The NTA Debate
A reader wrote to me some time back ...
"Hi there
I would like to enquire your opinion regarding PPHB & Mitrajaya. Currently they are trading at such a discount to their NTA. Are they a good buy now? Pls opine. Thanks."
The general thinking is that if the NTA per share > stock price, you may be in for a stock market bargain.
However, just like everything else in the stock market, looking at NTA may not get you much success.
There are lots of stocks trading way above their NTA and a equal number trading way below their NTA.
Some Issues With NTA
1) A company with more valuable (e.g. hard cash, property, land) asset is better.
2) High Receivables may indicate debtors might not want to pay me.
3) The company's inventories may be outdated.
4) Some business (e.g. service industry) where the important assets is not tangible e.g. its technology, brand name, people ......
5) Poor management or management which is not focus on the business.
6) Poor profits or profits that are volatile.
7) Company is in a high-risk business or cyclical business that is risky.
Other factors not related to the company may also affect the NTA
valuations eg. poor stock market sentiment, not much publicity on the
stock, etc.
Hope this helps ...
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