Malpac – be wary of this Graham Net Net

Malpac, a Bursa Malaysia plantation counter, is a Graham Net Net. The Graham Net-Net is a stock that is trading at a discount to its net current asset value (NCAV).

NCAV=Current Assets−Total Liabilities. The NCAV is often taken as a proxy for the liquidation value. This meant that even if the company were to be liquidated, investors could potentially make a profit because the market is undervaluing its current assets.

Malpac currently has a NCAV of RM 1.37 per share compared to its share price of RM 1.06 per share. Malpac has been a Graham Net Net for most of the past decade. Unfortunately if you have bought it years ago, you would not have been able to make money. This is because the company don’t really have any operations.

I have benefitted from buying Net Nets before. But this is because they were operating companies whose price became lower than the Net Net value due to poor market sentiments. They were not due to poor business prospects.