Intrinsic value of Partner Communications ADR - PTNR

Previous Close

$6.01

  Intrinsic Value

$2.63

stock screener

  Rating & Target

str. sell

-56%

Previous close

$6.01

 
Intrinsic value

$2.63

 
Up/down potential

-56%

 
Rating

str. sell

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

We calculate the intrinsic value of PTNR 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 2016), $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 1.0

 

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, %
  -13.76
  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
  959
  978
  1,001
  1,026
  1,055
  1,087
  1,122
  1,161
  1,202
  1,247
  1,294
  1,346
  1,400
  1,458
  1,520
  1,586
  1,655
  1,729
  1,807
  1,889
  1,975
  2,067
  2,164
  2,265
  2,373
  2,486
  2,605
  2,730
  2,861
  3,000
  3,146
Variable operating expenses, $m
 
  953
  974
  999
  1,027
  1,058
  1,091
  1,128
  1,168
  1,211
  1,257
  1,295
  1,348
  1,404
  1,463
  1,526
  1,593
  1,664
  1,739
  1,818
  1,901
  1,990
  2,083
  2,181
  2,284
  2,392
  2,507
  2,627
  2,754
  2,888
  3,028
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
  906
  953
  974
  999
  1,027
  1,058
  1,091
  1,128
  1,168
  1,211
  1,257
  1,295
  1,348
  1,404
  1,463
  1,526
  1,593
  1,664
  1,739
  1,818
  1,901
  1,990
  2,083
  2,181
  2,284
  2,392
  2,507
  2,627
  2,754
  2,888
  3,028
Operating income, $m
  52
  26
  26
  27
  29
  30
  31
  32
  34
  36
  38
  50
  52
  55
  57
  59
  62
  65
  68
  71
  74
  77
  81
  85
  89
  93
  98
  102
  107
  112
  118
EBITDA, $m
  205
  157
  161
  165
  170
  175
  180
  186
  193
  200
  208
  216
  225
  234
  244
  255
  266
  278
  290
  303
  317
  332
  348
  364
  381
  399
  418
  439
  460
  482
  505
Interest expense (income), $m
  29
  22
  23
  24
  24
  26
  27
  28
  30
  31
  33
  35
  36
  38
  41
  43
  45
  48
  51
  54
  57
  60
  63
  67
  71
  75
  79
  84
  88
  93
  98
Earnings before tax, $m
  24
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  16
  16
  16
  16
  16
  17
  17
  17
  17
  17
  17
  18
  18
  18
  18
  18
  19
  19
  19
  20
Tax expense, $m
  10
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
Net income, $m
  14
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  12
  12
  12
  12
  12
  12
  12
  12
  12
  13
  13
  13
  13
  13
  13
  13
  14
  14
  14
  14

