Intrinsic value of Trio-Tech International - TRT

Previous Close

$6.91

  Intrinsic Value

$39.67

stock screener

  Rating & Target

str. buy

+474%

Previous close

$6.91

 
Intrinsic value

$39.67

 
Up/down potential

+474%

 
Rating

str. buy

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

We calculate the intrinsic value of TRT 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 2017), $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 0.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  14.71
  22.20
  20.48
  18.93
  17.54
  16.28
  15.16
  14.14
  13.23
  12.40
  11.66
  11.00
  10.40
  9.86
  9.37
  8.93
  8.54
  8.19
  7.87
  7.58
  7.32
  7.09
  6.88
  6.69
  6.52
  6.37
  6.23
  6.11
  6.00
  5.90
  5.81
Revenue, $m
  39
  48
  57
  68
  80
  93
  107
  123
  139
  156
  174
  194
  214
  235
  257
  280
  304
  328
  354
  381
  409
  438
  468
  499
  532
  566
  601
  638
  676
  716
  758
Variable operating expenses, $m
 
  38
  46
  54
  64
  74
  85
  98
  110
  124
  139
  154
  170
  187
  204
  222
  241
  261
  282
  303
  325
  348
  372
  397
  423
  450
  478
  507
  538
  569
  602
Fixed operating expenses, $m
 
  6
  6
  6
  7
  7
  7
  7
  7
  7
  8
  8
  8
  8
  8
  9
  9
  9
  9
  10
  10
  10
  10
  11
  11
  11
  11
  12
  12
  12
  13
Total operating expenses, $m
  37
  44
  52
  60
  71
  81
  92
  105
  117
  131
  147
  162
  178
  195
  212
  231
  250
  270
  291
  313
  335
  358
  382
  408
  434
  461
  489
  519
  550
  581
  615
Operating income, $m
  1
  4
  5
  8
  10
  12
  15
  18
  21
  25
  28
  32
  36
  40
  44
  49
  53
  58
  63
  69
  74
  80
  86
  92
  98
  105
  112
  119
  127
  135
  143
EBITDA, $m
  3
  4
  5
  8
  10
  12
  15
  18
  21
  25
  28
  32
  36
  40
  44
  49
  53
  58
  63
  69
  74
  80
  86
  92
  98
  105
  112
  119
  127
  135
  143
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
Earnings before tax, $m
  2
  4
  5
  7
  9
  12
  14
  17
  20
  23
  27
  30
  34
  38
  42
  46
  51
  56
  60
  65
  71
  76
  82
  87
  94
  100
  107
  113
  121
  128
  136
Tax expense, $m
  1
  1
  1
  2
  3
  3
  4
  5
  5
  6
  7
  8
  9
  10
  11
  13
  14
  15
  16
  18
  19
  21
  22
  24
  25
  27
  29
  31
  33
  35
  37
Net income, $m
  1
  3
  4
  5
  7
  9
  11
  13
  15
  17
  20
  22
  25
  28
  31
  34
  37
  41
  44
  48
  52
  55
  60
  64
  68
  73
  78
  83
  88
  94
  99

