White Horse – is market wrong in pricing it below its liquidation value?

Ben Graham, the father of value investing, made famous the valuation metric known as the Net-Net. It is computed by deducting the total liabilities from the current assets. Many consider the Net-Net as a short hand for the liquidation value.

In Ben Graham days, he focussed on buying companies trading at a discount to their Net-Net. The logic was that if these are viable businesses, there is no reason for them to be trading below the liquidation value.

White Horse currently has a Net Net value of RM 1.39 per share compared to its market price of about less than RM 0.80 per share. Is this a viable business or is this a company going out of business?

White Horse is a leading ceramic tile manufacturer in the region and its performance over the past few years were impacted by the soft property market. It incurred losses.

If you believe that the property sector is cyclical and we are now leaving the bottom of the cycle, the performance of White Horse would improve. More important if it survived so far and is financially sound, ie not a company facing liquidation, the market must be wrong to price it below its liquidation value.