Cover Story 2: Counters trading below NTA: What gives?

This article first appeared in The Edge Malaysia Weekly on May 19, 2025 – May 25, 2025

OF the 1,000-plus companies listed on Bursa Malaysia, slightly more than half currently trade at a discount to their net tangible assets (NTA).

Granted, there are often good reasons that a company trades at a discount to its NTA per share — for example, prolonged operational losses or perceived lack of a new growth catalyst. Both factors could overshadow valuable assets in its books, as in the case of Tan Chong Motor Holdings Bhd (KL:TCHONG) (see our Cover Story titled “Tan Chong’s disconnect”, Issue 1571, April 21).

Furthermore, recent market volatility, triggered by uncertainties surrounding trade and tariffs, has also resulted in the decline of share prices in general.

In theory, markets are said to be efficient. Therefore, there are valid reasons for certain companies trading at a discount to their NTAs. And while a huge discount to NTA could be an indication of an undervalued company, unlocking the company’s value ultimately lies in the management’s ability to sweat the assets.

Nevertheless, are there hidden gems waiting to be uncovered or, in other words, unjustified discounts that investors have overlooked?

The NTA is one measure to determine the value of a company, where some would consider it its actual value — after deducting the liabilities and intangible assets — as it is made up of physical assets, such as land, buildings and inventories as well as cash, bank balances and quoted securities.

Data compiled by The Edge shows that many plantation companies and property companies have a high NTA per share. This is not surprising, given the land bank in their books. A significant number also trade at a discount to their NTA per share, however, for reasons that can also be linked to their large land bank.

TA Investment Management chief investment officer Choo Swee Kee says: “For years, most [of these companies] have been trading at a discount. It’s probably because many hold a huge land bank that can only be monetised over many years. It seems that investors value near-term earnings rather than long-term earnings potential.

“Also, properties are less liquid compared to financial assets, hence the discount to value.”

For companies with a market capitalisation of at least RM300 million, data shows that Mulpha International Bhd (KL:MULPHA) trades at the highest discount to its NTA per share compared to other companies. The property developer, which also owns investment properties and is in the hotel and leisure business, closed at RM3.14 in trade on May 14, at slightly less than one third of its NTA per share of RM10.96.

Its market capitalisation of RM961 million is only 20% of the value of its top 10 properties listed in its 2024 annual report, which has a combined net book value (NBV) of RM4.2 billion.

Mulpha’s assets are mostly located in Australia, where its portfolio includes the ultra-luxurious InterContinental Hayman Great Barrier Reef island resort on the northern tip of Whitsunday Island as well as InterContinental Sydney in the CBD. It also has real estate developments and property investments in New South Wales, Victoria and Queensland.

The group derives the bulk of its revenue from its hotel and leisure division, but it is property investment and finance that delivers the highest profit before tax (PBT). For the financial year ended Dec 31, 2024 (FY2024), the hotel and leisure segment generated RM745 million in revenue whereas its property investment and finance segment recorded RM126 million in PBT.

In FY2024, the group’s total revenue of RM1.03 billion was 14% lower than RM1.2 billion in FY2023. Net profit was also lower at RM71 million, down 35% from the previous year. Mulpha attributed the lower revenue to the lower settlements of development in Norwest, Sydney, while the lower PBT was due to one-off development loss from its affordable housing project for Leisure Farm, a development in Johor.

Another property and hospitality player of note is Plenitude Bhd (KL:PLENITU), whose market capitalisation of RM534 million is slightly over one third the NBV of the top 20 properties listed in its annual report of some RM1.5 billion. Its May 14 closing price of RM1.40 is less than a third of its NTA per share of RM4.55 as at Dec 31, 2024.

According to its 2024 Annual Report, Plenitude has a land bank of 1,011 acres, the bulk of which is located in Kedah (581 acres) and Johor (337 acres), where the ongoing Rapid Transit System (RTS) project has been a catalyst for the property sector in the southern region.

Plenitude also owns 10 hospitality assets: seven in Penang, Langkawi, Ipoh and Kuala Lumpur; two in South Korea; and one in Japan.

Recently, it announced that it would be disposing of one of these assets, the Travelodge Georgetown Penang, for RM50 million. The deal is expected to be completed in the third quarter.

