Intrinsic value of China Southern Airlines Company Limited - ZNH

Previous Close

$40.27

  Intrinsic Value

$7.65

stock screener

  Rating & Target

str. sell

-81%

Previous close

$40.27

 
Intrinsic value

$7.65

 
Up/down potential

-81%

 
Rating

str. sell

We calculate the intrinsic value of ZNH 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 9.9

 

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, %
  16.70
  15.53
  14.48
  13.53
  12.68
  11.91
  11.22
  10.60
  10.04
  9.53
  9.08
  8.67
  8.30
  7.97
  7.68
  7.41
  7.17
  6.95
  6.76
  6.58
  6.42
  6.28
  6.15
  6.04
  5.93
  5.84
  5.76
  5.68
  5.61
  5.55
Revenue, $m
  22,544
  26,045
  29,816
  33,850
  38,141
  42,683
  47,471
  52,501
  57,770
  63,277
  69,022
  75,008
  81,237
  87,714
  94,448
  101,445
  108,717
  116,274
  124,130
  132,298
  140,795
  149,637
  158,843
  168,432
  178,426
  188,846
  199,716
  211,060
  222,906
  235,279
Variable operating expenses, $m
  20,830
  24,065
  27,548
  31,274
  35,238
  39,434
  43,858
  48,504
  53,372
  58,460
  63,764
  69,293
  75,047
  81,032
  87,252
  93,717
  100,434
  107,416
  114,673
  122,219
  130,068
  138,237
  146,741
  155,600
  164,832
  174,458
  184,500
  194,980
  205,923
  217,354
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
  20,830
  24,065
  27,548
  31,274
  35,238
  39,434
  43,858
  48,504
  53,372
  58,460
  63,764
  69,293
  75,047
  81,032
  87,252
  93,717
  100,434
  107,416
  114,673
  122,219
  130,068
  138,237
  146,741
  155,600
  164,832
  174,458
  184,500
  194,980
  205,923
  217,354
Operating income, $m
  1,714
  1,981
  2,268
  2,575
  2,902
  3,248
  3,613
  3,996
  4,398
  4,817
  5,259
  5,715
  6,189
  6,683
  7,196
  7,729
  8,283
  8,859
  9,457
  10,079
  10,727
  11,400
  12,102
  12,832
  13,594
  14,387
  15,216
  16,080
  16,982
  17,925
EBITDA, $m
  8,007
  9,251
  10,590
  12,023
  13,547
  15,160
  16,861
  18,648
  20,519
  22,475
  24,516
  26,642
  28,854
  31,155
  33,547
  36,032
  38,615
  41,299
  44,089
  46,990
  50,008
  53,149
  56,419
  59,825
  63,374
  67,075
  70,936
  74,966
  79,173
  83,568
Interest expense (income), $m
  380
  949
  905
  857
  806
  752
  694
  632
  567
  499
  428
  353
  275
  194
  110
  22
  -69
  -164
  -262
  -364
  -471
  -581
  -696
  -816
  -941
  -1,071
  -1,206
  -1,347
  -1,494
  -1,648
  -1,808
Earnings before tax, $m
  765
  1,076
  1,411
  1,769
  2,150
  2,555
  2,981
  3,429
  3,898
  4,389
  4,905
  5,439
  5,995
  6,573
  7,173
  7,798
  8,446
  9,121
  9,821
  10,550
  11,308
  12,097
  12,918
  13,773
  14,664
  15,594
  16,563
  17,574
  18,630
  19,733
Tax expense, $m
  207
  290
  381
  478
  581
  690
  805
  926
  1,053
  1,185
  1,324
  1,469
  1,619
  1,775
  1,937
  2,105
  2,281
  2,463
  2,652
  2,849
  3,053
  3,266
  3,488
  3,719
  3,959
  4,210
  4,472
  4,745
  5,030
  5,328
Net income, $m
  559
  785
  1,030
  1,291
  1,570
  1,865
  2,176
  2,503
  2,846
  3,204
  3,581
  3,971
  4,376
  4,798
  5,237
  5,692
  6,166
  6,658
  7,170
  7,702
  8,255
  8,831
  9,430
  10,054
  10,705
  11,383
  12,091
  12,829
  13,600
  14,405

