Intrinsic value of VEON Ltd. - VEON

Previous Close

$2.49

  Intrinsic Value

$6.75

stock screener

  Rating & Target

str. buy

+171%

Previous close

$2.49

 
Intrinsic value

$6.75

 
Up/down potential

+171%

 
Rating

str. buy

We calculate the intrinsic value of VEON 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 4.4

 

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, %
  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
  9,268
  9,481
  9,725
  9,998
  10,301
  10,634
  10,996
  11,388
  11,810
  12,264
  12,748
  13,266
  13,817
  14,402
  15,023
  15,682
  16,379
  17,116
  17,894
  18,717
  19,584
  20,499
  21,464
  22,480
  23,550
  24,677
  25,863
  27,111
  28,424
  29,805
Variable operating expenses, $m
  7,820
  7,987
  8,177
  8,391
  8,629
  8,889
  9,172
  9,479
  9,810
  10,164
  9,977
  10,382
  10,813
  11,271
  11,757
  12,273
  12,818
  13,395
  14,004
  14,648
  15,327
  16,043
  16,797
  17,593
  18,430
  19,312
  20,240
  21,217
  22,244
  23,325
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
  7,820
  7,987
  8,177
  8,391
  8,629
  8,889
  9,172
  9,479
  9,810
  10,164
  9,977
  10,382
  10,813
  11,271
  11,757
  12,273
  12,818
  13,395
  14,004
  14,648
  15,327
  16,043
  16,797
  17,593
  18,430
  19,312
  20,240
  21,217
  22,244
  23,325
Operating income, $m
  1,448
  1,494
  1,547
  1,607
  1,673
  1,745
  1,824
  1,909
  2,001
  2,099
  2,772
  2,884
  3,004
  3,131
  3,266
  3,409
  3,561
  3,721
  3,890
  4,069
  4,258
  4,457
  4,666
  4,887
  5,120
  5,365
  5,623
  5,894
  6,179
  6,480
EBITDA, $m
  3,789
  3,876
  3,975
  4,087
  4,211
  4,347
  4,495
  4,655
  4,828
  5,013
  5,212
  5,423
  5,648
  5,888
  6,142
  6,411
  6,696
  6,997
  7,315
  7,651
  8,006
  8,380
  8,774
  9,190
  9,627
  10,088
  10,573
  11,083
  11,620
  12,184
Interest expense (income), $m
  789
  660
  678
  699
  722
  749
  778
  810
  845
  883
  924
  967
  1,014
  1,064
  1,117
  1,174
  1,234
  1,297
  1,365
  1,436
  1,511
  1,590
  1,674
  1,762
  1,855
  1,953
  2,057
  2,165
  2,280
  2,400
  2,527
Earnings before tax, $m
  788
  816
  848
  884
  924
  967
  1,014
  1,064
  1,118
  1,176
  1,804
  1,870
  1,940
  2,014
  2,092
  2,176
  2,264
  2,357
  2,455
  2,558
  2,668
  2,783
  2,904
  3,032
  3,166
  3,308
  3,457
  3,614
  3,779
  3,953
Tax expense, $m
  213
  220
  229
  239
  249
  261
  274
  287
  302
  317
  487
  505
  524
  544
  565
  587
  611
  636
  663
  691
  720
  751
  784
  819
  855
  893
  933
  976
  1,020
  1,067
Net income, $m
  575
  596
  619
  646
  674
  706
  740
  777
  816
  858
  1,317
  1,365
  1,416
  1,470
  1,527
  1,588
  1,652
  1,720
  1,792
  1,868
  1,947
  2,031
  2,120
  2,213
  2,311
  2,415
  2,524
  2,638
  2,759
  2,885

