RE: RE: OFFICIAL BOOK VALUE = NAV @JOE @TRIMISGUS
Quite right Joe that BV is only a guide to something which may be a bargain
or a value trap. BV represents the money that has gone into the company plus or
minus the accumulated earnings. The key lies in determining the quality of the assets.
I.E. Are most of the assets gas assets which were bought years ago when prices
were high or are they oil assets bought years ago when prices were low? Other
similar analogies can help you come to a conclusion as to the value of the
'BOOK VALUE' as an indicator of value.
I wish to make clear that when TRIMISGUS talked about NET ASSET VALUE I
thought he was referring to the NPV calculations that all junior energy companies in
Canada show in their monthly presentations and/or in their annual reserve report.
The NPV (net present value) is an estimate of the money that can be earned from
the reserves that have currently been booked. It makes assumptions about the future
price of energy and expenses and discounts them to the present time usually at 10%.
It is another indication of the value of the company's assets which.
In SGL's case management estimates the NPV of the reserves to be $962M. SO
subtracting the debt (300M) and adding in an estimate of the value of their undeveloped
land (say $100M) and you get the 10%net asset value per share.
I.E. (962 +100 - 300) / 128 = $5.95 per share based on the value of current
reserves.
This just another tool which, like book value, can be used as a guide to value.