Intrinsic value of 21Vianet Group, Inc. - VNET

Previous Close

$7.20

  Intrinsic Value

$0.63

stock screener

  Rating & Target

str. sell

-91%

Previous close

$7.20

 
Intrinsic value

$0.63

 
Up/down potential

-91%

 
Rating

str. sell

We calculate the intrinsic value of VNET 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 0.8

 

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
  523
  535
  549
  564
  582
  600
  621
  643
  667
  692
  720
  749
  780
  813
  848
  885
  925
  966
  1,010
  1,057
  1,106
  1,157
  1,212
  1,269
  1,330
  1,393
  1,460
  1,531
  1,605
  1,683
Variable operating expenses, $m
  657
  671
  687
  705
  724
  746
  770
  795
  823
  853
  834
  868
  904
  943
  983
  1,026
  1,072
  1,120
  1,171
  1,225
  1,282
  1,342
  1,405
  1,471
  1,541
  1,615
  1,693
  1,774
  1,860
  1,951
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
  657
  671
  687
  705
  724
  746
  770
  795
  823
  853
  834
  868
  904
  943
  983
  1,026
  1,072
  1,120
  1,171
  1,225
  1,282
  1,342
  1,405
  1,471
  1,541
  1,615
  1,693
  1,774
  1,860
  1,951
Operating income, $m
  -133
  -135
  -138
  -140
  -143
  -146
  -149
  -153
  -156
  -160
  -115
  -119
  -124
  -129
  -135
  -141
  -147
  -154
  -161
  -168
  -176
  -184
  -193
  -202
  -212
  -222
  -232
  -244
  -255
  -268
EBITDA, $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
Interest expense (income), $m
  23
  28
  29
  30
  31
  32
  33
  35
  37
  38
  40
  42
  44
  47
  49
  52
  54
  57
  60
  64
  67
  71
  75
  79
  83
  88
  92
  97
  103
  108
  114
Earnings before tax, $m
  -161
  -164
  -167
  -171
  -175
  -179
  -184
  -189
  -195
  -201
  -157
  -163
  -171
  -178
  -187
  -195
  -204
  -214
  -224
  -235
  -247
  -259
  -272
  -285
  -299
  -314
  -330
  -346
  -363
  -382
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
  -161
  -164
  -167
  -171
  -175
  -179
  -184
  -189
  -195
  -201
  -157
  -163
  -171
  -178
  -187
  -195
  -204
  -214
  -224
  -235
  -247
  -259
  -272
  -285
  -299
  -314
  -330
  -346
  -363
  -382

