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QuestionsCategory: Valuation QuadrantRight of Use Assets
Ray Titus asked 9 months ago

Dear Team,
 
A concern on the right of use assets (ROU). As I understand the PB Ratio calculation is impacted from deduction of intangible assets. As understood that right of use assets are intangible and the utility company recently used (ROU) as recognition in non-current assets.
 
How do we make evaluation of the company value for PB when just within a year the book value per share has dropped from from 9.1 to 2.3 .
 
Would love your advice on this matter.

Thank you.

2 Answers
Victor Chng answered 9 months ago

Hi Ray,
 
If the book value is volatile then PB ratio cannot be use. I think earning power, in term of PE will be better. 

Ray Titus replied 9 months ago

Hi Victor, noted on the recommendation. Actually the PB changed only recently due to the conversion of assets reclassified into right of use assets which from investopedia site that recommends to be included as intangible assets. Hence why such huge fluctuation in terms of valuation.

Could you guys probably add in a module for right of use assets?

Victor Chng replied 9 months ago

Hi Ray, Thank you for your suggestion. We will look into it :)

Jieren Zheng answered 9 months ago

Another thought would be why would it be written down or impaired so significantly? Perhaps that is worth looking deeper.

Ray Titus replied 9 months ago

Hi Jieren, as per my response to Victor that the amount is now reflected as right of use assets which I’ve classified as intangible assets following investopedia. Hence this impacts the overall book value.

Would love to understand more on how to include or exclude right of use assets in book value evaluation.