Intrinsic value of Xunlei Limited - XNET

Previous Close

$2.21

  Intrinsic Value

$1.64

stock screener

  Rating & Target

sell

-26%

Previous close

$2.21

 
Intrinsic value

$1.64

 
Up/down potential

-26%

 
Rating

sell

We calculate the intrinsic value of XNET 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 0.1

 

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, %
  43.10
  39.29
  35.86
  32.77
  30.00
  27.50
  25.25
  23.22
  21.40
  19.76
  18.28
  16.96
  15.76
  14.68
  13.72
  12.84
  12.06
  11.35
  10.72
  10.15
  9.63
  9.17
  8.75
  8.38
  8.04
  7.74
  7.46
  7.22
  6.99
  6.79
Revenue, $m
  288
  401
  544
  723
  940
  1,198
  1,500
  1,849
  2,244
  2,688
  3,179
  3,718
  4,304
  4,936
  5,614
  6,335
  7,099
  7,905
  8,752
  9,640
  10,568
  11,537
  12,547
  13,598
  14,691
  15,828
  17,009
  18,236
  19,511
  20,837
Variable operating expenses, $m
  345
  480
  651
  863
  1,121
  1,429
  1,789
  2,204
  2,675
  3,203
  3,785
  4,427
  5,125
  5,877
  6,683
  7,542
  8,451
  9,411
  10,420
  11,477
  12,582
  13,736
  14,938
  16,189
  17,491
  18,844
  20,250
  21,711
  23,230
  24,808
Fixed operating expenses, $m
  13
  14
  14
  14
  14
  15
  15
  15
  16
  16
  17
  17
  17
  18
  18
  18
  19
  19
  20
  20
  21
  21
  21
  22
  22
  23
  23
  24
  24
  25
Total operating expenses, $m
  358
  494
  665
  877
  1,135
  1,444
  1,804
  2,219
  2,691
  3,219
  3,802
  4,444
  5,142
  5,895
  6,701
  7,560
  8,470
  9,430
  10,440
  11,497
  12,603
  13,757
  14,959
  16,211
  17,513
  18,867
  20,273
  21,735
  23,254
  24,833
Operating income, $m
  -71
  -93
  -120
  -155
  -196
  -246
  -304
  -370
  -446
  -531
  -622
  -725
  -838
  -958
  -1,088
  -1,226
  -1,372
  -1,526
  -1,687
  -1,857
  -2,035
  -2,220
  -2,413
  -2,613
  -2,822
  -3,039
  -3,265
  -3,499
  -3,743
  -3,996
EBITDA, $m
  -58
  -76
  -98
  -126
  -160
  -200
  -247
  -302
  -363
  -432
  -509
  -592
  -684
  -782
  -887
  -999
  -1,118
  -1,243
  -1,374
  -1,512
  -1,656
  -1,807
  -1,964
  -2,127
  -2,297
  -2,473
  -2,656
  -2,847
  -3,045
  -3,251
Interest expense (income), $m
  0
  0
  3
  8
  14
  21
  29
  40
  52
  66
  81
  99
  119
  140
  164
  189
  216
  244
  275
  307
  341
  376
  413
  452
  492
  534
  577
  623
  670
  719
  770
Earnings before tax, $m
  -71
  -96
  -128
  -168
  -217
  -275
  -343
  -422
  -512
  -612
  -721
  -844
  -978
  -1,122
  -1,276
  -1,441
  -1,616
  -1,800
  -1,994
  -2,198
  -2,411
  -2,633
  -2,864
  -3,105
  -3,356
  -3,617
  -3,887
  -4,169
  -4,461
  -4,765
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
  -71
  -96
  -128
  -168
  -217
  -275
  -343
  -422
  -512
  -612
  -721
  -844
  -978
  -1,122
  -1,276
  -1,441
  -1,616
  -1,800
  -1,994
  -2,198
  -2,411
  -2,633
  -2,864
  -3,105
  -3,356
  -3,617
  -3,887
  -4,169
  -4,461
  -4,765