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
  3,155
  3,645
  4,172
  4,737
  5,337
  5,973
  6,643
  7,347
  8,084
  8,855
  9,659
  10,496
  11,368
  12,275
  13,217
  14,196
  15,214
  16,271
  17,371
  18,514
  19,703
  20,940
  22,228
  23,570
  24,969
  26,427
  27,948
  29,535
  31,193
  32,925
Adjusted assets (=assets-cash), $m
  3,155
  3,645
  4,172
  4,737
  5,337
  5,973
  6,643
  7,347
  8,084
  8,855
  9,659
  10,496
  11,368
  12,275
  13,217
  14,196
  15,214
  16,271
  17,371
  18,514
  19,703
  20,940
  22,228
  23,570
  24,969
  26,427
  27,948
  29,535
  31,193
  32,925
Revenue / Adjusted assets
  7.145
  7.145
  7.147
  7.146
  7.147
  7.146
  7.146
  7.146
  7.146
  7.146
  7.146
  7.146
  7.146
  7.146
  7.146
  7.146
  7.146
  7.146
  7.146
  7.146
  7.146
  7.146
  7.146
  7.146
  7.146
  7.146
  7.146
  7.146
  7.146
  7.146
Average production assets, $m
  31,449
  36,333
  41,593
  47,220
  53,206
  59,542
  66,222
  73,238
  80,589
  88,271
  96,286
  104,636
  113,325
  122,361
  131,755
  141,516
  151,660
  162,202
  173,161
  184,556
  196,409
  208,744
  221,586
  234,963
  248,904
  263,440
  278,603
  294,429
  310,953
  328,215
Working capital, $m
  -4,283
  -4,949
  -5,665
  -6,431
  -7,247
  -8,110
  -9,019
  -9,975
  -10,976
  -12,023
  -13,114
  -14,251
  -15,435
  -16,666
  -17,945
  -19,275
  -20,656
  -22,092
  -23,585
  -25,137
  -26,751
  -28,431
  -30,180
  -32,002
  -33,901
  -35,881
  -37,946
  -40,101
  -42,352
  -44,703
Total debt, $m
  16,756
  15,878
  14,933
  13,921
  12,845
  11,706
  10,506
  9,244
  7,923
  6,542
  5,101
  3,600
  2,038
  414
  -1,275
  -3,030
  -4,853
  -6,748
  -8,718
  -10,767
  -12,897
  -15,115
  -17,423
  -19,828
  -22,334
  -24,947
  -27,673
  -30,518
  -33,488
  -36,591
Total liabilities, $m
  -5,653
  -6,531
  -7,477
  -8,488
  -9,564
  -10,703
  -11,904
  -13,166
  -14,487
  -15,868
  -17,309
  -18,810
  -20,372
  -21,996
  -23,685
  -25,439
  -27,263
  -29,158
  -31,128
  -33,176
  -35,307
  -37,524
  -39,833
  -42,238
  -44,744
  -47,357
  -50,083
  -52,928
  -55,898
  -59,001
Total equity, $m
  8,808
  10,176
  11,649
  13,225
  14,902
  16,676
  18,547
  20,512
  22,571
  24,723
  26,968
  29,306
  31,740
  34,271
  36,902
  39,636
  42,477
  45,429
  48,499
  51,690
  55,010
  58,464
  62,061
  65,808
  69,712
  73,784
  78,031
  82,463
  87,091
  91,926
Total liabilities and equity, $m
  3,155
  3,645
  4,172
  4,737
  5,338
  5,973
  6,643
  7,346
  8,084
  8,855
  9,659
  10,496
  11,368
  12,275
  13,217
  14,197
  15,214
  16,271
  17,371
  18,514
  19,703
  20,940
  22,228
  23,570
  24,968
  26,427
  27,948
  29,535
  31,193
  32,925
Debt-to-equity ratio
  1.900
  1.560
  1.280
  1.050
  0.860
  0.700
  0.570
  0.450
  0.350
  0.260
  0.190
  0.120
  0.060
  0.010
  -0.030
  -0.080
  -0.110
  -0.150
  -0.180
  -0.210
  -0.230
  -0.260
  -0.280
  -0.300
  -0.320
  -0.340
  -0.350
  -0.370
  -0.380
  -0.400
Adjusted equity ratio
  2.792
  2.792
  2.792
  2.792
  2.792
  2.792
  2.792
  2.792
  2.792
  2.792
  2.792
  2.792
  2.792
  2.792
  2.792
  2.792
  2.792
  2.792
  2.792
  2.792
  2.792
  2.792
  2.792
  2.792
  2.792
  2.792
  2.792
  2.792
  2.792
  2.792

