Intrinsic value of Optibase Ltd. - OBAS

Previous Close

$9.95

  Intrinsic Value

$2.74

stock screener

  Rating & Target

str. sell

-72%

Previous close

$9.95

 
Intrinsic value

$2.74

 
Up/down potential

-72%

 
Rating

str. sell

Our model is not good at valuating stocks of financial companies, such as OBAS.

We calculate the intrinsic value of OBAS 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 0.1

 

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, %
  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
  17
  18
  18
  19
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  37
  38
  40
  42
  44
  46
  48
  51
  53
  56
Variable operating expenses, $m
  10
  10
  11
  11
  11
  12
  12
  13
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
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
  10
  10
  11
  11
  11
  12
  12
  13
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
Operating income, $m
  7
  7
  7
  8
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
EBITDA, $m
  14
  15
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  27
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
Interest expense (income), $m
  3
  8
  9
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  30
  31
Earnings before tax, $m
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
Tax expense, $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
Net income, $m
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8

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
  251
  257
  264
  271
  279
  288
  298
  309
  320
  333
  346
  360
  375
  391
  407
  425
  444
  464
  485
  508
  531
  556
  582
  610
  639
  669
  701
  735
  771
  808
Adjusted assets (=assets-cash), $m
  251
  257
  264
  271
  279
  288
  298
  309
  320
  333
  346
  360
  375
  391
  407
  425
  444
  464
  485
  508
  531
  556
  582
  610
  639
  669
  701
  735
  771
  808
Revenue / Adjusted assets
  0.068
  0.070
  0.068
  0.070
  0.068
  0.069
  0.070
  0.068
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.068
  0.070
  0.069
  0.068
  0.069
  0.070
  0.068
  0.069
  0.069
  0.069
  0.069
  0.068
  0.069
  0.069
  0.069
Average production assets, $m
  216
  221
  227
  234
  241
  248
  257
  266
  276
  286
  298
  310
  323
  336
  351
  366
  383
  400
  418
  437
  457
  479
  501
  525
  550
  576
  604
  633
  664
  696
Working capital, $m
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
Total debt, $m
  160
  165
  170
  176
  182
  190
  197
  206
  215
  225
  236
  247
  259
  271
  285
  299
  314
  330
  347
  365
  384
  404
  425
  447
  470
  494
  520
  547
  576
  606
Total liabilities, $m
  201
  206
  211
  217
  223
  231
  239
  247
  256
  266
  277
  288
  300
  312
  326
  340
  355
  371
  388
  406
  425
  445
  466
  488
  511
  535
  561
  588
  617
  647
Total equity, $m
  50
  51
  53
  54
  56
  58
  60
  62
  64
  67
  69
  72
  75
  78
  81
  85
  89
  93
  97
  102
  106
  111
  116
  122
  128
  134
  140
  147
  154
  162
Total liabilities and equity, $m
  251
  257
  264
  271
  279
  289
  299
  309
  320
  333
  346
  360
  375
  390
  407
  425
  444
  464
  485
  508
  531
  556
  582
  610
  639
  669
  701
  735
  771
  809
Debt-to-equity ratio
  3.180
  3.200
  3.220
  3.240
  3.270
  3.290
  3.310
  3.340
  3.360
  3.380
  3.410
  3.430
  3.450
  3.470
  3.500
  3.520
  3.540
  3.560
  3.580
  3.600
  3.610
  3.630
  3.650
  3.660
  3.680
  3.690
  3.710
  3.720
  3.730
  3.750
Adjusted equity ratio
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
Depreciation, amort., depletion, $m
  7
  7
  8
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
Funds from operations, $m
  6
  6
  6
  6
  6
  7
  7
  7
  7
  7
  8
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  14
  15
Change in working capital, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from operations, $m
  6
  6
  6
  6
  7
  7
  7
  7
  7
  8
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
Maintenance CAPEX, $m
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
New CAPEX, $m
  -4
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -32
Cash from investing activities, $m
  -11
  -12
  -13
  -14
  -15
  -16
  -16
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -35
  -36
  -39
  -41
  -43
  -44
  -47
  -49
  -52
  -54
Free cash flow, $m
  -5
  -6
  -7
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -33
  -35
  -36
  -38
Issuance/(repayment) of debt, $m
  5
  5
  5
  6
  7
  7
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
Issuance/(repurchase) of shares, $m
  3
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
Cash from financing (excl. dividends), $m  
  8
  7
  8
  9
  10
  10
  12
  13
  13
  15
  16
  16
  18
  19
  19
  21
  22
  24
  25
  27
  28
  30
  31
  33
  35
  36
  39
  41
  43
  46
Total cash flow (excl. dividends), $m
  2
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
Retained Cash Flow (-), $m
  -3
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
Prev. year cash balance distribution, $m
  8
  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
  8
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
Discount rate, %
  10.30
  10.82
  11.36
  11.92
  12.52
  13.15
  13.80
  14.49
  15.22
  15.98
  16.78
  17.62
  18.50
  19.42
  20.39
  21.41
  22.48
  23.61
  24.79
  26.03
  27.33
  28.70
  30.13
  31.64
  33.22
  34.88
  36.62
  38.45
  40.38
  42.40
PV of cash for distribution, $m
  7
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  94.6
  89.7
  84.7
  79.8
  74.9
  70.1
  65.5
  61.0
  56.6
  52.4
  48.4
  44.7
  41.1
  37.8
  34.6
  31.7
  28.9
  26.4
  24.0
  21.8
  19.8
  18.0
  16.3
  14.7
  13.3
  12.0
  10.8
  9.8
  8.8
  7.9

