
  28
  29
  29
  30
  31
  31
  32
  33
  34
  34
  35
  36
  37
  37
  38
  39
  40
  41
  42
  43
  44
  45
  46
  47
  48
  49
  50
  51
  52
Total operating expenses, $m
  1,725
  2,140
  2,616
  3,154
  3,757
  4,422
  5,149
  5,939
  6,790
  7,699
  8,644
  9,668
  10,746
  11,879
  13,064
  14,304
  15,597
  16,944
  18,346
  19,804
  21,319
  22,894
  24,530
  26,230
  27,998
  29,836
  31,748
  33,738
  35,809
  37,967
Operating income, $m
  293
  376
  472
  581
  703
  837
  984
  1,144
  1,316
  1,500
  1,716
  1,923
  2,142
  2,371
  2,611
  2,862
  3,124
  3,397
  3,681
  3,976
  4,283
  4,602
  4,933
  5,278
  5,636
  6,009
  6,396
  6,799
  7,219
  7,656
EBITDA, $m
  356
  450
  558
  681
  818
  969
  1,135
  1,315
  1,508
  1,716
  1,936
  2,169
  2,415
  2,673
  2,943
  3,226
  3,521
  3,828
  4,148
  4,480
  4,826
  5,185
  5,558
  5,946
  6,349
  6,768
  7,205
  7,659
  8,131
  8,624
Interest expense (income), $m
  1
  14
  25
  39
  55
  72
  92
  114
  138
  163
  191
  221
  253
  286
  322
  359
  398
  438
  481
  525
  571
  618
  668
  720
  773
  829
  887
  947
  1,010
  1,075
  1,143
Earnings before tax, $m
  279
  351
  433
  527
  631
  745
  871
  1,006
  1,153
  1,309
  1,495
  1,671
  1,855
  2,049
  2,252
  2,464
  2,686
  2,916
  3,156
  3,405
  3,664
  3,934
  4,214
  4,505
  4,807
  5,122
  5,449
  5,789
  6,144
  6,513
Tax expense, $m
  75
  95
  117
  142
  170
  201
  235
  272
  311
  353
  404
  451
  501
  553
  608
  665
  725
  787
  852
  919
  989
  1,062
  1,138
  1,216
  1,298
  1,383
  1,471
  1,563
  1,659
  1,759
Net income, $m
  204
  256
  316
  384
  460
  544
  636
  735
  841
  955
  1,091
  1,219
  1,354
  1,496
  1,644
  1,799
  1,961
  2,129
  2,304
  2,486
  2,675
  2,872
  3,076
  3,288
  3,509
  3,739
  3,978
  4,226
  4,485
  4,755

