Book value is calculated by dividing total stockholder equity by the o/s common shares.
That CHRB has traded at or below book value as of late may very well further signal bargain prices at this level.
As a very general rule, any time a stock sells for less than book value, the stock is trading at a discount. The thing to watch out for is whether the co.'s other balance sheet items (i.e., assets and liabilities) are properly valued. In the U.S., GAAP calls for assets to be valued at cost or, in the case of impairment of value, market value if mrkt. value is below cost. Liabilities are valued at one would expect, the amount owed to others. Often liabilities will contain amounts for contingencies or commitments, both of which are estimated future obligations based on facts that are not entirely known at the time the financials are published, but such figures are usually consersative (especially so now in this age of legal liability of accountants/auditors).
CHRB, being a Chinese co., however follows Chinese accounting standards, which will generally follow U.S. rules, but not always. There are discussions being held in developing an international GAAP, but nothings in stone yet, nor do I know if foreign cos. will have to follow it (if such a rule was to come into play, it is feasible that the SEC may require foreign cos. whose stock trades in the U.S. to comply, or at least file 10-K's and 10-Q's based on it).
The reason I bring up all the discussion of valuation and accounting rules is that CHRB's balance sheet does have to be reviewed carefully when calculating book value, as things may be presented in a different light causing such calculations to be altered. As far as I know, no major differences exist but caution is always required in looking at foreign cos. (even Canadian).
One reason why book value may be a benchmark to look at is something I referred to above, the valuation of assets at cost. Quite often a co.'s assets (e.g., land, equipment, investments in other co.'s) increase in value, which is not reflected on the balance sheet, nor are intangibles such as the value of distribution or supply agreements, customer lists, etc., items that may increase the true value of a co. Once again, not being intimately familiar w/ CHRB, it may be possible that the co.'s value exceeds book value. This would go on to further underscore the potential buying opportunities here.
Thanks for posting your response from Mr. Tam. He has not answered me yet (whether anything can be read into that, I don't know). You're right in that not much info was forwarded. He certainly didn't respond to some of the other major concerns voiced. I'm hoping he'll do me the courtesy of a response soon. I'll post when there's news.
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