Picture supply: Getty Pictures
The attraction of penny shares for buyers is commonly the hope of shopping for one thing for a lot lower than it’s price.
One share in my portfolio typifies that proper now, I reckon.
Logistics Growth Group (LSE: LDG) has a share value of round 14p. However its web asset worth (NAV) per share, on the finish of June, was 26.7p per share.
Can that actually be the attainable cut price it appears?
Worth is locked up, for now
There are a few factors it’s useful to grasp.
That NAV estimate is already from a couple of months again. Since then, the corporate has invested £15m right into a distribution enterprise. Over time, I believe that ought to assist to create worth, however for now it implies that cash is locked up in an funding, not sitting as money on the steadiness sheet.
In actual fact, on the finish of June, the corporate solely had £8m of web money on its steadiness sheet, so I shall be to see sooner or later what impact that deal has on the steadiness sheet within the short- to medium-term.
That’s typical of the broader asset base on the firm.
It’s not sitting on 26.7p per share in money. It’s sitting on some money and a number of stakes in personal firms.
They are often troublesome to worth within the absence of a public marketplace for their shares. It could actually additionally typically be troublesome to launch the perceived worth if desired, as there will not be a market of energetic patrons.
Clearly, estimating an NAV all the time entails ensuring assumptions. Nonetheless, Logistics Growth Group actually does look to me like a cut price penny share, given the worth of its underlying belongings.
Tempted to purchase extra
Earlier this 12 months, below shareholder stress, it used a few of its spare money to return £21m to shareholders at 19p per share.
I gladly took that cash and banked a revenue. Since then, although, I’ve added the penny share again into my portfolio.
At its present value, I’m tempted to purchase some extra. For now, although, I’m protecting my powder dry as I see fairly a couple of alternatives within the present market and assume extra might come alongside if we encounter additional inventory market volatility. Nonetheless, I’m weighing shopping for some extra Logistics Growth Group shares in coming months.
I’m a long-term investor anyway, however I definitely assume that mindset helps right here. The corporate is taking part in a strategic lengthy recreation, aiming to construct worth by proudly owning stakes in fastidiously chosen firms for years.
Nonetheless, from a long-term perspective, I see it as a penny share for buyers to contemplate. I plan to personal my stake for the long term.