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
  14,391
  14,722
  15,100
  15,525
  15,996
  16,512
  17,074
  17,683
  18,339
  19,043
  19,796
  20,599
  21,455
  22,364
  23,328
  24,351
  25,433
  26,577
  27,786
  29,063
  30,410
  31,831
  33,329
  34,906
  36,568
  38,318
  40,159
  42,097
  44,136
  46,280
Adjusted assets (=assets-cash), $m
  14,391
  14,722
  15,100
  15,525
  15,996
  16,512
  17,074
  17,683
  18,339
  19,043
  19,796
  20,599
  21,455
  22,364
  23,328
  24,351
  25,433
  26,577
  27,786
  29,063
  30,410
  31,831
  33,329
  34,906
  36,568
  38,318
  40,159
  42,097
  44,136
  46,280
Revenue / Adjusted assets
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
Average production assets, $m
  8,869
  9,073
  9,306
  9,568
  9,858
  10,177
  10,523
  10,898
  11,302
  11,736
  12,200
  12,695
  13,223
  13,783
  14,377
  15,008
  15,674
  16,380
  17,125
  17,912
  18,742
  19,618
  20,541
  21,513
  22,537
  23,616
  24,751
  25,945
  27,201
  28,523
Working capital, $m
  -1,965
  -2,010
  -2,062
  -2,120
  -2,184
  -2,254
  -2,331
  -2,414
  -2,504
  -2,600
  -2,703
  -2,812
  -2,929
  -3,053
  -3,185
  -3,325
  -3,472
  -3,629
  -3,794
  -3,968
  -4,152
  -4,346
  -4,550
  -4,766
  -4,993
  -5,231
  -5,483
  -5,747
  -6,026
  -6,319
Total debt, $m
  8,073
  8,318
  8,598
  8,912
  9,261
  9,643
  10,059
  10,510
  10,995
  11,516
  12,073
  12,667
  13,300
  13,973
  14,687
  15,444
  16,244
  17,091
  17,986
  18,931
  19,928
  20,979
  22,087
  23,255
  24,484
  25,779
  27,142
  28,576
  30,085
  31,672
Total liabilities, $m
  10,649
  10,894
  11,174
  11,488
  11,837
  12,219
  12,635
  13,086
  13,571
  14,092
  14,649
  15,243
  15,876
  16,549
  17,263
  18,020
  18,820
  19,667
  20,562
  21,507
  22,504
  23,555
  24,663
  25,831
  27,060
  28,355
  29,718
  31,152
  32,661
  34,248
Total equity, $m
  3,742
  3,828
  3,926
  4,036
  4,159
  4,293
  4,439
  4,598
  4,768
  4,951
  5,147
  5,356
  5,578
  5,815
  6,065
  6,331
  6,613
  6,910
  7,224
  7,556
  7,907
  8,276
  8,665
  9,076
  9,508
  9,963
  10,441
  10,945
  11,475
  12,033
Total liabilities and equity, $m
  14,391
  14,722
  15,100
  15,524
  15,996
  16,512
  17,074
  17,684
  18,339
  19,043
  19,796
  20,599
  21,454
  22,364
  23,328
  24,351
  25,433
  26,577
  27,786
  29,063
  30,411
  31,831
  33,328
  34,907
  36,568
  38,318
  40,159
  42,097
  44,136
  46,281
Debt-to-equity ratio
  2.160
  2.170
  2.190
  2.210
  2.230
  2.250
  2.270
  2.290
  2.310
  2.330
  2.350
  2.370
  2.380
  2.400
  2.420
  2.440
  2.460
  2.470
  2.490
  2.510
  2.520
  2.530
  2.550
  2.560
  2.580
  2.590
  2.600
  2.610
  2.620
  2.630
Adjusted equity ratio
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  575
  596
  619
  646
  674
  706
  740
  777
  816
  858
  1,317
  1,365
  1,416
  1,470
  1,527
  1,588
  1,652
  1,720
  1,792
  1,868
  1,947
  2,031
  2,120
  2,213
  2,311
  2,415
  2,524
  2,638
  2,759
  2,885
Depreciation, amort., depletion, $m
  2,341
  2,382
  2,428
  2,481
  2,539
  2,602
  2,672
  2,747
  2,827
  2,914
  2,440
  2,539
  2,645
  2,757
  2,875
  3,002
  3,135
  3,276
  3,425
  3,582
  3,748
  3,924
  4,108
  4,303
  4,507
  4,723
  4,950
  5,189
  5,440
  5,705
Funds from operations, $m
  2,916
  2,977
  3,048
  3,126
  3,213
  3,308
  3,412
  3,523
  3,643
  3,772
  3,757
  3,904
  4,061
  4,227
  4,403
  4,590
  4,787
  4,996
  5,217
  5,450
  5,696
