Don’t ven­ture into the woods

Finweek English Edition - - MARKETPLACE -

For the June 2015 year-end York has a stated tan­gi­ble net as­set value (TNAV) of 735c while the share is trad­ing at around 250c – a mas­sive dis­count that has at­tracted a lot of in­ter­est.

But two is­sues must first be con­sid­ered for the TNAV. How is it de­ter­mined and will the gap ever close?

In the case of York, most of this TNAV is made up of what it calls bi­o­log­i­cal as­sets – its trees. It dis­closes very clearly how it gets to the val­u­a­tions for the trees. But some tweaks to the cal­cu­la­tions can ad­just TNAV ei­ther way. For ex­am­ple: York uses a cost of eq­uity of 15.28%, yet its long-term re­turn of eq­uity is un­der 10%. This is a se­ri­ous mis­match, which sug­gests the trees (and hence TNAV) are over­val­ued. The sec­ond is­sue: will this dis­count to TNAV ever close? The ev­i­dence is that it never has and I can’t see what would trig­ger it clos­ing and push­ing the stock higher. With th­ese two un­cer­tain­ties I would not in­vest.

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