Intrinsic value of Manchester United Ltd. - MANU

Previous Close

$19.85

  Intrinsic Value

$14.01

stock screener

  Rating & Target

sell

-29%

Previous close

$19.85

 
Intrinsic value

$14.01

 
Up/down potential

-29%

 
Rating

sell

We calculate the intrinsic value of MANU 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 3.3

 

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, %
  2.70
  2.93
  3.14
  3.32
  3.49
  3.64
  3.78
  3.90
  4.01
  4.11
  4.20
  4.28
  4.35
  4.42
  4.47
  4.53
  4.57
  4.62
  4.65
  4.69
  4.72
  4.75
  4.77
  4.80
  4.82
  4.83
  4.85
  4.87
  4.88
  4.89
Revenue, $m
  808
  832
  858
  887
  917
  951
  987
  1,025
  1,066
  1,110
  1,157
  1,206
  1,259
  1,314
  1,373
  1,435
  1,501
  1,570
  1,643
  1,720
  1,802
  1,887
  1,977
  2,072
  2,172
  2,277
  2,387
  2,504
  2,626
  2,754
Variable operating expenses, $m
  693
  710
  729
  750
  772
  797
  823
  851
  880
  912
  839
  875
  913
  954
  996
  1,041
  1,089
  1,139
  1,192
  1,248
  1,307
  1,369
  1,435
  1,503
  1,576
  1,652
  1,732
  1,817
  1,905
  1,998
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
  693
  710
  729
  750
  772
  797
  823
  851
  880
  912
  839
  875
  913
  954
  996
  1,041
  1,089
  1,139
  1,192
  1,248
  1,307
  1,369
  1,435
  1,503
  1,576
  1,652
  1,732
  1,817
  1,905
  1,998
Operating income, $m
  115
  122
  129
  137
  145
  154
  164
  175
  186
  198
  318
  331
  345
  361
  377
  394
  412
  431
  451
  472
  494
  518
  543
  569
  596
  625
  655
  687
  721
  756
EBITDA, $m
  392
  403
  416
  430
  445
  461
  478
  497
  517
  538
  561
  585
  610
  637
  666
  696
  728
  761
  797
  834
  874
  915
  959
  1,005
  1,053
  1,104
  1,158
  1,214
  1,273
  1,335
Interest expense (income), $m
  24
  36
  38
  40
  43
  46
  49
  52
  56
  60
  64
  69
  74
  79
  84
  90
  96
  102
  109
  116
  123
  131
  140
  148
  158
  167
  178
  188
  200
  212
  224
Earnings before tax, $m
  80
  84
  89
  94
  99
  105
  112
  119
  126
  134
  249
  258
  267
  277
  287
  298
  310
  322
  335
  349
  363
  378
  394
  411
  429
  447
  467
  487
  509
  532
Tax expense, $m
  21
  23
  24
  25
  27
  28
  30
  32
  34
  36
  67
  70
  72
  75
  78
  81
  84
  87
  90
  94
  98
  102
  106
  111
  116
  121
  126
  132
  137
  144
Net income, $m
  58
  61
  65
  68
  73
  77
  82
  87
  92
  98
  182
  188
  195
  202
  210
  218
  226
  235
  245
  255
  265
  276
  288
  300
  313
  327
  341
  356
  372
  388

