08 July 2013

Net Tangible Asset (NTA) VS Net Asset Value (NAV)

Net Tangible Asset is the Net Asset Value deducted by Intangible Asset. 

Intangible asset can be goodwill that occurred after the group acquired subsidiaries above its book value / reasonable price. Or it could be a discounted future value from projects on hand, depending on how management judge for it. The company has right to revalue the intangible asset and discount it by amortization on annual basis. 

In general, I prefer NTA over NAV, as it could prevent me from over state the book value of the company. I had encountered one company with negative NAV but positive NAV and the company went bankruptcy eventually. So we should always take into account both NTA and NAV before we make any investment decision. 

ROE could be also affected as the formula stated as (Net Earning / Average Equity), where by Equity actually could be treated as NAV (Asset - Liabilities). If we replace the Equity figure by NTA, the RONTA (Return On Net Tangible Asset) could be higher than ROE if the difference of NAV and NTA is significant. 

Nonetheless, this is just my thought now. Welcome to let me know your thought here. 

7 comments:

  1. in the 3rd Paragraph, you wrote "I had encountered one company with negative NAV but positive NAV..."
    I think what you actually meant was negative NTA but positive NAV, right?

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