Undervalued (price) vs net asset value. A stock to consider?

There are more investment options than just buying a property and wait for it to appreciate. If we insist on something property related, we can try real estate investment trusts (REIT) or we can also buy the stock of the particular developer, as soon as we see that their launches are very successful. Remember to make sure it is really successful and not just ‘booked’ but in the end does not translate into actual sales. This same strategy is usable even when we buy other counters. For example, if we want to know about a certain retail brand, then go and visit some of their stores! If we see lots of people buying and queuing to pay, I think the counter can be a consideration. Then read some of the view from analysts to se if what you saw actually corresponds to what the analysts are forecasting. One such site to refer? Here: klse.i3investor.com  

Today, a property counter was mentioned in an article in thestar.com.my here. RHB Institute said in a report, “While property sales have weakened, we believe Mah Sing’s strengthening balance sheet should support decent land-banking activities this year. We believe downside risks to property sales and hence earnings are priced in, and strategic land banking should help drive future earnings.” Mah Sing’s balance sheet is carrying only a 2percent net gearing. (This means it has lots of capacity to buy landbanks)  KAF-Seagroatt & Campbell Securities Mah Sing’s current net asset value is RM2.81. It maintained a “buy” recommendation on Mah Sing, with an unchanged target price of RM1.80.  Mah Sing recently cut its 2017 sales target to RM1.8bil from RM2.3bil previously. It sold RM1.78bil worth of properties in 2016.  KAF-Seagroatt also said that Mah Sing remained committed to delivering a dividend policy of at least 40% of earnings.

mahsingA higher dividend policy could either mean the company has lots of reserve funds and thus do not need to keep too much of its earnings and can thus distribute it to shareholders as dividends. This is good for shareholder holding Mah Sing’s stock for continuous dividend. Yes, I have 3,000 units of Mah Sing. Bought it some time back and is currently still below the price I bought. Whichever developer stock we like, take steps to study them a bit further. As long as it is a fundamentally stable company, the share price should reflect its business in the future. (Warren Buffett said this before). The image shows all the target prices from different analysts covering the stock. Not considered a huge upside potential. Only buy if you can hold or believe something great is about to happen. Happy following.

written on 2 Mar 2017

Next suggested article:   Mah Sing: 70 percent of buyers below 39

2 thoughts on “Undervalued (price) vs net asset value. A stock to consider?

  1. Under valued-stock? Heard of this before?

    Shares are much more volatile than real properties’ prices. Buy a listed company that owns many real properties instead of developers who may own lands (for Landbanking purpose). Unless the land are bought real cheap comparing to its neighboring buildings, I would prefer buying into companies that own real properties. So when do we buy these listed companies?

    When market sentiment is poor, share prices depreciate very quickly as compare to real properties. Because listed companies that own these real properties will also be subjected to volatility of the market sentiment, its prices tank very quickly but the price of real property should not move much, so their real value remains.

    Do not buy when there is no crises, buy when there is a crises and share prices tank like crazy. The values of the listed companies owning real assets remain good. Know the difference between value and price.

    • Agree with your assessment Fred. Personally, I only buy businesses I understand and could see and feel what it does. I remember more than 10 years ago when I bought a car company, everyone laughed at me. Reason I bought was because I could see its new launch everywhere on the road. Even my sister bought one. When they reported their results many months later, the price which was very low nearly tripled. Another company, I happened to know many friends working inside. They were working overtime nearly everyday. I bought the shares and many months later, when results were announced, again the share price more than doubled. So, we can be bolder and buy during crises or we just buy occasionally when we happened to see opportunities. Happy buying Fred.

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