Intrinsic value of Reading International Inc - RDI

Previous Close

$13.49

  Intrinsic Value

$1.61

stock screener

  Rating & Target

str. sell

-88%

Previous close

$13.49

 
Intrinsic value

$1.61

 
Up/down potential

-88%

 
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, %
  12.30
  11.57
  10.91
  10.32
  9.79
  9.31
  8.88
  8.49
  8.14
  7.83
  7.55
  7.29
  7.06
  6.86
  6.67
  6.50
  6.35
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
Revenue, $m
  314
  351
  389
  429
  471
  515
  561
  609
  658
  710
  763
  819
  877
  937
  999
  1,064
  1,132
  1,202
  1,275
  1,352
  1,431
  1,514
  1,601
  1,691
  1,786
  1,884
  1,988
  2,095
  2,208
  2,326
Variable operating expenses, $m
  292
  325
  360
  397
  436
  476
  518
  562
  607
  655
  701
  752
  805
  861
  918
  978
  1,040
  1,104
  1,172
  1,242
  1,315
  1,391
  1,471
  1,554
  1,640
  1,731
  1,826
  1,925
  2,028
  2,137
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
  292
  325
  360
  397
  436
  476
  518
  562
  607
  655
  701
  752
  805
  861
  918
  978
  1,040
  1,104
  1,172
  1,242
  1,315
  1,391
  1,471
  1,554
  1,640
  1,731
  1,826
  1,925
  2,028
  2,137
Operating income, $m
  23
  26
  29
  32
  35
  39
  43
  47
  51
  55
  62
  67
  71
  76
  81
  87
  92
  98
  104
  110
  116
  123
  130
  138
  145
  153
  162
  170
  180
  189
EBITDA, $m
  45
  51
  56
  62
  68
  74
  81
  88
  95
  102
  110
  118
  126
  135
  144
  153
  163
  173
  184
  195
  206
  218
  230
  243
  257
  271
  286
  302
  318
  335
Interest expense (income), $m
  6
  7
  9
  10
  12
  14
  16
  18
  20
  23
  25
  27
  30
  33
  35
  38
  41
  44
  47
  51
  54
  58
  62
  66
  70
  74
  79
  83
  88
  93
  99
Earnings before tax, $m
  16
  17
  18
  20
  21
  23
  25
  26
  28
  30
  35
  37
  39
  41
  43
  45
  48
  50
  53
  56
  59
  62
  65
  68
  71
  75
  78
  82
  86
  91
Tax expense, $m
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
Net income, $m
  11
  12
  13
  14
  16
  17
  18
  19
  20
  22
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  47
  50
  52
  55
  57
  60
  63
  66

