Neither price nor NAV are static. NAV changes every six months depending on the company’s earnings and more importantly its retained earnings. In addition, some of its retained earnings are likely to be used for the share buyback.
Hongkong Land trades perennially at a discount to its net asset value (NAV). After a temporary rebound where its price to net asset value ratio (P/NAV) reverted to its mean (see chart) of 0.33 times, the stock retreated and P/NAV may continue to ease towards the –1 SD (standard deviation), which is 0.26 times.
Based on a NAV of US$14.75, a P/NAV of 0.26 translates to a price of US$3.83. Notably, Hongkong Land made a high of US$4.85 on Sept 9. At this price, the P/NAV was 0.33.
