LONDON -- If someone offered you the opportunity to buy 1-pound coins for, say, 80 pence, you'd be mad not to accept, wouldn't you?
Yet, there are companies around that are priced such that you're paying less than 1 pound for every 1 pound of their assets. OK, so it's not quite the same as 1-pound coins for 80 pence, but you get the idea: Stocks trading at a discount to the value of their assets could be bargains.
FTSE 100 companies Royal Bank of Scotland Group , Hammerson , and Kazakhmys are all trading at discounts to their tangible net asset values (TNAV).
Kazakhstan copper miner Kazakhmys is on the biggest discount of the three companies. At the last balance sheet date -- which is as long ago as the half-year ended June 30, 2012 -- the TNAV per share was around 1,100 pence (using current exchange rates). At the time of writing, the shares are trading at 559 pence -- or a discount of almost 50%.
However, Kazakhmys has a 26% stake in diversified natural resources group Eurasian Natural Resources Corporation (ENRC), itself a FTSE company. At the half-year stage, Kazakhmys said the carrying value of its investment in ENRC was around 1.6 billion pounds more (using current exchange rates) than its share of ENRC's market value. Adjusting for that, the discount comes down to around 30%.
Kazakhmys said in a trading update last week that it was reviewing the carrying value of the holding in ENRC and will report any impairment in full-year results on March 26. I believe Kazakhmys' shares at 559 pence will still be at a significant discount to TNAV whatever the outcome of the review.
Hammerson, a U.K. real estate investment trust, which also owns properties in France, had a transformational year in 2012. This 3.7 billion pound company executed over 1 billion pounds of investment activity during the year as it repositioned itself as a pure retail-focused company.
Hammerson released its annual results just a few days ago, so we have a TNAV number that's about as fresh as it can be. At the balance sheet date of Dec. 31, TNAV per share was 542 pence. As I write, the shares are trading at 505 pence, giving a discount of 7%.
Hammerson delivered a confident outlook statement in its results, and said it was "targeting strong growth in earnings and dividends over the three-year period to 2015."
Royal Bank of Scotland
Bailed-out bank RBS is four years into its recovery plan, and has targeted 2013 as its last big year of restructuring.
In its annual results released last week, the group reported TNAV per share of 446 pence at the balance sheet date of Dec. 31. At the time of writing, the shares are trading at 306 pence -- or a discount of 31%.
The end of year TNAV was down 11% on the 501 pence of a year earlier. The current discount still looks attractive, even allowing for a further decline in the value of net assets in 2013 as RBS completes the bulk of its dirty washing and moves toward being "a cleaner and better-performing bank in future years."
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