Over the last five years, Plenitude has been reaping the results from its property development projects in Johor as its revenue and net profits rose from RM188.84 million and RM8.17 million respectively for its financial year ended June 30, 2020 (FY2020), to RM511.56 million and RM63.82 million in FY2024. Revenue and profit have continued to rise in its current financial year. For 9MFY2025, it booked a net profit of RM85.15 million, up 36% from a year ago. Revenue was higher at RM459.1 million compared to RM377.21 million previously.

The property division is the group’s main revenue driver, contributing 59%.

Meanwhile, the data compiled shows that several conglomerates stand out among those that trade at a steep discount to NTA, underscoring the phenomenon of conglomerate discount, where the total book value of a company’s businesses exceeds its market value.

“There are many reasons for the discount. It could be due to liquidity or non-optimal capital management. Sometimes, it could also be because the company is not well promoted by the management,” says a head of research with a foreign research firm.

Among the top 50 companies with market capitalisation of at least RM300 million, conglomerates with the steepest discount to NTA on a per-share basis include PPB Group Bhd (KL:PPB), Oriental Holdings Bhd (KL:ORIENT) and Genting Bhd (KL:GENTING) (RM3.07).

DRB-Hicom Bhd (KL:DRBHCOM) is a conglomerate worth noting. The asset-rich group’s NTA of RM2.99 per share represents a discount of RM2.07, or 69%, to its share price of 92 sen on May 14. This could be largely attributed to its underwhelming financial performance. For the financial year ended Dec 31, 2024 (FY2024), DRB-Hicom’s net profit plunged 90.56% year on year to RM22.55 million, from RM238.88 million.

Analysts do not appear to be keen on its stock — with three having “hold” calls and only one “buy” — alongside a median 12-month target price of 86 sen that is still largely below its NTA.

The group’s portfolio is extensive, spanning automotive; aerospace and defence; banking; postal services; properties; and services. It owns 50.1% of Proton Holdings Bhd. Notable joint ventures and associates include Honda Malaysia Sdn Bhd, in which it holds an effective interest of 34%, Isuzu Malaysia Sdn Bhd (48.42%) and Mitsubishi Motors Malaysia Sdn Bhd (48%).

Its other automotive subsidiaries include Hicom Holdings Bhd, which owns Edaran Otomobil Nasional Bhd; DRB-Hicom Commercial Vehicles Sdn Bhd; and Hicom Engineering Sdn Bhd. The automotive division contributes the bulk of revenue for the group at RM11.15 billion, or about 70%, whereas segment profits amounted to RM347.71 million in FY2024.

It also has the asset-heavy Pos Malaysia Bhd (KL:POS) as a 53%-owned subsidiary, although losses at the postal company contributed to the drag in DRB-Hicom’s group earnings.

DRB-Hicom’s assets on its books are also likely to have been propped up by its 70% stake in banking group Bank Muamalat Malaysia Bhd, which contributed segment profits of RM201.05 million against revenue of RM2.11 billion in FY2024.

It also owns vehicle inspection service provider Puspakom Sdn Bhd. While the government has moved to end Puspakom’s monopoly in vehicle inspection services in the country by appointing three new companies to undertake the same role, some believe Puspakom will still have the upper hand, given its experience in the industry.

The businesses that DRB-Hicom owns could be worth much more separately than under a single group.

For other companies on the list, a substantial portion of their NTA is derived from plants and equipment, besides land and buildings. Such companies are usually involved in manufacturing or asset-heavy in nature.

For example, Can-One Bhd’s (KL:CANONE) NTA of RM9.39 per share translates to a discount of RM7.18, or 76%, to its share price of RM2.21 on May 14.

The company — which manufactures packaging products such as metal and lithographed cans, plastic jerry cans and bags-in-boxes — has plants, machinery and equipment amounting to RM994.8 million, or 22% of its total assets, while its freehold land and buildings are worth RM908.07 million, or 20% of total assets.

Notably, Can-One has a leasehold property in Myanmar with an NBV of RM178.73 million — the most valuable of its properties listed in its 2024 annual report. It measures 99.56 sq m and is used as an office and factory building.

