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18-12-2023, 08:52 AM
MHC has a Book Value of RM 1.37 per share. I estimated its EPV to be RM 0.80 per share based on its past decade of EPS and a 10% discount rate.
Based on Professor Bruce Greenwald Asset Value (AV) vs Earnings Power Value (EPV) analysis, this is a company with under-utilized assets. The under-utilization is worst if you assume that its Revised Book Value would be about double the Book Value. This was based on Boustead Plantation case where a recent valuation showed that the Revised Asset Value is about double the assets in the Book.
Greenwald actually used an updated basis to determine the AV. Accordingly we should be comparing the Revised BV of about RM 2.74 with the EPV of RM 0.80. On such a basis, I would say that the company has not delivered value to the shareholders.
Unfortunately, the market doesn’t really look at Book Value but focus on earnings. Book Value comes into play only if there is some takeover or asset sale.
Moral of story? There are better Bursa plantation companies in terms of earnings if you want to invest in this sector
Based on Professor Bruce Greenwald Asset Value (AV) vs Earnings Power Value (EPV) analysis, this is a company with under-utilized assets. The under-utilization is worst if you assume that its Revised Book Value would be about double the Book Value. This was based on Boustead Plantation case where a recent valuation showed that the Revised Asset Value is about double the assets in the Book.
Greenwald actually used an updated basis to determine the AV. Accordingly we should be comparing the Revised BV of about RM 2.74 with the EPV of RM 0.80. On such a basis, I would say that the company has not delivered value to the shareholders.
Unfortunately, the market doesn’t really look at Book Value but focus on earnings. Book Value comes into play only if there is some takeover or asset sale.
Moral of story? There are better Bursa plantation companies in terms of earnings if you want to invest in this sector