Intrinsic value of Reading International - RDI

Previous Close

$15.18

  Intrinsic Value

$1.74

stock screener

  Rating & Target

str. sell

-89%

Previous close

$15.18

 
Intrinsic value

$1.74

 
Up/down potential

-89%

 
Rating

str. sell

We calculate the intrinsic value of RDI 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 0.3

 

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, %
  16.30
  15.17
  14.15
  13.24
  12.41
  11.67
  11.01
  10.40
  9.86
  9.38
  8.94
  8.55
  8.19
  7.87
  7.59
  7.33
  7.09
  6.88
  6.70
  6.53
  6.37
  6.24
  6.11
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
Revenue, $m
  325
  375
  428
  484
  544
  608
  675
  745
  819
  895
  975
  1,059
  1,146
  1,236
  1,329
  1,427
  1,528
  1,633
  1,743
  1,856
  1,975
  2,098
  2,226
  2,360
  2,499
  2,644
  2,796
  2,954
  3,119
  3,292
Variable operating expenses, $m
  302
  347
  396
  448
  503
  561
  623
  687
  755
  826
  896
  973
  1,052
  1,135
  1,221
  1,311
  1,404
  1,501
  1,601
  1,705
  1,814
  1,927
  2,045
  2,168
  2,296
  2,429
  2,568
  2,714
  2,865
  3,024
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
  302
  347
  396
  448
  503
  561
  623
  687
  755
  826
  896
  973
  1,052
  1,135
  1,221
  1,311
  1,404
  1,501
  1,601
  1,705
  1,814
  1,927
  2,045
  2,168
  2,296
  2,429
  2,568
  2,714
  2,865
  3,024
Operating income, $m
  24
  28
  32
  36
  41
  47
  52
  58
  64
  70
  79
  86
  93
  100
  108
  116
  124
  133
  142
  151
  161
  171
  181
  192
  203
  215
  227
  240
  254
  268
EBITDA, $m
  47
  54
  61
  70
  78
  87
  97
  107
  118
  129
  140
  152
  165
  178
  191
  205
  220
  235
  250
  267
  284
  302
  320
  339
  359
  380
  402
  425
  448
  473
Interest expense (income), $m
  6
  7
  9
  12
  14
  17
  20
  23
  26
  29
  33
  36
  40
  44
  48
  52
  57
  61
  66
  71
  76
  82
  88
  93
  99
  106
  112
  119
  126
  134
  142
Earnings before tax, $m
  17
  18
  20
  22
  25
  27
  29
  32
  35
  37
  43
  46
  49
  52
  56
  59
  63
  66
  70
  74
  79
  83
  88
  92
  97
  103
  108
  114
  120
  126
Tax expense, $m
  4
  5
  5
  6
  7
  7
  8
  9
  9
  10
  12
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
  34
Net income, $m
  12
  13
  15
  16
  18
  20
  21
  23
  25
  27
  31
  34
  36
  38
  41
  43
  46
  49
  51
  54
  57
  61
  64
  67
  71
  75
  79
  83
  87
  92