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  6
  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
  34
  34
  41
  49
  58
  67
  77
  88
  100
  112
  125
  139
  153
  168
  184
  201
  218
  236
  254
  274
  294
  314
  336
  359
  382
  406
  432
  458
  485
  514
  544
Adjusted assets (=assets-cash), $m
  28
  34
  41
  49
  58
  67
  77
  88
  100
  112
  125
  139
  153
  168
  184
  201
  218
  236
  254
  274
  294
  314
  336
  359
  382
  406
  432
  458
  485
  514
  544
Revenue / Adjusted assets
  1.393
  1.412
  1.390
  1.388
  1.379
  1.388
  1.390
  1.398
  1.390
  1.393
  1.392
  1.396
  1.399
  1.399
  1.397
  1.393
  1.394
  1.390
  1.394
  1.391
  1.391
  1.395
  1.393
  1.390
  1.393
  1.394
  1.391
  1.393
  1.394
  1.393
  1.393
Average production assets, $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
  0
Working capital, $m
  7
  5
  6
  7
  8
  10
  11
  13
  14
  16
  18
  20
  22
  24
  26
  29
  31
  34
  36
  39
  42
  45
  48
  51
  55
  58
  62
  66
  70
  74
  78
Total debt, $m
  5
  4
  7
  10
  14
  17
  21
  26
  30
  35
  40
  46
  51
  57
  63
  70
  77
  84
  91
  99
  106
  115
  123
  132
  141
  151
  161
  171
  182
  193
  205
Total liabilities, $m
  13
  13
  16
  19
  23
  26
  30
  35
  39
  44
  49
  55
  60
  66
  72
  79
  86
  93
  100
  108
  115
  124
  132
  141
  150
  160
  170
  180
  191
  202
  214
Total equity, $m
  20
  21
  25
  30
  35
  41
  47
  53
  61
  68
  76
  84
  93
  102
  112
  122
  132
  143
  154
  166
  178
  191
  204
  218
  232
  247
  262
  278
  295
  312
  330
Total liabilities and equity, $m
  33
  34
  41
  49
  58
  67
  77
  88
  100
  112
  125
  139
  153
  168
  184
  201
  218
  236
  254
  274
  293
  315
  336
  359
  382
  407
  432
  458
  486
  514
  544
Debt-to-equity ratio
  0.250
  0.210
  0.290
  0.340
  0.390
  0.430
  0.460
  0.480
  0.500
  0.520
  0.530
  0.540
  0.550
  0.560
  0.570
  0.570
  0.580
  0.580
  0.590
  0.590
  0.600
  0.600
  0.600
  0.610
  0.610
  0.610
  0.610
  0.620
  0.620
  0.620
  0.620
Adjusted equity ratio
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1
  3
  4
  5
  7
  9
  11
  13
  15
  17
  20
  22
  25
  28
  31
  34
  37
  41
  44
  48
  52
  55
  60
  64
  68
  73
  78
  83
  88
  94
  99
Depreciation, amort., depletion, $m
  2
  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
Funds from operations, $m
  4
  3
  4
  5
  7
  9
  11
  13
  15
  17
  20
  22
  25
  28
  31
  34
  37
  41
  44
  48
  52
  55
  60
  64
  68
  73
  78
  83
  88
  94
  99
Change in working capital, $m
  0
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
Cash from operations, $m
  4
  2
  3
  4
  6
  7
  9
  11
  13
  15
  18
  20
  23
  26
  28
  32
  35
  38
  41
  45
  49
  52
  56
  61
  65
  69
  74
  79
  84
  89
  95
Maintenance CAPEX, $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
  0
New CAPEX, $m
  -2
  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 from investing activities, $m
  -2
  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
Free cash flow, $m
  2
  2
  3
  4
  6
  7
  9
  11
  13
  15
  18
  20
  23
  26
  28
  32
  35
  38
  41
  45
  49
  52
  56
  61
  65
  69
  74
  79
  84
  89
  95
Issuance/(repayment) of debt, $m
  0
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
Issuance/(repurchase) of shares, $m
  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
  0
Cash from financing (excl. dividends), $m  
  0
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
Total cash flow (excl. dividends), $m
  1
  5
  6
  7
  9
  11
  13
  15
  18
  20
  23
  26
  29
  32
  35
  38
  41
  45
  49
  53
  57
  61
  65
  69
  74
  79
  84
  89
  95
  101
  107
Retained Cash Flow (-), $m
  -1
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
Prev. year cash balance distribution, $m
 
  3
  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
  2
  3
  4
  5
  7
  9
  11
  13
  15
  17
  20
  22
  25
  28
  31
  34
  37
  41
  44
  48
  52
  56
  60
  64
  69
  73
  78
  83
  89
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
 