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
  2,701
  3,369
  4,134
  5,001
  5,970
  7,040
  8,212
  9,483
  10,851
  12,314
  13,870
  15,517
  17,252
  19,075
  20,985
  22,980
  25,062
  27,230
  29,487
  31,833
  34,273
  36,807
  39,442
  42,179
  45,025
  47,984
  51,062
  54,266
  57,601
  61,075
Adjusted assets (=assets-cash), $m
  2,701
  3,369
  4,134
  5,001
  5,970
  7,040
  8,212
  9,483
  10,851
  12,314
  13,870
  15,517
  17,252
  19,075
  20,985
  22,980
  25,062
  27,230
  29,487
  31,833
  34,273
  36,807
  39,442
  42,179
  45,025
  47,984
  51,062
  54,266
  57,601
  61,075
Revenue / Adjusted assets
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
Average production assets, $m
  214
  267
  327
  396
  473
  557
  650
  751
  859
  975
  1,098
  1,229
  1,366
  1,510
  1,662
  1,820
  1,984
  2,156
  2,335
  2,521
  2,714
  2,914
  3,123
  3,340
  3,565
  3,799
  4,043
  4,297
  4,561
  4,836
Working capital, $m
  -222
  -277
  -340
  -411
  -491
  -579
  -675
  -779
  -892
  -1,012
  -1,140
  -1,275
  -1,418
  -1,567
  -1,724
  -1,888
  -2,059
  -2,237
  -2,423
  -2,616
  -2,816
  -3,024
  -3,241
  -3,466
  -3,700
  -3,943
  -4,196
  -4,459
  -4,733
  -5,019
Total debt, $m
  470
  722
  1,011
  1,337
  1,703
  2,106
  2,548
  3,027
  3,543
  4,094
  4,681
  5,302
  5,956
  6,643
  7,363
  8,115
  8,900
  9,718
  10,568
  11,453
  12,373
  13,328
  14,321
  15,354
  16,426
  17,542
  18,702
  19,910
  21,168
  22,477
Total liabilities, $m
  1,018
  1,270
  1,559
  1,885
  2,251
  2,654
  3,096
  3,575
  4,091
  4,642
  5,229
  5,850
  6,504
  7,191
  7,911
  8,663
  9,448
  10,266
  11,116
  12,001
  12,921
  13,876
  14,869
  15,902
  16,974
  18,090
  19,250
  20,458
  21,716
  23,025
Total equity, $m
  1,683
  2,099
  2,576
  3,116
  3,719
  4,386
  5,116
  5,908
  6,760
  7,672
  8,641
  9,667
  10,748
  11,884
  13,073
  14,317
  15,613
  16,964
  18,370
  19,832
  21,352
  22,931
  24,572
  26,278
  28,051
  29,894
  31,812
  33,808
  35,885
  38,050
Total liabilities and equity, $m
  2,701
  3,369
  4,135
  5,001
  5,970
  7,040
  8,212
  9,483
  10,851
  12,314
  13,870
  15,517
  17,252
  19,075
  20,984
  22,980
  25,061
  27,230
  29,486
  31,833
  34,273
  36,807
  39,441
  42,180
  45,025
  47,984
  51,062
  54,266
  57,601
  61,075
Debt-to-equity ratio
  0.280
  0.340
  0.390
  0.430
  0.460
  0.480
  0.500
  0.510
  0.520
  0.530
  0.540
  0.550
  0.550
  0.560
  0.560
  0.570
  0.570
  0.570
  0.580
  0.580
  0.580
  0.580
  0.580
  0.580
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
Adjusted equity ratio
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  204
  256
  316
  384
  460
  544
  636
  735
  841
  955
  1,091
  1,219
  1,354
  1,496
  1,644
  1,799
  1,961
  2,129
  2,304
  2,486
  2,675
  2,872
  3,076
  3,288
  3,509
  3,739
  3,978
  4,226
  4,485
  4,755
Depreciation, amort., depletion, $m
  63
  74
  86
  100
  115
  132
  151
  171
  192
  216
  220
  246
  273
  302
  332
  364
  397
  431
  467
  504
  543
  583
  625
  668
  713
  760
  809
  859
  912
  967
Funds from operations, $m
  267
  330
  402
  484
  575
  676
  786
  906
  1,034
  1,171
  1,311
  1,465
  1,628
  1,798
  1,977
  2,163
  2,357
  2,560
  2,771
  2,990
  3,218
  3,455
  3,701
  3,956
  4,222
  4,499
  4,786
  5,086
  5,397
  5,722
Change in working capital, $m
  -47
  -55
  -63
  -71
  -80
  -88
  -96
  -104
  -112
  -120
  -128
  -135
  -143
  -150
  -157
  -164
  -171
  -178
  -185
  -193
  -200
  -208
  -216
  -225
  -234
  -243
  -253
  -263
  -274
  -285
Cash from operations, $m
  314
  385
  465
  555
  655
  764
  882
  1,010
  1,146
  1,291
  1,439
  1,601
  1,770
  1,948
  2,133
  2,327
  2,528
  2,738
  2,956
  3,183
  3,418
  3,663
  3,917
  4,181
  4,456
  4,742
  5,039
  5,349
  5,671
  6,007
Maintenance CAPEX, $m
  -34
  -43
  -53
  -65
  -79
  -95
  -111
  -130
  -150
  -172
  -195
  -220
  -246
  -273
  -302
  -332
  -364
  -397
  -431
  -467
  -504
  -543
  -583
  -625
  -668
  -713
  -760
  -809
  -859
  -912
New CAPEX, $m
  -45
  -53
  -61
  -69
  -77
  -85
  -93
  -101
  -108
  -116
  -123
  -130
  -137
  -144
  -151
  -158
  -165
  -172
  -179
  -186
  -193
  -201
  -209
  -217
  -225
  -234
  -244
  -254
  -264
  -275
Cash from investing activities, $m
  -79
  -96
  -114
  -134
  -156
  -180
  -204
  -231
  -258
  -288
  -318
  -350
  -383
  -417
  -453
  -490
  -529
  -569
  -610
  -653
  -697
  -744
  -792
  -842
  -893
  -947
  -1,004
  -1,063
  -1,123
  -1,187
Free cash flow, $m
  235
  289
  351
  421
  499
  585
  678
  779
  888
  1,003
  1,121
  1,250
  1,387
  1,530
  1,680
  1,837
  2,000
  2,170
  2,346
  2,530
  2,721
  2,919
  3,126
  3,340
  3,563
  3,794
  4,036
  4,286
  4,548
  4,820
Issuance/(repayment) of debt, $m
  216
  252
  289
  327
  365
  404
  442
  479
  516
  552
  587
  621
  654
  687
  720
  752
  785
  817
  851
  885
  920
  956
  993
  1,032
  1,073
  1,116
  1,160
  1,208
  1,257
  1,310
Issuance/(repurchase) of shares, $m
  151
  160
  161
  156
  143
  123
  94
  57
  11
  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  
  367
  412
  450
  483
  508
  527
  536
  536
  527
  552
  587
  621
  654
  687
  720
  752
  785
  817
  851
  885
  920
  956
  993
  1,032
  1,073
  1,116
  1,160
  1,208
  1,257
  1,310
Total cash flow (excl. dividends), $m
  602
  701
  801
  904
  1,008
  1,111
  1,214
  1,315
  1,414
  1,555
  1,707
  1,871
  2,041
  2,218
  2,400
  2,589
  2,785
  2,987
  3,197
  3,415
  3,641
  3,875
  4,119
  4,372
  4,636
  4,910
  5,196
  5,494
  5,805
  6,130
Retained Cash Flow (-), $m
  -355
  -416
  -477
  -540
  -603
  -667
  -730
  -792
  -852
  -912
  -969
  -1,026
  -1,081
  -1,136
  -1,190
  -1,243
  -1,297
  -1,351
  -1,406
  -1,462
  -1,520
  -1,579
  -1,641
  -1,706
  -1,773
  -1,844
  -1,918
  -1,996
  -2,078
  -2,164
Prev. year cash balance distribution, $m
  315
  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
  562
  285
  324
  364
  404
  444
  484
  524
  562
  644
  738
  845
  960
  1,082
  1,210
  1,346
  1,488
  1,636
  1,791
  1,953
  2,121
  2,296
  2,478
  2,666
  2,863
  3,066
  3,278
  3,498
  3,727
  3,966
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
  539
  261
  282
  299
  313
  322
  327
  327
  323
  337
  350
  361
  365
  363
  355
  342
  324
  301
  276
  248
  219
  190
  162
  136
  111
  89
  70
  54
  41
  30
Current shareholders' claim on cash, %
  97.7
  95.9
  94.4
  93.3
  92.4
  91.8
  91.4
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2

