I read an article on Business Times today about Bloomberg tabulated SGX Shares with Net Cash higher than their Market Capitalisation?
In layman term, "Net Cash" means how much a company have in the bank after accounted for borrowed money.
This type of investing is also called Net-Net investing made famous by Benjamin Graham. According to investopedia, Net-net is a value investing technique in which a company is valued solely on its net current assets. The net-net investing method focuses on current assets, taking cash and cash equivalents at full value, reducing accounts receivable for doubtful accounts, and reducing inventories to liquidation values. Total liabilities are then deducted from the adjusted current assets to get the company's net-net value.
You may start to wonder: Wow..... such a value deal that Net Cash is higher than market value, which means even if the whole business were to collapse, the Cash the company has in the bank is still higher than stock price. It is like dirt cheap stocks or what Warren Buffett called it "Cigar Butt" stocks.
How can this be possible?
Therefore It pays to dig deeper into the business of the company rather than just looking at the numbers on the surface.
For instance, Hong Leong and Sing Inv being financial institutions may require to keep more cash because of the cash to loan ratio. Also if there are bad debts which means these companies need to write off their debts, they will need to keep significant amount of cash for investors' confidence.
China Minzhong low stock pricing relative to her cash may be because of her Chinese origins which investors are sceptical.
Kingboard copper has accusation from minor shareholders on her IPT mandate in which she was accused of selling copper foil at a discount to her parent company.
Creative Technology is not coming up with new innovative product that interest investors, which can explains why the share is so cheap. Also in her latest quarterly result, cash is derived mainly from lawsuit win rather than actually revenue.