Tuesday, March 13, 2012

Mercantile Investment Company Limited: Hype

Mercantile Investment Company Limited is a stock that has run from about $0.07 at the end of last month to an intraday high of $0.14 yesterday.  Today the stock closed down $0.01 to $0.12.

The problem is that the stock is running on hype and not fundamentals.  Those readers with a long memory will remember that I used to write about the stock when was under the guise of India Equities Fund.  Whilst those still holding will have made good returns, it has been a long road that Im sure many have turned off sometime ago.

The company is an investment company holding listed stocks including CSE, TCQ, IFL, API and TJN.  It has to be noted that listed investment companies nearly always trade at a discount to Net Tangible Assets (NTA) or NTA backing.  The company has an NTA of $0.0734(31/01/2012) and recently completed a placement at $0.08.

So why does the stock has a premium share price compared to NTA?  It is purely based on the fact that Sir Ron Brierley is on the board and is a renouned investor.  The premium is way too high for my liking.

1 comment:

  1. Sir Ron Brierley has a knack of picking up undervaled stocks. If you analysis the share configuration of Mercantile Investments itself you will find Sir Ron is going to get it right this time. Never underestimate this man.
    MVT has already a number of class assets which can only bode well for this company.