Can-One also has three properties in Vietnam, each with an NBV of about RM30 million, while the rest of its properties are located in Malaysia, with the largest being its vacant leasehold land and building in Taman Perindustrian Puchong, which has a carrying value of RM78.36 million. Almost all of its properties listed in the annual report were last revalued in 2019.

There are also companies that have substantial portions of their assets in the form of quoted securities and deposits.

In Insas Bhd’s (KL:INSAS) case,  it holds 13.53% in semiconductor-related company Inari Amertron Bhd (KL:INARI) and 14% in Ho Hup Construction Co Bhd (KL:HOHUP). It also has a 28% stake in IT services provider Divfex Bhd (KL:DFX). These companies are treated as associates of Insas, alongside other unlisted associate companies.

Insas is also involved in the stockbroking business through its 50.49% stake in M&A Equity Holdings Bhd (KL:M&A). It is a subsidiary of the group.

 The value of Insas’ associates amounted to RM557.99 million as at Dec 31, 2024. It also has deposits with financial institutions amounting to RM1.01 billion.

For the cumulative six months ended Dec 31, 2024 (1HFY2025), Insas’ associates contributed RM14.26 million in profits to the group, an increase of 5% from a year ago. This is about 26% of the group’s net profit amounting to RM53.23 million for 1HFY2025.

Insas, which closed at 88 sen per share on May 14, trades at a discount of 75%, or RM2.74 per share, to its NTA.

Meanwhile, small-cap company KESM Industries Bhd (KL:KESM) with a market capitalisation of RM135.5 million is also trading at a big discount to its NTA. Its May 14 share price of RM3.15 works out to a sharp discount of RM4.78, or 60%, to its NTA of RM7.93 per share.

The semiconductor industry-related company’s balance sheet may show an insignificant amount of assets in terms of land and buildings; however, its cash and cash equivalents are substantial.

Based on the company’s financial statements for its second quarter ended Jan 31, 2025 (2QFY2025), cash and short-term deposits amounted to RM214.99 million and investment securities amounted to RM11.91 million. This means that on a per-share basis, cash and cash equivalents amount to RM5.27 per share, based on shares outstanding of 43.02 million.

The company has suffered losses in 1HFY2025, however, reporting a net loss of RM7.52 million against revenue of RM104.21 million, owing to weaker demand for processing of automotive chips.

Stationery maker Asia File Corp Bhd (KL:ASIAFLE) is another small-cap company with a high NTA. The company with a market capitalisation of RM276.46 million, equivalent to RM1.46 per share, has an NTA of RM3.89 per share.

The company is cash-rich, with cash and bank balances of RM263.84 million, equivalent to RM1.39 per share. It also has other investments consisting of short-term funds and bonds of RM79.73 million as at Dec 31, 2024.

Notably, Asia File has freehold properties consisting of offices and factories-cum-warehouses in Germany amounting to RM12.03 million and RM7.94 million in the UK, which were last revalued more than a decade ago.

The assets in Germany and the UK came about as a result of Asia File’s acquisition of German stationery company Plastoreg Smidt GmbH in 2008 for €13.8 million and paper mill Higher Kings Mill Ltd in England for £1 million.

Europe is an important market for the group, contributing about 70% of its revenue.

The rest of its properties, being offices, factories and warehouses, are located mainly in Penang — valued at slightly over RM50 million — according to its 2024 annual report.

Asia File also has a 23.69% stake in Muda Holdings Bhd (KL:MUDA). The value of its investment in the local paper mill as at Dec 31, 2024, amounted to RM199.28 million in its balance sheet.

Its investment in Muda has declined in recent times, however, given the drop in the paper mill’s share price on account of weaker earnings. Just this year, its share price has fallen 34.39% to close at RM1.03 on May 14.

Muda has been loss-making in the last few financial years, adding a drag to Asia File’s earnings. For 9MFY2025, Asia File’s share of losses from Muda amounted to RM11.81 million. Asia File’s 9MFY2025 net profit amounted to RM2.24 million.

Having said that, Asia File’s investment in Muda still remains in the money, given that it accumulated the shares on the open market back in 2008, when the latter was trading around 80 sen. 

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