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
  491
  566
  646
  732
  822
  918
  1,020
  1,126
  1,237
  1,353
  1,474
  1,599
  1,730
  1,867
  2,008
  2,155
  2,308
  2,467
  2,632
  2,804
  2,983
  3,169
  3,363
  3,565
  3,775
  3,994
  4,223
  4,462
  4,712
  4,972
Adjusted assets (=assets-cash), $m
  491
  566
  646
  732
  822
  918
  1,020
  1,126
  1,237
  1,353
  1,474
  1,599
  1,730
  1,867
  2,008
  2,155
  2,308
  2,467
  2,632
  2,804
  2,983
  3,169
  3,363
  3,565
  3,775
  3,994
  4,223
  4,462
  4,712
  4,972
Revenue / Adjusted assets
  0.662
  0.663
  0.663
  0.661
  0.662
  0.662
  0.662
  0.662
  0.662
  0.661
  0.661
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
Average production assets, $m
  351
  405
  462
  523
  588
  657
  729
  805
  884
  967
  1,054
  1,144
  1,237
  1,335
  1,436
  1,541
  1,650
  1,764
  1,882
  2,005
  2,133
  2,266
  2,404
  2,549
  2,699
  2,856
  3,019
  3,190
  3,369
  3,555
Working capital, $m
  -61
  -70
  -80
  -91
  -102
  -114
  -127
  -140
  -154
  -168
  -183
  -199
  -215
  -232
  -250
  -268
  -287
  -307
  -328
  -349
  -371
  -394
  -419
  -444
  -470
  -497
  -526
  -555
  -586
  -619
Total debt, $m
  170
  214
  260
  310
  363
  419
  478
  540
  604
  672
  742
  815
  892
  971
  1,053
  1,139
  1,228
  1,320
  1,416
  1,516
  1,621
  1,729
  1,842
  1,959
  2,081
  2,209
  2,342
  2,481
  2,627
  2,778
Total liabilities, $m
  286
  329
  376
  426
  479
  535
  593
  655
  720
  787
  858
  931
  1,007
  1,086
  1,169
  1,254
  1,343
  1,436
  1,532
  1,632
  1,736
  1,844
  1,957
  2,075
  2,197
  2,325
  2,458
  2,597
  2,742
  2,894
Total equity, $m
  205
  237
  270
  306
  344
  384
  426
  470
  517
  565
  616
  669
  723
  780
  839
  901
  965
  1,031
  1,100
  1,172
  1,247
  1,325
  1,406
  1,490
  1,578
  1,670
  1,765
  1,865
  1,969
  2,078
Total liabilities and equity, $m
  491
  566
  646
  732
  823
  919
  1,019
  1,125
  1,237
  1,352
  1,474
  1,600
  1,730
  1,866
  2,008
  2,155
  2,308
  2,467
  2,632
  2,804
  2,983
  3,169
  3,363
  3,565
  3,775
  3,995
  4,223
  4,462
  4,711
  4,972
Debt-to-equity ratio
  0.830
  0.900
  0.960
  1.010
  1.060
  1.090
  1.120
  1.150
  1.170
  1.190
  1.200
  1.220
  1.230
  1.240
  1.250
  1.260
  1.270
  1.280
  1.290
  1.290
  1.300
  1.310
  1.310
  1.310
  1.320
  1.320
  1.330
  1.330
  1.330
  1.340
Adjusted equity ratio
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  12
  13
  15
  16
  18
  20
  21
  23
  25
  27
  31
  34
  36
  38
  41
  43
  46
  49
  51
  54
  57
  61
  64
  67
  71
  75
  79
  83
  87
  92
Depreciation, amort., depletion, $m
  23
  26
  30
  33
  37
  41
  45
  49
  54
  59
  61
  66
  72
  77
  83
  89
  95
  102
  109
  116
  123
  131
  139
  147
  156
  165
  175
  184
  195
  205
Funds from operations, $m
  35
  40
  44
  49
  55
  61
  66
  73
  79
  86
  92
  100
  107
  115
  124
  132
  141