Optibase Ltd. is a real estate company. The Company, through its subsidiaries, is engaged in purchasing and operating of real estate properties for leasing and resale primarily for the purpose of commercial, industrial, office space use, as well as for residential purposes. The Company owns holdings in several commercial real estate properties, which are leased to third parties. The Company owns a portfolio of supermarkets located mainly in Bavaria, Germany. It also owns several real estate properties located in Philadelphia, Texas, Chicago and Miami, in the United States. The Company owns approximately 25 residential properties in Miami and Miami Beach, Florida, including 21 luxury condominium units and two penthouse units in the Marquis Residences, one penthouse unit in Ocean One Condominium and one condominium units in the Continuum on South Beach Condominium. The Company's subsidiaries include Optibase Inc., Optibase Real Estate Europe SARL and OPCTN S.A.

FINANCIAL RATIOS  of  Optibase Ltd. (OBAS)

Valuation Ratios
P/E Ratio 0
Price to Sales 3.2
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 7.3
Price to Free Cash Flow 10.3
Growth Rates
Sales Growth Rate 6.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -19.7%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 254.5%
Total Debt to Equity 272.7%
Interest Coverage 2
Management Effectiveness
Return On Assets 0.6%
Ret/ On Assets - 3 Yr. Avg. 0.8%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 0.4%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 1.2%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 81.3%
Gross Margin - 3 Yr. Avg. 79.9%
EBITDA Margin 68.8%
EBITDA Margin - 3 Yr. Avg. 73.9%
Operating Margin 37.5%
Oper. Margin - 3 Yr. Avg. 40.4%
Pre-Tax Margin 25%
Pre-Tax Margin - 3 Yr. Avg. 31.7%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 4.9%
Effective Tax Rate 50%
Eff/ Tax Rate - 3 Yr. Avg. 48.4%
Payout Ratio 0%

OBAS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the OBAS stock intrinsic value calculation we used $17 million for the last fiscal year's total revenue generated by Optibase Ltd.. The default revenue input number comes from 0001 income statement of Optibase 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 OBAS 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 10.3%, whose default value for OBAS is calculated based on our internal credit rating of Optibase 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 Optibase 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 OBAS stock the variable cost ratio is equal to 58.8%.

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 OBAS 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 Optibase Ltd..

Corporate tax rate of 27% is the nominal tax rate for Optibase 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 OBAS 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 OBAS are equal to 1248.3%.

Life of production assets of 50.4 years is the average useful life of capital assets used in Optibase 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 OBAS is equal to -32.9%. 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 - $57.037 million for Optibase 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 5.198 million for Optibase 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 Optibase Ltd. at the current share price and the inputted number of shares is $0.1 billion.

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