Volatility & Companies Trading Below Book

Question of the day – what happens when there is a significant drop in share price volatility (over a period of time) of companies that are trading below book (or net asset value, NAV) ?  Let take a brief look at 3 Malaysian-listed companies:

Company 1 – TA Enterprise

This property company has been trading below its book value or NTA. Since mid 2014, there has been a steady decline in its share price with a corresponding drop in Price / NAV and Average True Range (“ATR”) (a measure of volatility). There was a reversal of trend since early 2017 and has since continued with its upward trajectory. What was evident was that both Price / NAV and ATR had dropped to record low before a counter-trend emerges.

TA_may 17.png

Company 2 – MNRB

This reinsurance company’s share price has been on a declining trend since mid 2014, with a corresponding drop in Price / NAV and ATR. Similar to TA Enterprise, what was evident was that both Price / NAV and ATR had dropped to record low before a reversal in the trend emerges in August 2016.

MNRB_may17.png

Company 3 – Pasdec

Similar to both TA Enterprise and MNRB, what was evident was that both Price / NAV and ATR had dropped to record low before a reversal in the trend emerges in April 2016.

Pasdec_may 17.png

What about this company? 

Daiman has recently reached record low Price / NAV and ATR. One should ask when will a ‘new trend’ emerge? Could this company be in the value trap category? Only time will tell.

Daiman_may17

The above analysis is observation of certain selected companies. As the sample size is small, further research is definitely required on whether the combination of low Price / NAV and ATR will have predictive value of companies’ future share price.

DISCLAIMER: THIS IS A PERSONAL BLOG AND SHALL NOT BE RELIED IN WHATSOEVER MANNER BY ANYONE. ALL ARTICLES CONTAINED IN THIS SITE ARE FOR INFORMATION AND ILLUSTRATIVE PURPOSES ONLY AND DOES NOT PURPORT TO SHOW ACTUAL RESULTS. IT IS NOT, AND SHOULD NOT BE REGARDED AS INVESTMENT ADVICE OR AS A RECOMMENDATION REGARDING ANY PARTICULAR SECURITY OR COURSE OF ACTION. SOURCES USED IN THIS SITE HAVE NOT BEEN INDEPENDENTLY VERIFIED FOR ACCURACY, COMPLETENESS AND TIMELINESS. YOU SHOULD SEEK INDEPENDENT AND PROFESSIONAL INVESTMENT ADVICE IN REGARD TO YOUR INVESTMENT DECISIONS. THE AUTHOR MAY HOLD POSITIONS IN THE SECURITIES MENTIONED IN THE ARTICLES.

Author: Ken Utau

Data Scientist, Markets Analyst and Food Lover

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