It appears that investors start to realize that IPC stock has been undervalued. It jumped 3 cents yesterday from $0.375 to $0.405 per share. For the last 2 months. It has been trading between $0.30 and $0.37, after netting off $1.60 per share following the capital reduction announcement in mid-December 2015.
In the circular sent by IPC, it was mentioned based on 2014 annual report numbers that the NTA after capital reduction exercise would have been $1.21. This would mean that IPC was trading between 25% and 30% of NTA. With better financial results in 2015, the ratio should have reduced further. Unfortunately, investors seemed to ignore this. Of course, evaluation is a very subjective thing and even professional evaluators can get very wrong with their evaluation, but the market’s trading price at more than 50% discount would make it grossly undervalue. Even at this state of the economy and the poor sentiment, property stocks such as Wing Tai and Capitaland were trading at 44% and 75% against their NTA, but still comparatively higher than the same matrix for IPC. However, the properties that it owns outside Singapore may make it difficult for us to compare on apple-to-apple basis.
Based on this argument, I have decided to hold my IPC shares even after XD for the capital reduction distribution to shareholders. With the return of $1.60 per share, it would mean that I have not paid anything for the IPC that I own while waiting for more investors to discover the value of the shares currently priced at about $0.405. Unless the market is extremely pessimistic, personally, I think there is still some way to go up as the trading price has been too low for too long.
Disclaimer : The above does not constitute an advice for readers to buy (or sell) the said stock. The contents are the personal opinion of the author who has been in the market for more than 25 years. It is just means of sharing his observation on the stock. The contents are purely for private consumption only as he has no interest in readers’ stock investments. In other words, invest at your own risks!
(1) Investors are advised to do their homework to ensure that the value of the remaining assets are at least not impaired, or better still appreciating.
(2) The market may continue not to recognize the value of underlying assets, and therefore the share price continues to languish even though it had appreciated $0.03 cents or advanced 8% on Friday, 18 March 2016.
Brennen has been investing in the stock market for 26 years. He trains occasionally and is a managing partner for BP Wealth Learning Centre. He is also the author of the book – “Building Wealth Together Through Stocks” which is available in both soft and hardcopy.