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
  433
  603
  820
  1,088
  1,415
  1,804
  2,259
  2,784
  3,380
  4,048
  4,788
  5,600
  6,483
  7,434
  8,454
  9,540
  10,691
  11,904
  13,180
  14,518
  15,916
  17,376
  18,896
  20,479
  22,125
  23,837
  25,616
  27,464
  29,385
  31,381
Adjusted assets (=assets-cash), $m
  433
  603
  820
  1,088
  1,415
  1,804
  2,259
  2,784
  3,380
  4,048
  4,788
  5,600
  6,483
  7,434
  8,454
  9,540
  10,691
  11,904
  13,180
  14,518
  15,916
  17,376
  18,896
  20,479
  22,125
  23,837
  25,616
  27,464
  29,385
  31,381
Revenue / Adjusted assets
  0.665
  0.665
  0.663
  0.665
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
Average production assets, $m
  53
  75
  101
  134
  175
  223
  279
  344
  417
  500
  591
  692
  801
  918
  1,044
  1,178
  1,320
  1,470
  1,628
  1,793
  1,966
  2,146
  2,334
  2,529
  2,733
  2,944
  3,164
  3,392
  3,629
  3,876
Working capital, $m
  -119
  -166
  -225
  -299
  -389
  -496
  -621
  -765
  -929
  -1,113
  -1,316
  -1,539
  -1,782
  -2,044
  -2,324
  -2,623
  -2,939
  -3,272
  -3,623
  -3,991
  -4,375
  -4,776
  -5,194
  -5,630
  -6,082
  -6,553
  -7,042
  -7,550
  -8,078
  -8,627
Total debt, $m
  64
  147
  253
  385
  545
  736
  959
  1,216
  1,508
  1,835
  2,198
  2,596
  3,028
  3,494
  3,994
  4,526
  5,090
  5,685
  6,310
  6,965
  7,651
  8,366
  9,111
  9,886
  10,693
  11,532
  12,403
  13,309
  14,250
  15,228
Total liabilities, $m
  212
  296
  402
  533
  693
  884
  1,107
  1,364
  1,656
  1,983
  2,346
  2,744
  3,176
  3,643
  4,143
  4,675
  5,238
  5,833
  6,458
  7,114
  7,799
  8,514
  9,259
  10,035
  10,841
  11,680
  12,552
  13,457
  14,398
  15,377
Total equity, $m
  221
  308
  418
  555
  722
  920
  1,152
  1,420
  1,724
  2,064
  2,442
  2,856
  3,306
  3,792
  4,312
  4,865
  5,452
  6,071
  6,722
  7,404
  8,117
  8,862
  9,637
  10,444
  11,284
  12,157
  13,064
  14,007
  14,986
  16,004
Total liabilities and equity, $m
  433
  604
  820
  1,088
  1,415
  1,804
  2,259
  2,784
  3,380
  4,047
  4,788
  5,600
  6,482
  7,435
  8,455
  9,540
  10,690
  11,904
  13,180
  14,518
  15,916
  17,376
  18,896
  20,479
  22,125
  23,837
  25,616
  27,464
  29,384
  31,381
Debt-to-equity ratio
  0.290
  0.480
  0.610
  0.690
  0.760
  0.800
  0.830
  0.860
  0.870
  0.890
  0.900
  0.910
  0.920
  0.920
  0.930
  0.930
  0.930
  0.940
  0.940
  0.940
  0.940
  0.940
  0.950
  0.950
  0.950
  0.950
  0.950
  0.950
  0.950
  0.950
Adjusted equity ratio
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -71
  -96
  -128
  -168
  -217
  -275
  -343
  -422
  -512
  -612
  -721
  -844
  -978
  -1,122
  -1,276
  -1,441
  -1,616
  -1,800
  -1,994
  -2,198
  -2,411
  -2,633
  -2,864
  -3,105
  -3,356
  -3,617
  -3,887
  -4,169
  -4,461
  -4,765
Depreciation, amort., depletion, $m
  13
  17
  22
  29
  36
  46
  56
  69
  83
  99
  114
  133
  154
  177
  201
  227
  254
  283
  313
  345
  378
  413
  449
  486
  525
  566
  608
  652
  698
  745
Funds from operations, $m
  -58
  -79
  -106
  -140
  -181
  -230
  -287
  -353
  -429
  -514
  -608
  -711
  -824
  -945
  -1,076
  -1,215
  -1,362
  -1,518
  -1,681
  -1,853
  -2,033
  -2,220
  -2,415
  -2,619
  -2,830
  -3,050
  -3,279
  -3,517
  -3,763
  -4,020
Change in working capital, $m
  -36
  -47
  -59
  -74
  -90
  -107