  5,955
  6,228
  6,516
  6,819
  7,138
  7,474
  7,827
  8,199
  8,590
Change in working capital, $m
  -39
  -45
  -52
  -58
  -64
  -71
  -77
  -83
  -90
  -96
  -103
  -110
  -117
  -124
  -132
  -140
  -148
  -156
  -165
  -174
  -184
  -194
  -204
  -215
  -227
  -239
  -251
  -265
  -278
  -293
Cash from operations, $m
  2,955
  3,023
  3,099
  3,184
  3,277
  3,379
  3,488
  3,606
  3,733
  3,868
  3,860
  4,014
  4,177
  4,351
  4,535
  4,729
  4,935
  5,152
  5,382
  5,624
  5,880
  6,149
  6,433
  6,731
  7,046
  7,377
  7,725
  8,092
  8,477
  8,883
Maintenance CAPEX, $m
  -1,740
  -1,774
  -1,815
  -1,861
  -1,914
  -1,972
  -2,035
  -2,105
  -2,180
  -2,260
  -2,347
  -2,440
  -2,539
  -2,645
  -2,757
  -2,875
  -3,002
  -3,135
  -3,276
  -3,425
  -3,582
  -3,748
  -3,924
  -4,108
  -4,303
  -4,507
  -4,723
  -4,950
  -5,189
  -5,440
New CAPEX, $m
  -171
  -204
  -233
  -262
  -290
  -318
  -347
  -375
  -404
  -434
  -464
  -495
  -527
  -560
  -595
  -630
  -667
  -705
  -745
  -787
  -830
  -876
  -923
  -972
  -1,024
  -1,078
  -1,135
  -1,194
  -1,257
  -1,322
Cash from investing activities, $m
  -1,911
  -1,978
  -2,048
  -2,123
  -2,204
  -2,290
  -2,382
  -2,480
  -2,584
  -2,694
  -2,811
  -2,935
  -3,066
  -3,205
  -3,352
  -3,505
  -3,669
  -3,840
  -4,021
  -4,212
  -4,412
  -4,624
  -4,847
  -5,080
  -5,327
  -5,585
  -5,858
  -6,144
  -6,446
  -6,762
Free cash flow, $m
  1,044
  1,045
  1,051
  1,061
  1,074
  1,089
  1,106
  1,127
  1,149
  1,174
  1,049
  1,079
  1,111
  1,146
  1,184
  1,224
  1,267
  1,312
  1,361
  1,412
  1,467
  1,525
  1,586
  1,651
  1,719
  1,791
  1,867
  1,947
  2,032
  2,121
Issuance/(repayment) of debt, $m
  217
  245
  280
  314
  348
  382
  416
  450
  485
  521
  557
  595
  633
  673
  714
  757
  801
  847
  895
  945
  997
  1,051
  1,108
  1,168
  1,230
  1,295
  1,363
  1,434
  1,509
  1,587
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  217
  245
  280
  314
  348
  382
  416
  450
  485
  521
  557
  595
  633
  673
  714
  757
  801
  847
  895
  945
  997
  1,051
  1,108
  1,168
  1,230
  1,295
  1,363
  1,434
  1,509
  1,587
Total cash flow (excl. dividends), $m
  1,261
  1,290
  1,331
  1,375
  1,422
  1,471
  1,523
  1,577
  1,634
  1,695
  1,606
  1,673
  1,744
  1,819
  1,897
  1,980
  2,067
  2,159
  2,256
  2,357
  2,464
  2,576
  2,694
  2,818
  2,949
  3,086
  3,230
  3,381
  3,541
  3,708
Retained Cash Flow (-), $m
  -72
  -86
  -98
  -110
  -122
  -134
  -146
  -158
  -171
  -183
  -196
  -209
  -222
  -236
  -251
  -266
  -281
  -298
  -314
  -332
  -350
  -369
  -389
  -410
  -432
  -455
  -479
  -504
  -530
  -558
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
  1,190
  1,204
  1,233
  1,265
  1,300
  1,337
  1,376
  1,419
  1,464
  1,512
  1,410
  1,464
  1,522
  1,582
  1,647
  1,714
  1,786
  1,862
  1,941
  2,025
  2,114
  2,207
  2,305
  2,408
  2,517
  2,631
  2,751
  2,878
  3,010
  3,150
Discount rate, %
  6.20
  6.51
  6.84
  7.18
  7.54
  7.91
  8.31
  8.72
  9.16
  9.62
  10.10
  10.60
  11.13
  11.69
  12.28
  12.89
  13.53
  14.21
  14.92
  15.67
  16.45
  17.27
  18.14
  19.04
  20.00
  21.00
  22.05
  23.15
  24.30
  25.52
PV of cash for distribution, $m
  1,120
  1,061
  1,011
  959
  904
  846
  787
  727
  665
  604
  489
  437
  386
  337
  290
  246
  206
  170
  138
  110
  86
  66
  50
  37
  26
  19
  13
  8
  5
  3
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