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  559
  785
  1,030
  1,291
  1,570
  1,865
  2,176
  2,503
  2,846
  3,204
  3,581
  3,971
  4,376
  4,798
  5,237
  5,692
  6,166
  6,658
  7,170
  7,702
  8,255
  8,831
  9,430
  10,054
  10,705
  11,383
  12,091
  12,829
  13,600
  14,405
Depreciation, amort., depletion, $m
  6,293
  7,270
  8,322
  9,448
  10,645
  11,912
  13,248
  14,651
  16,121
  17,658
  19,257
  20,927
  22,665
  24,472
  26,351
  28,303
  30,332
  32,440
  34,632
  36,911
  39,282
  41,749
  44,317
  46,993
  49,781
  52,688
  55,721
  58,886
  62,191
  65,643
Funds from operations, $m
  6,852
  8,056
  9,352
  10,739
  12,215
  13,777
  15,424
  17,154
  18,967
  20,862
  22,838
  24,898
  27,041
  29,270
  31,587
  33,996
  36,498
  39,099
  41,802
  44,613
  47,537
  50,579
  53,747
  57,047
  60,486
  64,071
  67,812
  71,715
  75,791
  80,048
Change in working capital, $m
  -613
  -665
  -716
  -766
  -815
  -863
  -910
  -956
  -1,001
  -1,046
  -1,092
  -1,137
  -1,184
  -1,231
  -1,279
  -1,330
  -1,382
  -1,436
  -1,493
  -1,552
  -1,614
  -1,680
  -1,749
  -1,822
  -1,899
  -1,980
  -2,065
  -2,155
  -2,251
  -2,351
Cash from operations, $m
  7,465
  8,721
  10,068
  11,505
  13,030
  14,640
  16,334
  18,110
  19,968
  21,909
  23,930
  26,035
  28,225
  30,501
  32,867
  35,325
  37,879
  40,534
  43,294
  46,165
  49,151
  52,259
  55,496
  58,869
  62,385
  66,051
  69,877
  73,870
  78,041
  82,399
Maintenance CAPEX, $m
  -5,391
  -6,290
  -7,267
  -8,319
  -9,444
  -10,641
  -11,908
  -13,244
  -14,648
  -16,118
  -17,654
  -19,257
  -20,927
  -22,665
  -24,472
  -26,351
  -28,303
  -30,332
  -32,440
  -34,632
  -36,911
  -39,282
  -41,749
  -44,317
  -46,993
  -49,781
  -52,688
  -55,721
  -58,886
  -62,191
New CAPEX, $m
  -4,492
  -4,884
  -5,260
  -5,627
  -5,986
  -6,336
  -6,679
  -7,017
  -7,351
  -7,682
  -8,015
  -8,350
  -8,689
  -9,037
  -9,393
  -9,762
  -10,144
  -10,542
  -10,959
  -11,395
  -11,853
  -12,335
  -12,842
  -13,377
  -13,941
  -14,536
  -15,163
  -15,826
  -16,524
  -17,261
Cash from investing activities, $m
  -9,883
  -11,174
  -12,527
  -13,946
  -15,430
  -16,977
  -18,587
  -20,261
  -21,999
  -23,800
  -25,669
  -27,607
  -29,616
  -31,702
  -33,865
  -36,113
  -38,447
  -40,874
  -43,399
  -46,027
  -48,764
  -51,617
  -54,591
  -57,694
  -60,934
  -64,317
  -67,851
  -71,547
  -75,410
  -79,452
Free cash flow, $m
  -2,418
  -2,453
  -2,458
  -2,440
  -2,400
  -2,337
  -2,254
  -2,151
  -2,030
  -1,892
  -1,739
  -1,572
  -1,392
  -1,200
  -999
  -788
  -568
  -340
  -105
  138
  387
  643
  905
  1,175
  1,451
  1,734
  2,025
  2,324
  2,631
  2,947
Issuance/(repayment) of debt, $m
  -809
  -878
  -946
  -1,012
  -1,076
  -1,139
  -1,201
  -1,261
  -1,321
  -1,381
  -1,441
  -1,501
  -1,562
  -1,624
  -1,689
  -1,755
  -1,824
  -1,895
  -1,970
  -2,048
  -2,131
  -2,217
  -2,309
  -2,405
  -2,506
  -2,613
  -2,726
  -2,845
  -2,970
  -3,103
Issuance/(repurchase) of shares, $m
  702
  583
  444
  285
  107
  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  
  -107
  -295
  -502
  -727
  -969
  -1,139
  -1,201
  -1,261
  -1,321
  -1,381
  -1,441
  -1,501
  -1,562
  -1,624
  -1,689
  -1,755
  -1,824
  -1,895
  -1,970
  -2,048
  -2,131
  -2,217
  -2,309
  -2,405
  -2,506
  -2,613
  -2,726
  -2,845
  -2,970
  -3,103
Total cash flow (excl. dividends), $m
  -2,525
  -2,748
  -2,960
  -3,167
  -3,369
  -3,477
  -3,455
  -3,412
  -3,351
  -3,273
  -3,180
  -3,073
  -2,954
  -2,825
  -2,687
  -2,542
  -2,391
  -2,235
  -2,075
  -1,911
  -1,744
  -1,575
  -1,403
  -1,230
  -1,055
  -879
  -701
  -521
  -339
  -156
Retained Cash Flow (-), $m
  -1,260
  -1,368
  -1,473
  -1,576
  -1,676
  -1,775
  -1,871
  -1,965
  -2,059
  -2,152
  -2,245
  -2,339
  -2,434
  -2,531
  -2,631
  -2,734
  -2,841
  -2,953
  -3,069
  -3,191
  -3,320
  -3,455
  -3,597
  -3,747
  -3,905
  -4,071
  -4,247
  -4,432
  -4,628
  -4,834
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
  -1,260
  -1,368
  -1,473
  -1,576
  -1,676
  -1,775
  -1,871
  -1,965
  -2,059
  -2,152
  -2,245
  -2,339
  -2,434
  -2,531
  -2,631
  -2,734
  -2,841
  -2,953
  -3,069
  -3,191
  -3,320
  -3,455
  -3,597
  -3,747
  -3,905
  -4,071
  -4,247
  -4,432
  -4,628
  -4,834
Discount rate, %
  9.50
  9.98
  10.47
  11.00
  11.55
  12.12
  12.73
  13.37
  14.04
  14.74
  15.47
  16.25
  17.06
  17.91
  18.81
  19.75
  20.74
  21.77
  22.86
  24.01
  25.21
  26.47
  27.79
  29.18
  30.64
  32.17
  33.78
  35.47
  37.24
  39.10
PV of cash for distribution, $m
  -1,151
  -1,131
  -1,093
  -1,038
  -971
  -893
  -809
  -720
  -631
  -544
  -461
  -384
  -314
  -252
  -198
  -153
  -115
  -85
  -61
  -43
  -30
  -20
  -13
  -8
  -5
  -3
  -2
  -1
  0
  0
Current shareholders' claim on cash, %
  93.4
  88.9
  86.0
  84.4
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9
  83.9