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  316
  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
  1,406
  1,112
  1,137
  1,166
  1,199
  1,236
  1,275
  1,319
  1,366
  1,417
  1,471
  1,529
  1,591
  1,657
  1,727
  1,802
  1,881
  1,964
  2,053
  2,146
  2,245
  2,349
  2,459
  2,574
  2,696
  2,825
  2,960
  3,102
  3,252
  3,409
  3,575
Adjusted assets (=assets-cash), $m
  1,090
  1,112
  1,137
  1,166
  1,199
  1,236
  1,275
  1,319
  1,366
  1,417
  1,471
  1,529
  1,591
  1,657
  1,727
  1,802
  1,881
  1,964
  2,053
  2,146
  2,245
  2,349
  2,459
  2,574
  2,696
  2,825
  2,960
  3,102
  3,252
  3,409
  3,575
Revenue / Adjusted assets
  0.880
  0.879
  0.880
  0.880
  0.880
  0.879
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
Average production assets, $m
  591
  603
  616
  632
  650
  670
  691
  715
  740
  768
  797
  829
  863
  898
  936
  977
  1,020
  1,065
  1,113
  1,163
  1,217
  1,273
  1,333
  1,395
  1,462
  1,531
  1,604
  1,682
  1,763
  1,848
  1,938
Working capital, $m
  198
  18
  18
  18
  19
  20
  20
  21
  22
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  52
  54
  57
Total debt, $m
  729
  613
  636
  662
  691
  724
  759
  798
  840
  885
  933
  985
  1,040
  1,099
  1,161
  1,228
  1,298
  1,372
  1,451
  1,534
  1,622
  1,715
  1,812
  1,915
  2,024
  2,138
  2,258
  2,385
  2,518
  2,658
  2,806
Total liabilities, $m
  1,105
  989
  1,012
  1,038
  1,067
  1,100
  1,135
  1,174
  1,216
  1,261
  1,309
  1,361
  1,416
  1,475
  1,537
  1,604
  1,674
  1,748
  1,827
  1,910
  1,998
  2,091
  2,188
  2,291
  2,400
  2,514
  2,634
  2,761
  2,894
  3,034
  3,182
Total equity, $m
  301
  122
  125
  128
  132
  136
  140
  145
  150
  156
  162
  168
  175
  182
  190
  198
  207
  216
  226
  236
  247
  258
  270
  283
  297
  311
  326
  341
  358
  375
  393
Total liabilities and equity, $m
  1,406
  1,111
  1,137
  1,166
  1,199
  1,236
  1,275
  1,319
  1,366
  1,417
  1,471
  1,529
  1,591
  1,657
  1,727
  1,802
  1,881
  1,964
  2,053
  2,146
  2,245
  2,349
  2,458
  2,574
  2,697
  2,825
  2,960
  3,102
  3,252
  3,409
  3,575
Debt-to-equity ratio
  2.422
  5.020
  5.080
  5.160
  5.240
  5.320
  5.410
  5.500
  5.590
  5.680
  5.770
  5.860
  5.940
  6.030
  6.110
  6.190
  6.270
  6.350
  6.430
  6.500
  6.570
  6.640
  6.700
  6.760
  6.820
  6.880
  6.940
  6.990
  7.040
  7.090
  7.130
Adjusted equity ratio
  -0.014
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  14
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  12
  12
  12
  12
  12
  12
  12
  12
  12
  13
  13
  13
  13
  13
  13
  13
  14
  14
  14
  14
Depreciation, amort., depletion, $m
  153
  132
  134
  137
  141
  145
  149
  154
  159
  165
  170
  166
  173
  180
  187
  195
  204
  213
  223
  233
  243
  255
  267
  279
  292
  306
  321
  336
  353
  370
  388
Funds from operations, $m
  399
  134
  137
  140
  144
  148
  152
  157
  162
  168
  174
  177
  184
  191
  199
  207
  216
  225
  235
  245
  256
  267
  279
  292
  305
  320
  334
  350
  366
  384
  402
Change in working capital, $m
  85
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
Cash from operations, $m
  314
  134
  137
  140
  143
  147
  152
  157
  162
  167
  173
  176
  183
  190
  198
  206
  215
  224
  234
  244
  254
  266
  278
  290
  304
  318
  332
  348
  364
  381
  399
Maintenance CAPEX, $m
  0
  -118
  -121
  -123
  -126
  -130
  -134
  -138
  -143
  -148
  -154
  -159
  -166
  -173
  -180
  -187
  -195
  -204
  -213
  -223
  -233
  -243
  -255
  -267
  -279
  -292
  -306
  -321
  -336
  -353
  -370
New CAPEX, $m
  -53
  -12
  -14
  -16
  -18
  -20
  -22
  -24
  -25
  -27
  -29
  -32
  -34
  -36
  -38
  -40
  -43
  -45
  -48
  -51
  -53
  -56
  -59
  -63
  -66
  -70
  -73
  -77
  -81
  -85
  -90
Cash from investing activities, $m
  -173
  -130
  -135
  -139
  -144
  -150
  -156
  -162
  -168
  -175
  -183
  -191
  -200
  -209
  -218
  -227
  -238
  -249
  -261
  -274
  -286
  -299
  -314
  -330
  -345
  -362
  -379
  -398
  -417
  -438
  -460
Free cash flow, $m
  141
  4
  2
  1
  -1
  -2
  -4
  -5
  -7
  -8
  -10
  -15
  -16
  -18
  -20
  -21
  -23
  -25
  -27
  -30
  -32
  -34
  -36
  -39
  -42
  -44
  -47
  -50
  -53
  -57
  -60
Issuance/(repayment) of debt, $m
  -110
  19
  23
  26
  29
  32
  36
  39
  42
  45
  48
  52
  55
  59
  62
  66
  70
  74
  79
  83
  88
  93
  98
  103
  108
  114
  120
  127
  133
  140
  147
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  1
  1
  1
  2
  2
  2
  3
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  2
  3
  3
  4
Cash from financing (excl. dividends), $m  
  -140
  19
  23
  26
  30
  33
  37
  41
  44
  47
  51
  52
  55
  59
  62
  66
  70
  74
  79
  83
  88
  93
  98
  103
  108
  115
  121
  129
  136
  143
  151
Total cash flow (excl. dividends), $m
  -57
  23
  25
  27
  29
  31
  33
  35
  37
  39
  41
  37
  39
  41
  43
  45
  47
  49
  51
  54
  56
  59
  61
  64
  67
  71
  74
  78
  82
  87
  91
Retained Cash Flow (-), $m
  -25
  -2
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
Prev. year cash balance distribution, $m
 
  181
  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
 
  202
  22
  24
  25
  27
  29
  30
  32
  33
  35
  31
  32
  34
  35
  37
  38
  40
  42
  43
  45
  47
  49
  51
  54
  57
  60
  63
  66
  69
  73
Discount rate, %
 
