If you’ve followed Millennium & Copthorne Hotels (MCK) on the NZX, you’ve probably wondered why it’s always traded below NTA. Especially when that NTA is mostly comprised of property.
You might assume that MCK don’t own the buildings, or there was some sort of problem that wasn’t accounted for.
The reason MCK trades below NTA (in my opinion) is because in the case of MCK, NTA is irrelevant to its valuation.
NTA is normally relevant in a valuation, in order to consider the value of the assets if a business was to be bought out. Due to the ownership structure of MCK, specifically an overpowering majority owned by a single family in a long term trust, MCK will never see a total sale of the business or assets; hence would be a bad investment on the premise of a sale as an exit; hence the NTA is irrelevant to the valuation of MCK shares.