NAV in Company or group when calculating valuation ?

[valueinvestor]

Should base on RNAV. book value can only be
first filter. Some companies like to write down
their properties jialat jialat. Book NAV not representative.

RNAV of the group or company ?

Interesting question. I would say RNAV of the Group.

But can RNAV be negative? Meaning liabilities more than assets.
If subsi liability has no recourse to parent, then subsi RNAV is zero then
subsi RNAV no impact on Group RNAV

If parent liable to subsi via guarantee or legal, the subsi RNAV can be negative
and reduce total Group RNAV on a consolidated basis.

Why not Rnav of the company ?
Group nav consolidate all subsidiaries so not so accurate ?

[opmi]

Should base on RNAV. book value can only be
first filter. Some companies like to write down
their properties jialat jialat. Book NAV not representative.

RNAV of the group or company ?

Interesting question. I would say RNAV of the Group.

But can RNAV be negative? Meaning liabilities more than assets.
If subsi liability has no recourse to parent, then subsi RNAV is zero then
subsi RNAV no impact on Group RNAV

If parent liable to subsi via guarantee or legal, the subsi RNAV can be negative
and reduce total Group RNAV on a consolidated basis.

Why not Rnav of the company ?
Group nav consolidate all subsidiaries so not so accurate ?

For RNAV (not NAV), Group RNAV would total up subsi RNAV (and Net liabilities if got recourse to parent ). Company RNAV would not capture other subsi RNAV.

[valueinvestor]

Not many know the answer to this question despite being valued investors.

[CityFarmer]

Not many know the answer to this question despite being valued investors.

I reckon you know the "right" answer of this question. Mind to share?

[valueinvestor]

Not many know the answer to this question despite being valued investors.

I reckon you know the "right" answer of this question. Mind to share?

Mind to share why you reckoned I knew the ''right'''answer ?

[ianphoon]

was reading this thread when i encountered these qns
1) why companies like to state down the values of their ppties jialat jialat?
2) nav is total asset minus liabilities. but for those companies we know for sure that their name costs money+++ eg mcd coca cola, then nav might not be anywhere near their true value since their big names are irreplaceble and definitely worth a lot of money. so it might not be possible to buy such companies under their book value.
paisae if my qn sound silly.

[Harvest Time]

If you are manufacturer, there is no need to revalue your property. You will need to pay money to value your property (valuation fees) if you want to revalue the property.

Since the company don't need to boost their asset to get loan, they will like to save the money.
Also, if you book valuation gain, not sure tax about deferred tax due to valuation gain (this area not too sure).
Hence the company will depreciate the property base on certain % yearly. The actual fact is the property may worth a lot more.

For example for Transcorp (4 Chang Charn Road), the property likely worth at least $8m to $10m (maybe more but I am not sure unless they intend to sell and get valuation). But the book value is $1.918m.

[scottleey]

NAV can happen several ways like undervalued ppties not reflect on book like what Harvest said or simply, the net liquidation value of the machines, ppties, inventory and receivables of the company. The latter, though sounds easy, requires a big investment of time to study what the line items are really worth.

Anyway, isnt it ultimately dependent on the security you are looking at? If you are buying the group listed equity then of course its the group NAV. If you are buying subsi then its the company equity but there are some differences in terms of whether subsi have intercorporate guarantees etc. In the case of chapt 7 (Liquidation) in US, some times the group bond obligation need not be paid by subsi even if group is a holding co and subsi is operating. It really depends on how some of these businesses are structured.

Hope this helps.

[specuvestor]

Let me try to see if I can clarify the issues in this thread:

There are different understanding of Book Value, NAV and NTA. We usually say Book value is NAV and is Equity. But as usual the devil is always in the detail: Equity itself has several components, from reval reserves to retained earnings to paid up capital. NAV is the difference between Asset and Liability, but then Liability could have complex structures and contingencies as well. And NTA tries to deduct intangibles from calculation

But let's focus on this thing called Book Value. Book keeping is a very tedious and disciplined process. They record down the transactions studiously and keep the book in balance. So when we talk about book value of an asset in general we are talking about historical TRANSACTIONAL figures.