  5.10
  5.36
  5.62
  5.90
  6.20
  6.51
  6.83
  7.18
  7.54
  7.91
  8.31
  8.72
  9.16
  9.62
  10.10
  10.60
  11.13
  11.69
  12.27
  12.89
  13.53
  14.21
  14.92
  15.66
  16.45
  17.27
  18.13
  19.04
  19.99
  20.99
PV of cash for distribution, $m
 
  192
  20
  20
  20
  20
  20
  19
  18
  17
  16
  13
  12
  11
  10
  9
  8
  7
  6
  5
  4
  3
  3
  2
  2
  1
  1
  1
  1
  0
  0
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  99.9
  99.8
  99.6
  99.3
  99.0
  98.6
  98.2
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.6
  97.5
  97.3
  97.1
  96.9
  96.6

Partner Communications Company Ltd. is a telecommunications company. The Company is engaged in the business of cellular telephony, provided on its second generation (2G), third generation (3G) and fourth generation (4G) networks. It operates through two segments: cellular segment and fixed-line segment. Its products and services are marketed under the Partner brand. The Company's cellular business segment includes basic cellular telephony services, text messaging, data, airtime, interconnect, roaming, content services and other value added services. The fixed-line segment includes a range of services provided over fixed-line networks, including Internet service provider (ISP) services, business information storage in a data center and cloud services. The Company also provides wireless fidelity (Wi-Fi) networks and fixed-line voice communication services. In addition, the fixed-line segment includes sales of related equipment. It also offers anti-virus and anti-spam filtering.

FINANCIAL RATIOS  of  Partner Communications ADR (PTNR)

Valuation Ratios
P/E Ratio 67.4
Price to Sales 1
Price to Book 3.1
Price to Tangible Book
Price to Cash Flow 3
Price to Free Cash Flow 3.6
Growth Rates
Sales Growth Rate -13.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -45.4%
Cap. Spend. - 3 Yr. Gr. Rate -9.6%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 197.3%
Total Debt to Equity 242.2%
Interest Coverage 2
Management Effectiveness
Return On Assets 2.1%
Ret/ On Assets - 3 Yr. Avg. 2.9%
Return On Total Capital 1.3%
Ret/ On T. Cap. - 3 Yr. Avg. 1.4%
Return On Equity 4.9%
Return On Equity - 3 Yr. Avg. 6%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 17.5%
Gross Margin - 3 Yr. Avg. 18.4%
EBITDA Margin 21.5%
EBITDA Margin - 3 Yr. Avg. 20.9%
Operating Margin 5.5%
Oper. Margin - 3 Yr. Avg. 5.7%
Pre-Tax Margin 2.5%
Pre-Tax Margin - 3 Yr. Avg. 2.4%
Net Profit Margin 1.5%
Net Profit Margin - 3 Yr. Avg. 1.4%
Effective Tax Rate 41.7%
Eff/ Tax Rate - 3 Yr. Avg. 21.3%
Payout Ratio 0%

PTNR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PTNR stock intrinsic value calculation we used $959 million for the last fiscal year's total revenue generated by Partner Communications ADR. The default revenue input number comes from 2016 income statement of Partner Communications 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 PTNR 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 5.1%, whose default value for PTNR is calculated based on our internal credit rating of Partner Communications 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 Partner Communications 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 PTNR stock the variable cost ratio is equal to 97.4%.

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 PTNR 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 3.7% for Partner Communications ADR.

Corporate tax rate of 27% is the nominal tax rate for Partner Communications 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 PTNR 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 PTNR are equal to 61.6%.

Life of production assets of 4.6 years is the average useful life of capital assets used in Partner Communications 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 PTNR is equal to 1.8%. 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 - $301 million for Partner Communications 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 173.251 million for Partner Communications 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 Partner Communications ADR at the current share price and the inputted number of shares is $1.0 billion.

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COMPANY NEWS

▶ Partner Communications posts 3Q profit   [05:00AM  Associated Press]
▶ Partner Communications posts 2Q profit   [Aug-16-17 08:09PM  Associated Press]
▶ Partner Communications posts 1Q profit   [May-22-17 05:00AM  Associated Press]
▶ Partner Communications reports 4Q loss   [Mar-30-17 05:02AM  Associated Press]
▶ Partner Comms says new CFO to start on April 2   [Mar-08-17 05:56AM  Reuters]
▶ Partner Communications Announces Notes Buyback   [Apr-20-16 02:42AM  Business Wire]
▶ Partner Communications Announces Notes Buyback   [Mar-29-16 02:42AM  Business Wire]
▶ press releases   [Mar-27-16 12:54PM  at noodls]
Financial statements of PTNR
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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