  -125
  -144
  -164
  -184
  -203
  -223
  -243
  -262
  -280
  -299
  -316
  -334
  -351
  -368
  -384
  -401
  -418
  -435
  -453
  -470
  -489
  -508
  -528
  -549
Cash from operations, $m
  -22
  -32
  -47
  -66
  -91
  -123
  -162
  -209
  -265
  -330
  -404
  -488
  -581
  -684
  -795
  -916
  -1,046
  -1,184
  -1,331
  -1,485
  -1,648
  -1,819
  -1,997
  -2,184
  -2,378
  -2,580
  -2,790
  -3,008
  -3,235
  -3,471
Maintenance CAPEX, $m
  -7
  -10
  -14
  -19
  -26
  -34
  -43
  -54
  -66
  -80
  -96
  -114
  -133
  -154
  -177
  -201
  -227
  -254
  -283
  -313
  -345
  -378
  -413
  -449
  -486
  -525
  -566
  -608
  -652
  -698
New CAPEX, $m
  -16
  -21
  -27
  -33
  -40
  -48
  -56
  -65
  -74
  -82
  -91
  -100
  -109
  -118
  -126
  -134
  -142
  -150
  -158
  -165
  -173
  -180
  -188
  -195
  -203
  -211
  -220
  -228
  -237
  -247
Cash from investing activities, $m
  -23
  -31
  -41
  -52
  -66
  -82
  -99
  -119
  -140
  -162
  -187
  -214
  -242
  -272
  -303
  -335
  -369
  -404
  -441
  -478
  -518
  -558
  -601
  -644
  -689
  -736
  -786
  -836
  -889
  -945
Free cash flow, $m
  -45
  -64
  -88
  -119
  -157
  -204
  -261
  -328
  -405
  -493
  -592
  -702
  -823
  -955
  -1,098
  -1,251
  -1,414
  -1,588
  -1,771
  -1,964
  -2,166
  -2,377
  -2,598
  -2,828
  -3,068
  -3,317
  -3,576
  -3,845
  -4,125
  -4,416
Issuance/(repayment) of debt, $m
  64
  83
  106
  132
  160
  191
  223
  257
  292
  327
  363
  398
  432
  466
  500
  532
  564
  595
  625
  655
  685
  715
  745
  776
  807
  839
  872
  906
  941
  978
Issuance/(repurchase) of shares, $m
  137
  183
  239
  305
  384
  474
  576
  690
  816
  953
  1,099
  1,258
  1,428
  1,607
  1,797
  1,995
  2,203
  2,419
  2,645
  2,880
  3,124
  3,377
  3,640
  3,913
  4,196
  4,489
  4,795
  5,111
  5,441
  5,784
Cash from financing (excl. dividends), $m  
  201
  266
  345
  437
  544
  665
  799
  947
  1,108
  1,280
  1,462
  1,656
  1,860
  2,073
  2,297
  2,527
  2,767
  3,014
  3,270
  3,535
  3,809
  4,092
  4,385
  4,689
  5,003
  5,328
  5,667
  6,017
  6,382
  6,762
Total cash flow (excl. dividends), $m
  156
  203
  257
  318
  386
  460
  538
  619
  703
  788
  870
  954
  1,037
  1,119
  1,198
  1,276
  1,352
  1,426
  1,499
  1,572
  1,643
  1,715
  1,787
  1,860
  1,935
  2,011
  2,090
  2,172
  2,257
  2,346
Retained Cash Flow (-), $m
  -137
  -183
  -239
  -305
  -384
  -474
  -576
  -690
  -816
  -953
  -1,099
  -1,258
  -1,428
  -1,607
  -1,797
  -1,995
  -2,203
  -2,419
  -2,645
  -2,880
  -3,124
  -3,377
  -3,640
  -3,913
  -4,196
  -4,489
  -4,795
  -5,111
  -5,441
  -5,784
Prev. year cash balance distribution, $m
  231
  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
  249
  20
  18
  13
  3
  -14
  -38
  -71
  -113
  -166
  -229
  -304
  -391
  -489
  -598
  -719
  -851
  -993
  -1,146
  -1,308
  -1,481
  -1,662
  -1,853
  -2,052
  -2,261
  -2,478
  -2,704
  -2,939
  -3,184
  -3,437
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
  239
  18
  16
  11
  2
  -10
  -26
  -44
  -65
  -87
  -109
  -130
  -149
  -164
  -176
  -183
  -185
  -183
  -176
  -166
  -153
  -138
  -121
  -105
  -88
  -72
  -58
  -45
  -35
  -26
Current shareholders' claim on cash, %
  44.0
  20.2
  9.6
  4.7
  2.4
  1.2
  0.6
  0.3
  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
  0.0
  0.0
  0.0
  0.0
  0.0

