GFP Investments

Deswell: Valuation Of A Classic Net-Net


The purpose of this article is to analyze an investment opportunity in Deswell Industries, Inc. (NASDAQ:DSWL) under the assumption that the company may be liquidated/sold sooner or later due to declining sales and an increasingly hostile business environment. The basic approach to the analysis follows the form of a 'Net-Net' valuation, in which liquidation values are estimated from recoverable assets and then compared to the current market capitalization. The basic liquidation valuation approach is then extended to answer the question 'How does the valuation change if the company is not liquidated immediately, but rather at some point in the next few years?'. The analysis also attempts to incorporate factors that are unique to DSWL, such as rapidly...

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