  151
  160
  170
  181
  192
  203
  215
  227
  240
  253
  267
  282
  297
Change in working capital, $m
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
Cash from operations, $m
  44
  49
  54
  60
  66
  72
  79
  86
  93
  100
  107
  115
  124
  132
  141
  151
  160
  170
  181
  192
  203
  215
  227
  240
  253
  267
  282
  297
  313
  330
Maintenance CAPEX, $m
  -17
  -20
  -23
  -27
  -30
  -34
  -38
  -42
  -47
  -51
  -56
  -61
  -66
  -72
  -77
  -83
  -89
  -95
  -102
  -109
  -116
  -123
  -131
  -139
  -147
  -156
  -165
  -175
  -184
  -195
New CAPEX, $m
  -49
  -53
  -57
  -61
  -65
  -69
  -72
  -76
  -79
  -83
  -86
  -90
  -94
  -97
  -101
  -105
  -109
  -114
  -118
  -123
  -128
  -133
  -138
  -144
  -150
  -157
  -164
  -171
  -178
  -186
Cash from investing activities, $m
  -66
  -73
  -80
  -88
  -95
  -103
  -110
  -118
  -126
  -134
  -142
  -151
  -160
  -169
  -178
  -188
  -198
  -209
  -220
  -232
  -244
  -256
  -269
  -283
  -297
  -313
  -329
  -346
  -362
  -381
Free cash flow, $m
  -23
  -25
  -26
  -28
  -29
  -30
  -31
  -32
  -33
  -34
  -35
  -36
  -36
  -37
  -37
  -38
  -38
  -39
  -39
  -40
  -41
  -42
  -42
  -43
  -44
  -46
  -47
  -48
  -50
  -51
Issuance/(repayment) of debt, $m
  40
  43
  47
  50
  53
  56
  59
  62
  65
  67
  70
  73
  76
  79
  82
  86
  89
  92
  96
  100
  104
  108
  113
  117
  122
  128
  133
  139
  145
  152
Issuance/(repurchase) of shares, $m
  16
  18
  19
  19
  20
  20
  21
  21
  21
  21
  19
  19
  19
  19
  19
  18
  18
  18
  18
  17
  17
  17
  17
  17
  17
  17
  17
  17
  17
  17
Cash from financing (excl. dividends), $m  
  56
  61
  66
  69
  73
  76
  80
  83
  86
  88
  89
  92
  95
  98
  101
  104
  107
  110
  114
  117
  121
  125
  130
  134
  139
  145
  150
  156
  162
  169
Total cash flow (excl. dividends), $m
  34
  36
  39
  41
  44
  46
  48
  51
  53
  55
  55
  57
  59
  61
  64
  66
  69
  72
  74
  77
  81
  84
  87
  91
  95
  99
  103
  108
  112
  118
Retained Cash Flow (-), $m
  -29
  -31
  -33
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -55
  -57
  -59
  -62
  -64
  -66
  -69
  -72
  -75
  -78
  -81
  -84
  -88
  -92
  -96
  -100
  -104
  -109
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
  5
  5
  6
  6
  6
  6
  6
  6
  7
  7
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
Discount rate, %
  6.70
  7.04
  7.39
  7.76
  8.14
  8.55
  8.98
  9.43
  9.90
  10.39
  10.91
  11.46
  12.03
  12.63
  13.27
  13.93
  14.63
  15.36
  16.12
  16.93
  17.78
  18.67
  19.60
  20.58
  21.61
  22.69
  23.82
  25.01
  26.26
  27.58
PV of cash for distribution, $m
  5
  5
  4
  4
  4
  4
  3
  3
  3
  2
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  95.2
  90.9
  87.1
  83.8
  80.9
  78.4
  76.1
  74.1
  72.3
  70.8
  69.5
  68.3
  67.3
  66.3
  65.5
  64.7
  64.0
  63.4
  62.8
  62.2
  61.7
  61.3
  60.8
  60.4
  60.1
  59.7
  59.4
  59.1
  58.8
  58.5