Intangible assets, RNAV and so forth to ESTIMATE the worth of a company is a financial reporting function. There is a difference.

If an asset say is fully depreciated we don't see it on the financial statements because it is zero on the balance sheet. But on the books it is actually recorded as $X contra by $X depreciation because the asset is still around in the company! Only when it is disposed or write off do we see the reversals on the depreciation charges together with the cost. Information is lost when you simplify things.

Hence an asset could be underestimated in the financial statements because it is still a productive asset but reported as zero, yet still held in the books, or the depreciation achedule is overly conservative.

The second reason is that the asset has appreciated due to INFLATION (key issue why book value is almost always below market value) or real capital gains. That's where revaluation of the assets comes in. Revaluation itself is a discretionary judgment.

Hence back to the original question: Should we look at Company or Consolidated? Few people realise that when we buy the listco we are actually legally buying the holding company level. Assets held under the company is booked under the transactional cost basis. So when we talk about RNAV of the holding company we have to reval the assets which includes the subsidiary or the associates. If they are listed it is based on the listing price but if not we will have to reval the subsidiary and associates... no simple task.

That also answers scottleey question on why the subsi is not liable for the holdco liabilities. The holdco has to fulfil their obligation by liquidating their holdings through sale or liquidation of their assets, of which the subsi and associates are.

That's why most of the time we only look at key assets and skip the tedious process, and sometimes we actually miss out jewels that are booked long ago and had depreciated on the financial statements.

However on the financial reporting part, we report on a consolidated basis so that we have a look-through into the subsidairy and associates. Holdco structure and consolidated basis both have their purposes, but don't mistake nor confuse one for the other. They are not the same thing

Some thoughts on a Friday afternoon. Not sure if it is coherent

[newborn1000]

Let me try to see if I can clarify the issues in this thread:

There are different understanding of Book Value, NAV and NTA. We usually say Book value is NAV and is Equity. But as usual the devil is always in the detail: Equity itself has several components, from reval reserves to retained earnings to paid up capital. NAV is the difference between Asset and Liability, but then Liability could have complex structures and contingencies as well. And NTA tries to deduct intangibles from calculation

But let's focus on this thing called Book Value. Book keeping is a very tedious and disciplined process. They record down the transactions studiously and keep the book in balance. So when we talk about book value of an asset in general we are talking about historical TRANSACTIONAL figures.

Intangible assets, RNAV and so forth to ESTIMATE the worth of a company is a financial reporting function. There is a difference.

If an asset say is fully depreciated we don't see it on the financial statements because it is zero on the balance sheet. But on the books it is actually recorded as $X contra by $X depreciation because the asset is still around in the company! Only when it is disposed or write off do we see the reversals on the depreciation charges together with the cost. Information is lost when you simplify things.

Hence an asset could be underestimated in the financial statements because it is still a productive asset but reported as zero, yet still held in the books, or the depreciation achedule is overly conservative.

The second reason is that the asset has appreciated due to INFLATION (key issue why book value is almost always below market value) or real capital gains. That's where revaluation of the assets comes in. Revaluation itself is a discretionary judgment.

Hence back to the original question: Should we look at Company or Consolidated? Few people realise that when we buy the listco we are actually legally buying the holding company level. Assets held under the company is booked under the transactional cost basis. So when we talk about RNAV of the holding company we have to reval the assets which includes the subsidiary or the associates. If they are listed it is based on the listing price but if not we will have to reval the subsidiary and associates... no simple task.

That also answers scottleey question on why the subsi is not liable for the holdco liabilities. The holdco has to fulfil their obligation by liquidating their holdings through sale or liquidation of their assets, of which the subsi and associates are.

That's why most of the time we only look at key assets and skip the tedious process, and sometimes we actually miss out jewels that are booked long ago and had depreciated on the financial statements.

However on the financial reporting part, we report on a consolidated basis so that we have a look-through into the subsidairy and associates. Holdco structure and consolidated basis both have their purposes, but don't mistake nor confuse one for the other. They are not the same thing

Some thoughts on a Friday afternoon. Not sure if it is coherent

Best answer so far, coherent for me.........