Hi, I understand valuing a company is a complex affair, though is a company technically undervalued if, for example, it has a market cap of $3m and has $4m cash in the bank? Lets say the company has several small scale projects ongoing, at early exploration stages.
If this were the case then the market would be assigning a value of negative $1mill to it.
If it has $4mill cash (assets) then you would expect it to be priced above that. Unless perhaps there were some things such as debt or gearing, but thats where i start to not know as much.
Have you found a co with a market cap smaller than its assets?
Lion Select (LST)
August 30th Net Tangible Assets and Cash $418 Million , Current Market Cap $370 Million
The market is a strange place.
I've found one... AXT Argo Exploration - Market Cap is 3.28 mill approx with 82 mill shares on issue at 4c. Cash at hand is 4.4 mill. A difference of 1.12 mill or 1.3c per share!!!
Yep, a good example of that would be PPP. No debt. Cash in the bank about AUD 135 million. PE of about 2.4. Anticipated revenue for 2008/2009 about AUD 75 million (assuming a pessimistic average oil price at USD 65 and AUD/USD rate of 0.75). And a market cap of AUD 120 million. You gotta laugh in the current market....Heaps out there at the moment.
If you look hard enough there are some co's with positive cashflow and no debt that are trading below their cash value. Now thats a bargain
Skyquake - this isn't NTA we're talking about - this is cash position - but the advice still holds in that its important to check the accuracy of the figures and how current they are, and also look for debt on the balance sheet and also their capital structure in general. e.g. if there are options that are in the money or close to the money they should probably be diluted into the market cap figure. Also sometimes there are other shares on issue that aren't quoted (e.g. escrowed stock, convertible notes/preference shares etc.).
But there are a lot of companies trading below, at or just above their net cash position at the moment and some of them are generating strong positive cashflow from very comfortably profitable operations.
prawn - they don't care - they are the major shareholders - they're not going to p*ss their own money up against the wall. The more shares sold at this level the more they can buy for themselves.
The reason they haven't done a buy back (the most efficent way to return capital imo) is because they are doing their own private buy back.
PPP is actively seeking growth opportunities
•Acquisition of pre or early development oil reserves to provide short term production and replacement of the declining Tui Area Fields
•Development of a balanced exploration portfolio in proven basins, with a priority on low-medium, rather than high risk prospects
The focus area is Australia-New Zealand and the South East Asia region, leveraging existing knowledge and relationships.
Other quality opportunities will also be considered
We have a preference for oil projects to retain exposure to the oil
The recent fall in oil prices and a tight credit market will provided attractive opportunities for PPP which has a strong cash position and can act quickly
•We are regularly offered opportunities, but are maintaining a disciplined approach to project quality and acceptable risk.
•A range of options are currently under consideration
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