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
  1,328
  1,359
  1,394
  1,433
  1,476
  1,524
  1,576
  1,632
  1,692
  1,757
  1,827
  1,901
  1,980
  2,064
  2,153
  2,247
  2,347
  2,453
  2,564
  2,682
  2,806
  2,938
  3,076
  3,221
  3,375
  3,536
  3,706
  3,885
  4,073
  4,271
Adjusted assets (=assets-cash), $m
  1,328
  1,359
  1,394
  1,433
  1,476
  1,524
  1,576
  1,632
  1,692
  1,757
  1,827
  1,901
  1,980
  2,064
  2,153
  2,247
  2,347
  2,453
  2,564
  2,682
  2,806
  2,938
  3,076
  3,221
  3,375
  3,536
  3,706
  3,885
  4,073
  4,271
Revenue / Adjusted assets
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
Average production assets, $m
  700
  716
  735
  755
  778
  803
  831
  860
  892
  926
  963
  1,002
  1,044
  1,088
  1,135
  1,185
  1,237
  1,293
  1,352
  1,414
  1,479
  1,549
  1,621
  1,698
  1,779
  1,864
  1,954
  2,048
  2,147
  2,252
Working capital, $m
  9
  10
  10
  10
  10
  11
  11
  12
  12
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
Total debt, $m
  473
  488
  506
  526
  548
  572
  599
  627
  658
  691
  726
  764
  804
  847
  892
  940
  991
  1,044
  1,101
  1,161
  1,224
  1,290
  1,361
  1,435
  1,513
  1,595
  1,681
  1,772
  1,867
  1,968
Total liabilities, $m
  675
  690
  708
  728
  750
  774
  800
  829
  860
  893
  928
  966
  1,006
  1,048
  1,094
  1,142
  1,192
  1,246
  1,303
  1,363
  1,426
  1,492
  1,562
  1,636
  1,714
  1,796
  1,883
  1,974
  2,069
  2,170
Total equity, $m
  653
  668
  686
  705
  726
  750
  775
  803
  833
  865
  899
  935
  974
  1,015
  1,059
  1,106
  1,155
  1,207
  1,262
  1,320
  1,381
  1,445
  1,513
  1,585
  1,660
  1,740
  1,823
  1,911
  2,004
  2,101
Total liabilities and equity, $m
  1,328
  1,358
  1,394
  1,433
  1,476
  1,524
  1,575
  1,632
  1,693
  1,758
  1,827
  1,901
  1,980
  2,063
  2,153
  2,248
  2,347
  2,453
  2,565
  2,683
  2,807
  2,937
  3,075
  3,221
  3,374
  3,536
  3,706
  3,885
  4,073
  4,271
Debt-to-equity ratio
  0.720
  0.730
  0.740
  0.750
  0.750
  0.760
  0.770
  0.780
  0.790
  0.800
  0.810
  0.820
  0.830
  0.830
  0.840
  0.850
  0.860
  0.870
  0.870
  0.880
  0.890
  0.890
  0.900
  0.910
  0.910
  0.920
  0.920
  0.930
  0.930
  0.940
Adjusted equity ratio
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -161
  -164
  -167
  -171
  -175
  -179
  -184
  -189
  -195
  -201
  -157
  -163
  -171
  -178
  -187
  -195
  -204
  -214
  -224
  -235
  -247
  -259
  -272
  -285
  -299
  -314
  -330
  -346
  -363
  -382
Depreciation, amort., depletion, $m
  134
  135
  138
  140
  143
  146
  149
  153
  156
  160
  115
  119
  124
  130
  135
  141
  147
  154
  161
  168
  176
  184
  193
  202
  212
  222
  233
  244
  256
  268
Funds from operations, $m
  -28
  -29
  -30
  -31
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -49
  -52
  -54
  -57
  -60
  -64
  -67
  -71
  -74
  -79
  -83
  -87
  -92
  -97
  -102
  -108
  -114
Change in working capital, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Cash from operations, $m
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -39
  -40
  -43
  -45
  -47
  -50
  -52
  -55
  -58
  -61
  -64
  -68
  -72
  -75
  -80
  -84
  -88
  -93
  -98
  -104
  -109
  -115
Maintenance CAPEX, $m
  -82
  -83
  -85
  -87
  -90
  -93
  -96
  -99
  -102
  -106
  -110
  -115
  -119
  -124
  -130
  -135
  -141
  -147
  -154
  -161
  -168
  -176
  -184
  -193
  -202
  -212
  -222
  -233
  -244
  -256
New CAPEX, $m
  -14
  -16
  -18
  -21
  -23
  -25
  -27
  -30
  -32
  -34
  -37
  -39
  -42
  -44
  -47
  -50
  -53
  -56
  -59
  -62
  -66
  -69
  -73
  -77
  -81
  -85
  -90
  -94
  -99
  -104
Cash from investing activities, $m
  -96
  -99
  -103
  -108
  -113
  -118
  -123
  -129
  -134
  -140
  -147
  -154
  -161
  -168
  -177
  -185
  -194
  -203
  -213
  -223
  -234
  -245
  -257
  -270
  -283
  -297
  -312
  -327
  -343
  -360
Free cash flow, $m
  -124
  -128
  -134
  -139
  -145
  -151
  -158
  -165
  -173
  -181
  -189
  -198
  -208
  -218
  -229
  -240
  -252
  -264
  -277
  -291
  -305
  -321
  -337
  -354
  -371
  -390
  -410
  -430
  -452
  -475
Issuance/(repayment) of debt, $m
  13
  16
  18
  20
  22
  24
  26
  29
  31
  33
  35
  38
  40
  43
  45
  48
  51
  54
  57
  60
  63
  67
  70
  74
  78
  82
  86
  91
  96
  101
Issuance/(repurchase) of shares, $m
  175
  179
  185
  190
  196
  203
  209
  217
  224
  232
  191
  200
  210
  220
  230
  242
  254
  266
  279
  293
  308
  323
  340
  357
  375
  393
  413
  434
  456
  479
Cash from financing (excl. dividends), $m  
  188
  195
  203
  210
  218
  227
  235
  246
  255
  265
  226
  238
  250
  263
  275
  290
  305
  320
  336
  353
  371
  390
  410
  431
  453
  475
  499
  525
  552
  580
Total cash flow (excl. dividends), $m
  65
  66
  69
  71
  73
  75
  78
  80
  82
  85
  37
  39
  42
  44
  47
  50
  53
  56
  59
  62
  66
  69
  73
  77
  81
  85
  90
  95
  99
  105
Retained Cash Flow (-), $m
  -175
  -179
  -185
  -190
  -196
  -203
  -209
  -217
  -224
  -232
  -191
  -200
  -210
  -220
  -230
  -242
  -254
  -266
  -279
  -293
  -308
  -323
  -340
  -357
  -375
  -393
  -413
  -434
  -456
  -479
Prev. year cash balance distribution, $m
  146
  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
  36
  -113
  -116
  -119
  -123
  -127
  -132
  -137
  -142
  -148
  -154
  -161
  -168
  -175
  -183
  -192
  -201
  -210
  -220
  -231
  -242
  -254
  -267
  -280
  -294
  -308
  -323
  -340
  -357
  -374
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
  34
  -103
  -101
  -98
  -95
  -92
  -89
  -85
  -82
  -78
  -73
  -69
  -64
  -59
  -54
  -49
  -44
  -39
  -34
  -29
  -25
  -21
  -17
  -14
  -11
  -9
  -7
  -5
  -4
  -3
Current shareholders' claim on cash, %
  79.0
  62.3
  49.1
  38.7
  30.4
  23.9
  18.8
  14.8
  11.6
  9.1
  7.5
  6.2
  5.1
  4.2
  3.4
  2.8
  2.3
  1.9
  1.5
  1.2
  1.0
  0.8
  0.7
  0.5
  0.4
  0.4
  0.3
  0.2
  0.2
  0.2