Xunlei Limited (Xunlei) is a cloud-based acceleration technology company. The Company operates an Internet platform in China based on cloud computing to enable users to access, manage and consume digital media content. The Company's segment is the operation of its online media platform. The Company's products and services include Xunlei Accelerator, which enables users to accelerate digital transmission over the Internet, and cloud acceleration subscription services, which offer user services for speed and reliability. The Company's Xunlei Accelerator allows users to accelerate digital transmission over the Internet. Xunlei Accelerator also bridges users with diverse needs to other services it offers, such as Xunlei Media Player, which supports both online and offline video watching, and its various online games, including Web games and massively multiplayer online games (MMOGs), by recommending and providing links to these services on its user interface.

FINANCIAL RATIOS  of  Xunlei Limited (XNET)

Valuation Ratios
P/E Ratio -30.4
Price to Sales 4.7
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 43
Price to Free Cash Flow 243.5
Growth Rates
Sales Growth Rate 20%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -17.6%
Cap. Spend. - 3 Yr. Gr. Rate -20.1%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -4.6%
Ret/ On Assets - 3 Yr. Avg. -1.4%
Return On Total Capital -5.6%
Ret/ On T. Cap. - 3 Yr. Avg. -1.6%
Return On Equity -5.6%
Return On Equity - 3 Yr. Avg. -1.6%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 48.7%
Gross Margin - 3 Yr. Avg. 53.6%
EBITDA Margin -10.9%
EBITDA Margin - 3 Yr. Avg. 18.9%
Operating Margin -21.8%
Oper. Margin - 3 Yr. Avg. -8.1%
Pre-Tax Margin -16%
Pre-Tax Margin - 3 Yr. Avg. 1.1%
Net Profit Margin -15.4%
Net Profit Margin - 3 Yr. Avg. -5.7%
Effective Tax Rate 4%
Eff/ Tax Rate - 3 Yr. Avg. 13.6%
Payout Ratio 0%

XNET stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the XNET stock intrinsic value calculation we used $201 million for the last fiscal year's total revenue generated by Xunlei Limited. The default revenue input number comes from 0001 income statement of Xunlei Limited. 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 XNET stock valuation model: a) initial revenue growth rate of 43.1% 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 XNET is calculated based on our internal credit rating of Xunlei Limited, 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 Xunlei Limited.
    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 XNET stock the variable cost ratio is equal to 120.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $13 million in the base year in the intrinsic value calculation for XNET 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 Xunlei Limited.

Corporate tax rate of 27% is the nominal tax rate for Xunlei Limited. 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 XNET 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 XNET are equal to 18.6%.

Life of production assets of 5.2 years is the average useful life of capital assets used in Xunlei Limited 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 XNET is equal to -41.4%. 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 - $384.997 million for Xunlei Limited - 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 67.306 million for Xunlei Limited 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 Xunlei Limited at the current share price and the inputted number of shares is $0.1 billion.

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