  4
  2
  2
  3
  4
  5
  6
  7
  7
  8
  8
  8
  9
  8
  8
  8
  7
  7
  6
  6
  5
  4
  4
  3
  3
  2
  2
  1
  1
  1
Current shareholders' claim on cash, %
  100
  94.6
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3

Trio-Tech International (Trio-Tech) is engaged in providing third-party semiconductor testing and burn-in services primarily through its laboratories in Southeast Asia. The Company operates its business in four segments: Manufacturing, Testing Services, Distribution and Real Estate. The Company operates in the United States, Singapore, Malaysia, Thailand and China. As of June 30, 2016, the Company operated six testing services facilities: one in the United States and five in Southeast Asia. As of June 30, 2016, the Company operated two manufacturing facilities: one in the United States and the other in Southeast Asia. Its distribution segment and real estate segment operate primarily in Southeast Asia. In addition, the Company operates testing facilities in the United States. Trio-Tech also designs, develops, manufactures and markets a range of equipment and systems used in the manufacturing and testing of semiconductor devices and electronic components.

FINANCIAL RATIOS  of  Trio-Tech International (TRT)

Valuation Ratios
P/E Ratio 24.3
Price to Sales 0.6
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 6.1
Price to Free Cash Flow 12.2
Growth Rates
Sales Growth Rate 14.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -7.8%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 10%
Total Debt to Equity 25%
Interest Coverage 0
Management Effectiveness
Return On Assets 3%
Ret/ On Assets - 3 Yr. Avg. 3%
Return On Total Capital 4.1%
Ret/ On T. Cap. - 3 Yr. Avg. 4.1%
Return On Equity 5.1%
Return On Equity - 3 Yr. Avg. 5.2%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 23.1%
Gross Margin - 3 Yr. Avg. 25.3%
EBITDA Margin 10.3%
EBITDA Margin - 3 Yr. Avg. 9.3%
Operating Margin 5.1%
Oper. Margin - 3 Yr. Avg. 3.7%
Pre-Tax Margin 5.1%
Pre-Tax Margin - 3 Yr. Avg. 3.7%
Net Profit Margin 2.6%
Net Profit Margin - 3 Yr. Avg. 2.8%
Effective Tax Rate 50%
Eff/ Tax Rate - 3 Yr. Avg. 16.7%
Payout Ratio 0%

TRT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TRT stock intrinsic value calculation we used $39 million for the last fiscal year's total revenue generated by Trio-Tech International. The default revenue input number comes from 2017 income statement of Trio-Tech 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 TRT stock valuation model: a) initial revenue growth rate of 22.2% 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 4.3%, whose default value for TRT is calculated based on our internal credit rating of Trio-Tech 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 Trio-Tech 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 TRT stock the variable cost ratio is equal to 79.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $6 million in the base year in the intrinsic value calculation for TRT 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 3.5% for Trio-Tech International.

Corporate tax rate of 27% is the nominal tax rate for Trio-Tech 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 TRT 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 TRT are equal to 0%.

Life of production assets of 0 years is the average useful life of capital assets used in Trio-Tech 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 TRT is equal to 10.3%. 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 - $20 million for Trio-Tech 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 3.535 million for Trio-Tech 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 Trio-Tech International at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ 10-Q for Trio-Tech International   [May-15  08:09PM  at Company Spotlight]
▶ 10-Q for Trio-Tech International   [Feb-19  07:07PM  at Company Spotlight]
▶ 10-Q for Trio-Tech International   [Nov-20  07:07PM  Company Spotlight]
▶ [video] Prescription drugs: Risk vs. cost   [Jul-02  01:46PM  at CNBC]
▶ Trio-Tech Reports First Quarter Results   [08:30AM  Business Wire]
▶ Trio-Tech Reports Fiscal 2013 Results   [07:30AM  Business Wire]
▶ Trio-Tech Reports Third Quarter Results   [May-14  08:30AM  Business Wire]
▶ Trio-Tech Reports Third Quarter Results   [07:45AM  Business Wire]
▶ Trio-Tech Reports Second Quarter Results   [08:30AM  Business Wire]
Financial statements of TRT
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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