Reading International, Inc. (RDI) is engaged in the development, ownership and operation of multiplex cinemas in the United States, Australia, and New Zealand, and the development, ownership and operation of retail and commercial real estate in the United States, Australia and New Zealand. RDI operates through two segments: cinema exhibition and real estate. The cinema exhibition segment operates multiplex cinemas. RDI's real estate segment includes real estate development and the rental of retail, commercial and live theater assets. The Company manages its cinema exhibition businesses around the world under various brands, including Reading Cinema, Angelika Film Centers, Consolidated Theatres and City Cinemas brands in the United States; under the Reading Cinema brand in Australia, and under the Reading Cinema and Rialto brands in New Zealand.

FINANCIAL RATIOS  of  Reading International (RDI)

Valuation Ratios
P/E Ratio 39.1
Price to Sales 1.3
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 11.7
Price to Free Cash Flow -18.5
Growth Rates
Sales Growth Rate 4.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -7.5%
Cap. Spend. - 3 Yr. Gr. Rate 19.6%
Financial Strength
Quick Ratio 3
Current Ratio 0.6
LT Debt to Equity 101.4%
Total Debt to Equity 105.6%
Interest Coverage 3
Management Effectiveness
Return On Assets 3.3%
Ret/ On Assets - 3 Yr. Avg. 7.2%
Return On Total Capital 3.2%
Ret/ On T. Cap. - 3 Yr. Avg. 6.6%
Return On Equity 6.5%
Return On Equity - 3 Yr. Avg. 14.8%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 23.3%
Gross Margin - 3 Yr. Avg. 22.6%
EBITDA Margin 12.6%
EBITDA Margin - 3 Yr. Avg. 16%
Operating Margin 7.4%
Oper. Margin - 3 Yr. Avg. 8.4%
Pre-Tax Margin 4.4%
Pre-Tax Margin - 3 Yr. Avg. 6.9%
Net Profit Margin 3.3%
Net Profit Margin - 3 Yr. Avg. 7.4%
Effective Tax Rate 33.3%
Eff/ Tax Rate - 3 Yr. Avg. -2.7%
Payout Ratio 0%

RDI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the RDI stock intrinsic value calculation we used $279.734 million for the last fiscal year's total revenue generated by Reading International. The default revenue input number comes from 0001 income statement of Reading International. 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 RDI stock valuation model: a) initial revenue growth rate of 16.3% 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 6.7%, whose default value for RDI is calculated based on our internal credit rating of Reading International, 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 Reading International.
    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 RDI stock the variable cost ratio is equal to 92.9%.

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 RDI 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 Reading International.

Corporate tax rate of 27% is the nominal tax rate for Reading International. 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 RDI 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 RDI are equal to 108%.

Life of production assets of 17.3 years is the average useful life of capital assets used in Reading International 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 RDI is equal to -18.8%. 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 - $176.91 million for Reading International - 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 21.31 million for Reading International 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 Reading International at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ Reading International: 3Q Earnings Snapshot   [09:34AM  Associated Press]
▶ Planet Fitness (PLNT) Jumps: Stock Rises 7.1%   [Sep-26-18 08:53AM  Zacks]
▶ Reading International: 2Q Earnings Snapshot   [07:37PM  Associated Press]
▶ Reading International Introduces a Cinematic Feast   [Jun-20-18 08:00AM  Business Wire]
▶ Reading International: 1Q Earnings Snapshot   [May-11-18 05:06AM  Associated Press]
▶ Reading International posts 4Q profit   [Mar-16-18 06:39AM  Associated Press]
▶ Yacktman Asset Management Buys 2 Stocks in 4th Quarter   [Feb-02-18 04:59PM  GuruFocus.com]
▶ Reading International posts 3Q profit   [Nov-07-17 05:03AM  Associated Press]
▶ Reading International Announces Third Quarter 2017 Results   [Nov-06-17 09:30PM  Business Wire]
▶ Reading International posts 2Q profit   [Aug-10-17 12:33AM  Associated Press]
▶ Reading International Announces Second Quarter 2017 Results   [Aug-08-17 07:18PM  Business Wire]
▶ Gabelli & Companys 9th Annual Entertainment Conference   [May-25-17 08:57AM  Business Wire]
▶ Reading International posts 1Q profit   [May-09-17 08:29AM  Associated Press]
▶ San Diegos Best Movie Value   [May-02-17 11:40PM  Business Wire]
▶ TITAN XC Opens at Reading Cinemas Grossmont   [11:38PM  Business Wire]

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