Intrinsic value of TransGlobe Energy Corporation - TGA

Previous Close

$2.17

  Intrinsic Value

$0.64

stock screener

  Rating & Target

str. sell

-71%

Previous close

$2.17

 
Intrinsic value

$0.64

 
Up/down potential

-71%

 
Rating

str. sell

We calculate the intrinsic value of TGA 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 0.2

 

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, %
  19.00
  17.60
  16.34
  15.21
  14.19
  13.27
  12.44
  11.70
  11.03
  10.42
  9.88
  9.39
  8.95
  8.56
  8.20
  7.88
  7.59
  7.33
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.01
  5.90
  5.81
  5.73
  5.66
Revenue, $m
  211
  248
  288
  332
  379
  429
  483
  539
  599
  661
  726
  795
  866
  940
  1,017
  1,097
  1,181
  1,267
  1,357
  1,451
  1,548
  1,649
  1,754
  1,864
  1,978
  2,096
  2,220
  2,349
  2,484
  2,625
Variable operating expenses, $m
  266
  312
  363
  417
  476
  538
  605
  675
  749
  827
  905
  990
  1,079
  1,171
  1,267
  1,367
  1,471
  1,578
  1,691
  1,807
  1,928
  2,054
  2,185
  2,322
  2,464
  2,611
  2,766
  2,926
  3,094
  3,269
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
  266
  312
  363
  417
  476
  538
  605
  675
  749
  827
  905
  990
  1,079
  1,171
  1,267
  1,367
  1,471
  1,578
  1,691
  1,807
  1,928
  2,054
  2,185
  2,322
  2,464
  2,611
  2,766
  2,926
  3,094
  3,269
Operating income, $m
  -55
  -64
  -74
  -85
  -97
  -109
  -122
  -136
  -151
  -166
  -178
  -195
  -213
  -231
  -250
  -270
  -290
  -311
  -333
  -356
  -380
  -405
  -431
  -458
  -486
  -515
  -545
  -577
  -610
  -645
EBITDA, $m
  -14
  -17
  -19
  -22
  -26
  -29
  -33
  -36
  -40
  -45
  -49
  -54
  -58
  -63
  -69
  -74
  -80
  -86
  -92
  -98
  -105
  -111
  -118
  -126
  -134
  -142
  -150
  -159
  -168
  -177
Interest expense (income), $m
  5
  4
  6
  8
  9
  11
  14
  16
  18
  21
  24
  27
  30
  33
  36
  39
  43
  47
  51
  54
  59
  63
  67
  72
  77
  82
  87
  93
  98
  104
  110
Earnings before tax, $m
  -60
  -70
  -82
  -95
  -108
  -123
  -138
  -154
  -172
  -190
  -205
  -225
  -245
  -267
  -289
  -313
  -337
  -362
  -388
  -415
  -443
  -472
  -503
  -535
  -568
  -602
  -638
  -675
  -714
  -755
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
  -60
  -70
  -82
  -95
  -108
  -123
  -138
  -154
  -172
  -190
  -205
  -225
  -245
  -267
  -289
  -313
  -337
  -362
  -388
  -415
  -443
  -472
  -503
  -535
  -568
  -602
  -638
  -675
  -714
  -755