VEON Ltd., formerly VimpelCom Ltd., is a provider of communications services. The Company operates as personal internet platform. It integrates powerful data analytics and artificial intelligence, with a fresh take on messaging capabilities. It enables its users and communities to connect by voice, text, picture and video through a designed interface.

FINANCIAL RATIOS  of  VEON Ltd. (VEON)

Valuation Ratios
P/E Ratio 1.9
Price to Sales 0.5
Price to Book 0.7
Price to Tangible Book
Price to Cash Flow 2
Price to Free Cash Flow 8.1
Growth Rates
Sales Growth Rate -7.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -25.2%
Cap. Spend. - 3 Yr. Gr. Rate -10.7%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 135.4%
Total Debt to Equity 186.5%
Interest Coverage 1
Management Effectiveness
Return On Assets 6.1%
Ret/ On Assets - 3 Yr. Avg. 1.5%
Return On Total Capital 15.2%
Ret/ On T. Cap. - 3 Yr. Avg. 3.5%
Return On Equity 47.9%
Return On Equity - 3 Yr. Avg. 8.1%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 77.7%
Gross Margin - 3 Yr. Avg. 77.1%
EBITDA Margin 34.6%
EBITDA Margin - 3 Yr. Avg. 29.3%
Operating Margin 12.2%
Oper. Margin - 3 Yr. Avg. 10.5%
Pre-Tax Margin 3.9%
Pre-Tax Margin - 3 Yr. Avg. 0.2%
Net Profit Margin 26.2%
Net Profit Margin - 3 Yr. Avg. 4.9%
Effective Tax Rate 183%
Eff/ Tax Rate - 3 Yr. Avg. 101.8%
Payout Ratio 2.6%

VEON stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VEON stock intrinsic value calculation we used $9086 million for the last fiscal year's total revenue generated by VEON Ltd.. The default revenue input number comes from 0001 income statement of VEON Ltd.. 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 VEON 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 6.2%, whose default value for VEON is calculated based on our internal credit rating of VEON Ltd., 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 VEON Ltd..
    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 VEON stock the variable cost ratio is equal to 84.5%.

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 VEON 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 8.4% for VEON Ltd..

Corporate tax rate of 27% is the nominal tax rate for VEON Ltd.. 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 VEON 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 VEON are equal to 95.7%.

Life of production assets of 4.4 years is the average useful life of capital assets used in VEON Ltd. 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 VEON is equal to -21.2%. 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 - $3670 million for VEON Ltd. - 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 1751.004 million for VEON Ltd. 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 VEON Ltd. at the current share price and the inputted number of shares is $4.4 billion.

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