LINE Corporation is a Japan-based company mainly engaged in the operation of LINE business portal business. Its LINE business portal segment includes communication and content service and advertising service. Communication and content service provides communication, contents and other services, such as LINE Pay, LINE FRIENDS and LINE Mobile. Advertising service provides LINE advertising and portal advertising services.

FINANCIAL RATIOS  of  LINE Corporation (LN)

Valuation Ratios
P/E Ratio 125.3
Price to Sales 5.8
Price to Book 5.3
Price to Tangible Book
Price to Cash Flow 29.6
Price to Free Cash Flow 37.9
Growth Rates
Sales Growth Rate 21.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 10%
Cap. Spend. - 3 Yr. Gr. Rate 14.5%
Financial Strength
Quick Ratio 6
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 13.6%
Interest Coverage 158
Management Effectiveness
Return On Assets 3.6%
Ret/ On Assets - 3 Yr. Avg. 0.9%
Return On Total Capital 5.6%
Ret/ On T. Cap. - 3 Yr. Avg. 1.6%
Return On Equity 7.6%
Return On Equity - 3 Yr. Avg. -2%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 97.6%
Gross Margin - 3 Yr. Avg. 98%
EBITDA Margin 15.8%
EBITDA Margin - 3 Yr. Avg. 9.8%
Operating Margin 13.3%
Oper. Margin - 3 Yr. Avg. 6.9%
Pre-Tax Margin 12.3%
Pre-Tax Margin - 3 Yr. Avg. 6.4%
Net Profit Margin 4.6%
Net Profit Margin - 3 Yr. Avg. 1.1%
Effective Tax Rate 49.7%
Eff/ Tax Rate - 3 Yr. Avg. 68.1%
Payout Ratio 0%

LN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LN stock intrinsic value calculation we used $1590 million for the last fiscal year's total revenue generated by LINE Corporation. The default revenue input number comes from 0001 income statement of LINE Corporation. 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 LN stock valuation model: a) initial revenue growth rate of 26.9% 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 LN is calculated based on our internal credit rating of LINE Corporation, 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 LINE Corporation.
    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 LN stock the variable cost ratio is equal to 84.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $27 million in the base year in the intrinsic value calculation for LN 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 5.4% for LINE Corporation.

Corporate tax rate of 27% is the nominal tax rate for LINE Corporation. 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 LN 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 LN are equal to 10.6%.

Life of production assets of 3.6 years is the average useful life of capital assets used in LINE Corporation 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 LN is equal to -11%. 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 - $1642.39568358 million for LINE Corporation - 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 238.340 million for LINE Corporation 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 LINE Corporation at the current share price and the inputted number of shares is $8.1 billion.

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