China Southern Airlines Company Limited is principally engaged in the operation of civil aviation, including the provision of passenger, cargo, mail delivery and other extended transportation services. The Company operates through two business segments, including Airline Transportation segment and Other segment. Airline Transportation segment consist of passenger and cargo and mail operations. Other segment includes hotel and tour operation, ground services, cargo handling and other miscellaneous services. . The Company also provides services of general aviation and aircraft maintenance. The Company acts as an agency of domestic and foreign airlines, and other aviation and related business, such as personal accident insurance and agency business.

FINANCIAL RATIOS  of  China Southern Airlines Company Limited (ZNH)

Valuation Ratios
P/E Ratio 541.6
Price to Sales 23.8
Price to Book 62.9
Price to Tangible Book
Price to Cash Flow 115
Price to Free Cash Flow 569.7
Growth Rates
Sales Growth Rate 3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 56.3%
Cap. Spend. - 3 Yr. Gr. Rate 9%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 166.3%
Total Debt to Equity 247.9%
Interest Coverage 4
Management Effectiveness
Return On Assets 3.7%
Ret/ On Assets - 3 Yr. Avg. 2.8%
Return On Total Capital 3.5%
Ret/ On T. Cap. - 3 Yr. Avg. 2.5%
Return On Equity 12.2%
Return On Equity - 3 Yr. Avg. 9.1%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 26%
Gross Margin - 3 Yr. Avg. 23.6%
EBITDA Margin 20%
EBITDA Margin - 3 Yr. Avg. 17.7%
Operating Margin 11%
Oper. Margin - 3 Yr. Avg. 9.2%
Pre-Tax Margin 6.7%
Pre-Tax Margin - 3 Yr. Avg. 5%
Net Profit Margin 4.4%
Net Profit Margin - 3 Yr. Avg. 3.1%
Effective Tax Rate 23%
Eff/ Tax Rate - 3 Yr. Avg. 22%
Payout Ratio 15.6%

ZNH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ZNH stock intrinsic value calculation we used $19318 million for the last fiscal year's total revenue generated by China Southern Airlines Company Limited. The default revenue input number comes from 0001 income statement of China Southern Airlines Company 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 ZNH stock valuation model: a) initial revenue growth rate of 16.7% 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 9.5%, whose default value for ZNH is calculated based on our internal credit rating of China Southern Airlines Company 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 China Southern Airlines Company 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 ZNH stock the variable cost ratio is equal to 92.4%.

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 ZNH 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 China Southern Airlines Company Limited.

Corporate tax rate of 27% is the nominal tax rate for China Southern Airlines Company 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 ZNH 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 ZNH are equal to 139.5%.

Life of production assets of 0 years is the average useful life of capital assets used in China Southern Airlines Company 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 ZNH is equal to -19%. 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 - $7547.76299879 million for China Southern Airlines Company 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 245.339 million for China Southern Airlines Company 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 China Southern Airlines Company Limited at the current share price and the inputted number of shares is $9.9 billion.

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