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
  350
  412
  479
  552
  631
  714
  803
  897
  996
  1,100
  1,209
  1,322
  1,441
  1,564
  1,692
  1,826
  1,964
  2,108
  2,258
  2,414
  2,576
  2,744
  2,919
  3,101
  3,291
  3,488
  3,694
  3,909
  4,133
  4,367
Adjusted assets (=assets-cash), $m
  350
  412
  479
  552
  631
  714
  803
  897
  996
  1,100
  1,209
  1,322
  1,441
  1,564
  1,692
  1,826
  1,964
  2,108
  2,258
  2,414
  2,576
  2,744
  2,919
  3,101
  3,291
  3,488
  3,694
  3,909
  4,133
  4,367
Revenue / Adjusted assets
  0.603
  0.602
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.600
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
  0.601
Average production assets, $m
  259
  304
  354
  408
  466
  528
  593
  663
  736
  813
  893
  977
  1,064
  1,155
  1,250
  1,349
  1,451
  1,557
  1,668
  1,783
  1,902
  2,027
  2,156
  2,290
  2,431
  2,577
  2,729
  2,887
  3,053
  3,226
Working capital, $m
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
Total debt, $m
  71
  92
  114
  138
  164
  192
  222
  253
  286
  321
  357
  395
  434
  475
  518
  562
  608
  656
  706
  758
  812
  868
  926
  987
  1,050
  1,116
  1,185
  1,256
  1,331
  1,409
Total liabilities, $m
  117
  137
  160
  184
  210
  238
  268
  299
  332
  366
  403
  440
  480
  521
  564
  608
  654
  702
  752
  804
  858
  914
  972
  1,033
  1,096
  1,162
  1,230
  1,302
  1,376
  1,454
Total equity, $m
  234
  275
  320
  368
  421
  477
  536
  598
  664
  734
  806
  882
  961
  1,043
  1,129
  1,218
  1,310
  1,406
  1,506
  1,610
  1,718
  1,830
  1,947
  2,068
  2,195
  2,327
  2,464
  2,607
  2,757
  2,913
Total liabilities and equity, $m
  351
  412
  480
  552
  631
  715
  804
  897
  996
  1,100
  1,209
  1,322
  1,441
  1,564
  1,693
  1,826
  1,964
  2,108
  2,258
  2,414
  2,576
  2,744
  2,919
  3,101
  3,291
  3,489
  3,694
  3,909
  4,133
  4,367
Debt-to-equity ratio
  0.300
  0.330
  0.360
  0.380
  0.390
  0.400
  0.410
  0.420
  0.430
  0.440
  0.440
  0.450
  0.450
  0.460
  0.460
  0.460
  0.460
  0.470
  0.470
  0.470
  0.470
  0.470
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
Adjusted equity ratio
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -60
  -70
  -82
  -95
  -108
  -123
  -138
  -154
  -172
  -190
  -205
  -225
  -245
  -267
  -289
  -313
  -337
  -362
  -388
  -415
  -443
  -472
  -503
  -535
  -568
  -602
  -638
  -675
  -714
  -755
Depreciation, amort., depletion, $m
  41
  48
  55
  63
  71
  80
  90
  100
  110
  121
  129
  142
  154
  167
  181
  195
  210
  226
  242
  258
  276
  294
  312
  332
  352
  373
  395
  418
  442
  467
Funds from operations, $m
  -19
  -23
  -27
  -32
  -37
  -43
  -49
  -55
  -61
  -68
  -76
  -83
  -91
  -100
  -108
  -117
  -126
  -136
  -146
  -157
  -167
  -179
  -191
  -203
  -216
  -229
  -243
  -257
  -272
  -288
Change in working capital, $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
  -1
  -1
  -1
Cash from operations, $m
  -18
  -22
  -27
  -32
  -37
  -42
  -48
  -55
  -61
  -68
  -75
  -83
  -91
  -99
  -108
  -117
  -126
  -136
  -146
  -156
  -167
  -178
  -190
  -202
  -215
  -228
  -242
  -256
  -271
  -287
Maintenance CAPEX, $m
  -32
  -38
  -44
  -51
  -59
  -68
  -76
  -86
  -96
  -107
  -118
  -129
  -142
  -154
  -167
  -181
  -195
  -210
  -226
  -242
  -258
  -276
  -294
  -312
  -332
  -352
  -373
  -395
  -418
  -442
New CAPEX, $m
  -41
  -46
  -50
  -54
  -58
  -62
  -66
  -69
  -73
  -77
  -80
  -84
  -87
  -91
  -95
  -99
  -102
  -106
  -111
  -115
  -119
  -124
  -129
  -135
  -140
  -146
  -152
  -159
  -166
  -173
Cash from investing activities, $m
  -73
  -84
  -94
  -105
  -117
  -130
  -142
  -155
  -169
  -184
  -198
  -213
  -229
  -245
  -262
  -280
  -297
  -316
  -337
  -357
  -377
  -400
  -423
  -447
  -472
  -498
  -525
  -554
  -584
  -615
Free cash flow, $m
  -91
  -106
  -121
  -137
  -154
  -172
  -190
  -210
  -230
  -251
  -273
  -296
  -320
  -345
  -370
  -396
  -424
  -452
  -482
  -513
  -545
  -578
  -613
  -649
  -687
  -727
  -768
  -811
  -855
  -902
Issuance/(repayment) of debt, $m
  19
  21
  22
  24
  26
  28
  30
  31
  33
  35
  36
  38
  39
  41
  43
  44
  46
  48
  50
  52
  54
  56
  58
  61
  63
  66
  69
  72
  75
  78
Issuance/(repurchase) of shares, $m
  97
  111
  127
  143
  160
  179
  197
  217
  238
  259
  278
  301
  324
  349
  375
  402
  429
  458
  488
  519
  551
  585
  620
  656
  694
  734
  775
  819
  864
  911
Cash from financing (excl. dividends), $m  
  116
  132
  149
  167
  186
  207
  227
  248
  271
  294
  314
  339
  363
  390
  418
  446
  475
  506
  538
  571
  605
  641
  678
  717
  757
  800
  844
  891
  939
  989
Total cash flow (excl. dividends), $m
  24
  26
  29
  31
  33
  35
  37
  38
  40
  42
  40
  42
  44
  46
  48
  49
  51
  53
  56
  58
  60
  62
  65
  68
  70
  73
  76
  80
  83
  87
Retained Cash Flow (-), $m
  -97
  -111
  -127
  -143
  -160
  -179
  -197
  -217
  -238
  -259
  -278
  -301
  -324
  -349
  -375
  -402
  -429
  -458
  -488
  -519
  -551
  -585
  -620
  -656
  -694
  -734
  -775
  -819
  -864
  -911
Prev. year cash balance distribution, $m
  24
  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
  -49
  -85
  -98
  -113
  -128
  -144
  -161
  -179
  -197
  -217
  -237
  -258
  -281
  -303
  -327
  -352
  -378
  -404
  -432
  -461
  -491
  -522
  -555
  -589
  -624
  -661
  -699
  -739
  -781
  -824
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  -47
  -78
  -86
  -93
  -99
  -104
  -109
  -112
  -113
  -114
  -113
  -110
  -107
  -102
  -96
  -89
  -82
  -74
  -67
  -59
  -51
  -43
  -36
  -30
  -24
  -19
  -15
  -11
  -9
  -6
Current shareholders' claim on cash, %
  59.1
  35.4
  21.4
  13.2
  8.2
  5.1
  3.2
  2.1
  1.3
  0.9
  0.6
  0.4
  0.2
  0.2
  0.1
  0.1
  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