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
  476
  531
  589
  649
  713
  779
  849
  921
  996
  1,074
  1,155
  1,239
  1,326
  1,417
  1,512
  1,610
  1,712
  1,819
  1,930
  2,045
  2,165
  2,291
  2,422
  2,559
  2,702
  2,851
  3,007
  3,170
  3,341
  3,519
Adjusted assets (=assets-cash), $m
  476
  531
  589
  649
  713
  779
  849
  921
  996
  1,074
  1,155
  1,239
  1,326
  1,417
  1,512
  1,610
  1,712
  1,819
  1,930
  2,045
  2,165
  2,291
  2,422
  2,559
  2,702
  2,851
  3,007
  3,170
  3,341
  3,519
Revenue / Adjusted assets
  0.660
  0.661
  0.660
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
Average production assets, $m
  364
  406
  451
  497
  546
  597
  650
  705
  762
  822
  884
  948
  1,015
  1,085
  1,157
  1,232
  1,311
  1,392
  1,477
  1,565
  1,658
  1,754
  1,854
  1,959
  2,068
  2,182
  2,302
  2,426
  2,557
  2,694
Working capital, $m
  -59
  -66
  -73
  -81
  -89
  -97
  -105
  -114
  -124
  -133
  -143
  -154
  -165
  -176
  -188
  -200
  -213
  -226
  -240
  -254
  -269
  -285
  -301
  -318
  -336
  -354
  -374
  -394
  -415
  -437
Total debt, $m
  161
  193
  226
  262
  299
  337
  377
  419
  463
  508
  555
  604
  655
  708
  763
  820
  879
  941
  1,005
  1,073
  1,143
  1,215
  1,292
  1,371
  1,454
  1,541
  1,631
  1,726
  1,825
  1,929
Total liabilities, $m
  276
  308
  342
  377
  414
  453
  493
  535
  578
  624
  671
  720
  771
  823
  878
  935
  995
  1,057
  1,121
  1,188
  1,258
  1,331
  1,407
  1,487
  1,570
  1,656
  1,747
  1,842
  1,941
  2,045
Total equity, $m
  199
  222
  247
  272
  299
  327
  356
  386
  417
  450
  484
  519
  556
  594
  633
  675
  717
  762
  808
  857
  907
  960
  1,015
  1,072
  1,132
  1,195
  1,260
  1,328
  1,400
  1,475
Total liabilities and equity, $m
  475
  530
  589
  649
  713
  780
  849
  921
  995
  1,074
  1,155
  1,239
  1,327
  1,417
  1,511
  1,610
  1,712
  1,819
  1,929
  2,045
  2,165
  2,291
  2,422
  2,559
  2,702
  2,851
  3,007
  3,170
  3,341
  3,520
Debt-to-equity ratio
  0.810
  0.870
  0.920
  0.960
  1.000
  1.030
  1.060
  1.090
  1.110
  1.130
  1.150
  1.160
  1.180
  1.190
  1.200
  1.220
  1.230
  1.230
  1.240
  1.250
  1.260
  1.270
  1.270
  1.280
  1.280
  1.290
  1.290
  1.300
  1.300
  1.310
Adjusted equity ratio
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  11
  12
  13
  14
  16
  17
  18
  19
  20
  22
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  47
  50
  52
  55
  57
  60
  63
  66
Depreciation, amort., depletion, $m
  23
  25
  27
  30
  32
  35
  38
  41
  44
  47
  48
  51
  55
  59
  63
  67
  71
  75
  80
  85
  90
  95
  100
  106
  112
  118
  124
  131
  138
  146
Funds from operations, $m
  34
  37
  41
  44
  48
  52
  56
  60
  65
  69
  73
  78
  83
  88
  94
  100
  106
  112
  118
  125
  132
  140
  147
  155
  164
  173
  182
  191
  201
  212
Change in working capital, $m
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
Cash from operations, $m
  40
  44
  48
  52
  56
  60
  65
  69
  74
  79
  83
  88
  94
  100
  106
  112
  118
  125
  132
  140
  147
  155
  164
  172
  182
  191
  201
  212
  223
  234
Maintenance CAPEX, $m
  -18
  -20
  -22
  -24
  -27
  -30
  -32
  -35
  -38
  -41
  -44
  -48
  -51
  -55
  -59
  -63
  -67
  -71
  -75
  -80
  -85
  -90
  -95
  -100
  -106
  -112
  -118
  -124
  -131
  -138
New CAPEX, $m
  -40
  -42
  -44
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -64
  -67
  -70
  -72
  -75
  -78
  -81
  -85
  -88
  -92
  -96
  -100
  -105
  -109
  -114
  -119
  -125
  -131
  -137
Cash from investing activities, $m
  -58
  -62
  -66
  -71
  -76
  -81
  -85
  -90
  -95
  -101
  -106
  -112
  -118
  -125
  -131
  -138
  -145
  -152
  -160
  -168
  -177
  -186
  -195
  -205
  -215
  -226
  -237
  -249
  -262
  -275
Free cash flow, $m
  -17
  -18
  -18
  -19
  -20
  -20
  -21
  -21
  -22
  -22
  -23
  -24
  -24
  -25
  -25
  -26
  -26
  -27
  -28
  -29
  -29
  -30
  -31
  -32
  -34
  -35
  -36
  -38
  -39
  -41
Issuance/(repayment) of debt, $m
  30
  32
  34
  35
  37
  39
  40
  42
  44
  45
  47
  49
  51
  53
  55
  57
  59
  62
  64
  67
  70
  73
  76
  79
  83
  87
  91
  95
  99
  104
Issuance/(repurchase) of shares, $m
  11
  11
  11
  11
  11
  11
  11
  11
  11
  11
  9
  9
  8
  8
  8
  8
  8
  8
  8
  8
  8
  8
  8
  8
  8
  8
  8
  8
  8
  9
Cash from financing (excl. dividends), $m  
  41
  43
  45
  46
  48
  50
  51
  53
  55
  56
  56
  58
  59
  61
  63
  65
  67
  70
  72
  75
  78
  81
  84
  87
  91
  95
  99
  103
  107
  113
Total cash flow (excl. dividends), $m
  24
  25
  26
  27
  28
  29
  31
  32
  33
  34
  32
  34
  35
  36
  38
  39
  41
  43
  44
  46
  48
  50
  52
  55
  57
  60
  62
  65
  68
  71
Retained Cash Flow (-), $m
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -46
  -48
  -50
  -53
  -55
  -57
  -60
  -63
  -65
  -68
  -71
  -75
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
  2
  2
  2
  2
  2
  2
  2
  2
  1
  1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
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
  2
  2
  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, %
  96.7
  93.8
  91.3
  89.0
  87.0
  85.2
  83.6
  82.1
  80.8
  79.6
  78.7
  78.0
  77.2
  76.6
  76.0
  75.4
  74.9
  74.5
  74.0
  73.6
  73.3
  72.9
  72.6
  72.3
  72.0
  71.7
  71.4
  71.1
  70.9
  70.6

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 Inc (RDI)

Valuation Ratios
P/E Ratio 34.7
Price to Sales 1.2
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 10.4
Price to Free Cash Flow -16.5
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 $280 million for the last fiscal year's total revenue generated by Reading International Inc. The default revenue input number comes from 0001 income statement of Reading International Inc. 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 12.3% 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 Inc, 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 Inc.
    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 Inc.

Corporate tax rate of 27% is the nominal tax rate for Reading International Inc. 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 115.8%.

Life of production assets of 18.5 years is the average useful life of capital assets used in Reading International Inc 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 - $177.287 million for Reading International Inc - 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 23.017 million for Reading International Inc 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 Inc at the current share price and the inputted number of shares is $0.3 billion.

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