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
  2,116
  2,178
  2,246
  2,321
  2,402
  2,489
  2,583
  2,684
  2,792
  2,906
  3,028
  3,158
  3,295
  3,441
  3,595
  3,758
  3,929
  4,111
  4,302
  4,504
  4,716
  4,940
  5,176
  5,425
  5,686
  5,961
  6,250
  6,554
  6,874
  7,210
Adjusted assets (=assets-cash), $m
  2,116
  2,178
  2,246
  2,321
  2,402
  2,489
  2,583
  2,684
  2,792
  2,906
  3,028
  3,158
  3,295
  3,441
  3,595
  3,758
  3,929
  4,111
  4,302
  4,504
  4,716
  4,940
  5,176
  5,425
  5,686
  5,961
  6,250
  6,554
  6,874
  7,210
Revenue / Adjusted assets
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
Average production assets, $m
  850
  875
  903
  933
  965
  1,000
  1,038
  1,079
  1,122
  1,168
  1,217
  1,269
  1,324
  1,383
  1,445
  1,510
  1,579
  1,652
  1,729
  1,810
  1,895
  1,985
  2,080
  2,180
  2,285
  2,395
  2,512
  2,634
  2,762
  2,897
Working capital, $m
  -389
  -400
  -413
  -426
  -441
  -457
  -475
  -493
  -513
  -534
  -556
  -580
  -605
  -632
  -661
  -690
  -722
  -755
  -790
  -828
  -867
  -908
  -951
  -997
  -1,045
  -1,095
  -1,148
  -1,204
  -1,263
  -1,325
Total debt, $m
  700
  745
  795
  849
  908
  971
  1,039
  1,112
  1,190
  1,273
  1,362
  1,456
  1,555
  1,661
  1,772
  1,890
  2,015
  2,147
  2,285
  2,432
  2,586
  2,748
  2,919
  3,099
  3,288
  3,488
  3,697
  3,918
  4,150
  4,393
Total liabilities, $m
  1,534
  1,579
  1,628
  1,683
  1,741
  1,805
  1,873
  1,946
  2,024
  2,107
  2,196
  2,290
  2,389
  2,495
  2,606
  2,724
  2,849
  2,980
  3,119
  3,265
  3,419
  3,582
  3,753
  3,933
  4,122
  4,322
  4,531
  4,752
  4,984
  5,227
Total equity, $m
  582
  599
  618
  638
  660
  685
  710
  738
  768
  799
  833
  868
  906
  946
  989
  1,033
  1,081
  1,130
  1,183
  1,239
  1,297
  1,359
  1,423
  1,492
  1,564
  1,639
  1,719
  1,802
  1,890
  1,983
Total liabilities and equity, $m
  2,116
  2,178
  2,246
  2,321
  2,401
  2,490
  2,583
  2,684
  2,792
  2,906
  3,029
  3,158
  3,295
  3,441
  3,595
  3,757
  3,930
  4,110
  4,302
  4,504
  4,716
  4,941
  5,176
  5,425
  5,686
  5,961
  6,250
  6,554
  6,874
  7,210
Debt-to-equity ratio
  1.200
  1.240
  1.290
  1.330
  1.370
  1.420
  1.460
  1.510
  1.550
  1.590
  1.640
  1.680
  1.720
  1.760
  1.790
  1.830
  1.860
  1.900
  1.930
  1.960
  1.990
  2.020
  2.050
  2.080
  2.100
  2.130
  2.150
  2.170
  2.200
  2.220
Adjusted equity ratio
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  58
  61
  65
  68
  73
  77
  82
  87
  92
  98
  182
  188
  195
  202
  210
  218
  226
  235
  245
  255
  265
  276
  288
  300
  313
  327
  341
  356
  372
  388
Depreciation, amort., depletion, $m
  277
  282
  287
  293
  300
  307
  314
  322
  331
  340
  243
  254
  265
  277
  289
  302
  316
  330
  346
  362
  379
  397
  416
  436
  457
  479
  502
  527
  552
  579
Funds from operations, $m
  335
  343
  352
  362
  372
  384
  396
  409
  423
  438
  425
  442
  460
  479
  499
  520
  542
  566
  590
  617
  644
  673
  704
  736
  770
  806
  843
  883
  924
  968
Change in working capital, $m
  -10
  -11
  -13
  -14
  -15
  -16
  -17
  -19
  -20
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -51
  -53
  -56
  -59
  -62
Cash from operations, $m
  345
  354
  364
  375
  387
  400
  413
  427
  443
  459
  447
  466
  485
  505
  527
  550
  574
  599
  626
  654
  683
  714
  747
  782
  818
  856
  896
  938
  983
  1,030
Maintenance CAPEX, $m
  -166
  -170
  -175
  -181
  -187
  -193
  -200
  -208
  -216
  -224
  -234
  -243
  -254
  -265
  -277
  -289
  -302
  -316
  -330
  -346
  -362
  -379
  -397
  -416
  -436
  -457
  -479
  -502
  -527
  -552
New CAPEX, $m
  -23
  -25
  -27
  -30
  -33
  -35
  -38
  -40
  -43
  -46
  -49
  -52
  -55
  -58
  -62
  -65
  -69
  -73
  -77
  -81
  -85
  -90
  -95
  -100
  -105
  -110
  -116
  -122
  -129
  -135
Cash from investing activities, $m
  -189
  -195
  -202
  -211
  -220
  -228
  -238
  -248
  -259
  -270
  -283
  -295
  -309
  -323
  -339
  -354
  -371
  -389
  -407
  -427
  -447
  -469
  -492
  -516
  -541
  -567
  -595
  -624
  -656
  -687
Free cash flow, $m
  157
  159
  162
  165
  168
  171
  175
  179
  184
  189
  165
  170
  176
  182
  188
  195
  203
  210
  218
  227
  236
  245
  255
  266
  277
  289
  301
  314
  328
  342
Issuance/(repayment) of debt, $m
  39
  45
  50
  54
  59
  63
  68
  73
  78
  83
  88
  94
  100
  105
  112
  118
  125
  132
  139
  146
  154
  162
  171
  180
  189
  199
  210
  220
  232
  244
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
Cash from financing (excl. dividends), $m  
  39
  45
  50
  54
  59
  63
  68
  73
  78
  83
  88
  94
  100
  105
  112
  118
  125
  132
  139
  146
  154
  162
  171
  180
  189
  199
  210
  220
  232
  244
Total cash flow (excl. dividends), $m
  196
  204
  211
  219
  227
  235
  243
  252
  262
  272
  253
  264
  276
  287
  300
  313
  327
  342
  357
  373
  390
  408
  426
  446
  466
  488
  511
  534
  559
  586
Retained Cash Flow (-), $m
  -15
  -17
  -19
  -21
  -22
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -45
  -47
  -50
  -53
  -55
  -58
  -62
  -65
  -68
  -72
  -76
  -80
  -84
  -88
  -92
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
  181
  187
  193
  198
  204
  211
  218
  225
  232
  240
  220
  228
  238
  247
  258
  269
  280
  292
  304
  318
  332
  346
  361
  378
  395
  412
  431
  451
  471
  493
Discount rate, %
  4.60
  4.83
  5.07
  5.33
  5.59
  5.87
  6.16
  6.47
  6.80
  7.14
  7.49
  7.87
  8.26
  8.67
  9.11
  9.56
  10.04
  10.54
  11.07
  11.62
  12.21
  12.82
  13.46
  14.13
  14.84
  15.58
  16.36
  17.17
  18.03
  18.93
PV of cash for distribution, $m
  173
  170
  166
  161
  156
  150
  143
  136
  128
  121
  99
  92
  85
  77
  70
  62
  55
  48
  41
  35
  30
  24
  20
  16
  12
  10
  7
  5
  4
  3
Current shareholders' claim on cash, %
  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