TransGlobe Energy Corporation is an oil exploration and production company. The Company's activities are concentrated in the Arab Republic of Egypt (Egypt). The Company conducts its operations through the Arab Republic of Egypt segment. The Company is primarily engaged in oil exploration, development, production and the acquisition of properties. It holds interests in various production sharing concessions (PSC) in Eastern Desert Egypt and Western Desert Egypt. Its blocks in Eastern Desert Egypt include West Gharib, which covers approximately 34,860 acres; West Bakr, covering over 11,600 acres; North West (NW) Gharib, covering approximately 162,000 acres; South East (SE) Gharib, which covers over 125,650 acres, and South West (SW) Gharib, covering approximately 48,310 acres. Its blocks in the Western Desert Egypt include South Alamein, covering approximately 335,830 acres; South Ghazalat, covering over 465,300 acres, and North West (NW) Sitra, covering approximately 480,850 acres.

FINANCIAL RATIOS  of  TransGlobe Energy Corporation (TGA)

Valuation Ratios
P/E Ratio -1.8
Price to Sales 2.4
Price to Book 0.5
Price to Tangible Book
Price to Cash Flow -156.7
Price to Free Cash Flow -2.1
Growth Rates
Sales Growth Rate -31.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 66.7%
Cap. Spend. - 3 Yr. Gr. Rate -10.3%
Financial Strength
Quick Ratio 0
Current Ratio 0.2
LT Debt to Equity 2.1%
Total Debt to Equity 29.5%
Interest Coverage -14
Management Effectiveness
Return On Assets -19.1%
Ret/ On Assets - 3 Yr. Avg. -11.8%
Return On Total Capital -21.9%
Ret/ On T. Cap. - 3 Yr. Avg. -13.7%
Return On Equity -26.8%
Return On Equity - 3 Yr. Avg. -16.3%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 35.9%
Gross Margin - 3 Yr. Avg. 50.7%
EBITDA Margin -64.1%
EBITDA Margin - 3 Yr. Avg. -30.8%
Operating Margin -89.1%
Oper. Margin - 3 Yr. Avg. -64.2%
Pre-Tax Margin -117.2%
Pre-Tax Margin - 3 Yr. Avg. -73%
Net Profit Margin -137.5%
Net Profit Margin - 3 Yr. Avg. -82.5%
Effective Tax Rate -17.3%
Eff/ Tax Rate - 3 Yr. Avg. 24.8%
Payout Ratio 0%

TGA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TGA stock intrinsic value calculation we used $177 million for the last fiscal year's total revenue generated by TransGlobe Energy Corporation. The default revenue input number comes from 0001 income statement of TransGlobe Energy Corporation. 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 TGA stock valuation model: a) initial revenue growth rate of 19% 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 4.3%, whose default value for TGA is calculated based on our internal credit rating of TransGlobe Energy Corporation, 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 TransGlobe Energy Corporation.
    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 TGA stock the variable cost ratio is equal to 126.6%.

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 TGA 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 8.3% for TransGlobe Energy Corporation.

Corporate tax rate of 27% is the nominal tax rate for TransGlobe Energy Corporation. 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 TGA 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 TGA are equal to 122.9%.

Life of production assets of 6.9 years is the average useful life of capital assets used in TransGlobe Energy Corporation 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 TGA is equal to -0.4%. 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 - $220.291 million for TransGlobe Energy Corporation - 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 72.207 million for TransGlobe Energy Corporation 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 TransGlobe Energy Corporation at the current share price and the inputted number of shares is $0.2 billion.

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