21Vianet Group, Inc. is a carrier-neutral Internet data center services provider. The Company hosts its customers' servers and networking equipment and provides interconnectivity. The Company also provides managed network services to enable customers to deliver data across the Internet through its data transmission network and smart routing technology. The Company provides value-added services, such as content delivery network (CDN) services, virtual private network (VPN) services and last-mile wired broadband services. It offers public cloud services, private cloud and hybrid services. In addition, the Company also offers container-based data center service. The Company's service offerings include hosting and related services, and managed network services. The Company provides hosting and related services to house servers and networking equipment in its data centers and connects them through its data transmission network, and offers other hosting related value-added services.

FINANCIAL RATIOS  of  21Vianet Group, Inc. (VNET)

Valuation Ratios
P/E Ratio -53.2
Price to Sales 9.3
Price to Book 5.5
Price to Tangible Book
Price to Cash Flow 407.9
Price to Free Cash Flow -63.6
Growth Rates
Sales Growth Rate 0.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -44%
Cap. Spend. - 3 Yr. Gr. Rate 6.2%
Financial Strength
Quick Ratio 1
Current Ratio 0.5
LT Debt to Equity 13.1%
Total Debt to Equity 52.1%
Interest Coverage -5
Management Effectiveness
Return On Assets -4.1%
Ret/ On Assets - 3 Yr. Avg. -2.3%
Return On Total Capital -7.6%
Ret/ On T. Cap. - 3 Yr. Avg. -6.7%
Return On Equity -12.5%
Return On Equity - 3 Yr. Avg. -13.7%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 19.5%
Gross Margin - 3 Yr. Avg. 23.7%
EBITDA Margin -3.2%
EBITDA Margin - 3 Yr. Avg. 7%
Operating Margin -23.9%
Oper. Margin - 3 Yr. Avg. -12.4%
Pre-Tax Margin -25.8%
Pre-Tax Margin - 3 Yr. Avg. -15.4%
Net Profit Margin -17.5%
Net Profit Margin - 3 Yr. Avg. -13.8%
Effective Tax Rate 0.7%
Eff/ Tax Rate - 3 Yr. Avg. -6.6%
Payout Ratio 0%

VNET stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VNET stock intrinsic value calculation we used $513 million for the last fiscal year's total revenue generated by 21Vianet Group, Inc.. The default revenue input number comes from 0001 income statement of 21Vianet Group, 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 VNET 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 4.3%, whose default value for VNET is calculated based on our internal credit rating of 21Vianet Group, 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 21Vianet Group, 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 VNET stock the variable cost ratio is equal to 125.7%.

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 VNET 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 6.1% for 21Vianet Group, Inc..

Corporate tax rate of 27% is the nominal tax rate for 21Vianet Group, 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 VNET 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 VNET are equal to 133.8%.

Life of production assets of 8.4 years is the average useful life of capital assets used in 21Vianet Group, 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 VNET is equal to 1.8%. 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 - $786.125151149 million for 21Vianet Group, 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 112.098 million for 21Vianet Group, 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 21Vianet Group, Inc. at the current share price and the inputted number of shares is $0.8 billion.

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