Manchester United plc is engaged in the operation of a professional football club together with related and ancillary activities. Its football operations primarily comprise various activities, such as its first team, reserve team, youth academy, global scouting networks and other operations, such as its sport science, medical and fitness operations at the Aon Training Complex. It operates in three sectors, including Commercial, Broadcasting and Matchday. Within the Commercial revenue sector, the Company monetizes its global brand through approximately three revenue streams, such as sponsorship; retail, merchandising, apparel and product licensing, and mobile and content. It monetizes the value of its global brand and community of followers through marketing and sponsorship relationships with international and regional companies around the world. It markets and sells sports apparel, training and leisure wear and other clothing featuring the Manchester United brand on a global basis.

FINANCIAL RATIOS  of  Manchester United Ltd. (MANU)

Valuation Ratios
P/E Ratio 67.9
Price to Sales 4.6
Price to Book 5.6
Price to Tangible Book
Price to Cash Flow 11.8
Price to Free Cash Flow 105.1
Growth Rates
Sales Growth Rate 12.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 41.4%
Cap. Spend. - 3 Yr. Gr. Rate 14.3%
Financial Strength
Quick Ratio 50
Current Ratio 0
LT Debt to Equity 104.1%
Total Debt to Equity 105.3%
Interest Coverage 4
Management Effectiveness
Return On Assets 3.6%
Ret/ On Assets - 3 Yr. Avg. 2.6%
Return On Total Capital 4.1%
Ret/ On T. Cap. - 3 Yr. Avg. 2.6%
Return On Equity 8.4%
Return On Equity - 3 Yr. Avg. 5.3%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 36.2%
EBITDA Margin - 3 Yr. Avg. 35%
Operating Margin 14%
Oper. Margin - 3 Yr. Avg. 11.8%
Pre-Tax Margin 9.8%
Pre-Tax Margin - 3 Yr. Avg. 6.1%
Net Profit Margin 6.8%
Net Profit Margin - 3 Yr. Avg. 4.5%
Effective Tax Rate 30.4%
Eff/ Tax Rate - 3 Yr. Avg. 43.6%
Payout Ratio 58.3%

MANU stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MANU stock intrinsic value calculation we used $787 million for the last fiscal year's total revenue generated by Manchester United Ltd.. The default revenue input number comes from 0001 income statement of Manchester United Ltd.. 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 MANU stock valuation model: a) initial revenue growth rate of 2.7% 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 4.6%, whose default value for MANU is calculated based on our internal credit rating of Manchester United Ltd., 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 Manchester United Ltd..
    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 MANU stock the variable cost ratio is equal to 86.1%.

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 MANU 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 Manchester United Ltd..

Corporate tax rate of 27% is the nominal tax rate for Manchester United Ltd.. 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 MANU 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 MANU are equal to 105.2%.

Life of production assets of 0 years is the average useful life of capital assets used in Manchester United Ltd. 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 MANU is equal to -48.1%. 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 - $567.021333333 million for Manchester United Ltd. - 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 164.576 million for Manchester United Ltd. 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 Manchester United Ltd. at the current share price and the inputted number of shares is $3.3 billion.

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