I took a look on this road concessions company and found that it may be worth to dig in for more information.
From Google Finance I got the average CFO for 2008,2009 and 2010: 592M
From Fundamentus I got a market value of 4B at the price of 58,05 BRL yesterday.
That's a CFO/MV ratio of 14,8%.
Considering a maintenance reinvestment of 200M a year (a little more than current depreciation charges) a got a FCF of about 392M a year, which equals to a 9,8% FCF to MV ratio.
I did't use a 4 years average because the income from the new concessions started in 2008. I couldn't use that year in the calculations because it was a different business until 2008.
I inserted these data in the DCF calculator, with 4% growth for 10 years and 3% growth thereafter, with a 7% discount rate. The result was a present value of almost 11B, which equals to a 175% upside.
The bottom line is just too good to true, so I stresses the DCF calculator a bit,increasing the maintenance reinvestiment to 300M (50% higher than current depreciation). The present value now as about 8,1B, still more than twice the market value.
I think there's something wrong with the CFO, specifically in the "non-cash itens line", which requires a close examination.
Efeitos no Brasil do cenário financeiro nos EUA
3 weeks ago
6 comments:
I think that Non-Cash Items is probably interests expenses added back to earnings.
They are paid in the line Issuance of Debt under Financing Activities.
So I think, as I get looking at 2010 financial statements, that you don't have to add back this amount.
The interests will be paid someday. I usually don't add them to calculate the FCF.
Yeah, it's right, what we have it's just a shenanigan.
Even so, if you consider just Earnings + Depreciation we got a CFO of about 500 mi per year in the more recent year (when all concessions were yielding cash).
But I don't have a clue about what could be "normal" investments amount.
In the income statament, 2Q11, there's an account for "road maintenance provision". In the 1S2011 the expense accrued was 104M. In the 1S10 the expense accrued was 45M. My estimate of 200M for maintenance was quite good.
OHLB3 it's the major stake of Skopos Fund.
I made some adjustments to the 1S11 cash flow and got an 193M FCF for the 1S11.
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