Investment Property valuation calculation: from 16.hk annual report
The fair value of the Group’s investment properties under development are derived using the residual method. The valuation is determined by taking into account the capital value of the proposed development assuming completion as at the date of valuation and then deducting from that amount the estimated costs to complete the construction, cost of borrowing the capital to undertake the development and a margin for profit and risk. The capital value of the completed development is derived by capitalization of the projected income from the development by making reference to comparable transactions available in the relevant market.
I-bank explanation on NAV discount
NAV measures the value of a stock based on the market value of its assets; for a property company those would be its development and investment properties. The NAV discount is then adjusted for the 'realizability' of those assets and growth potential in that NAV; the more realizable the NAV is, or the larger the growth potential the NAV carries, the lower the discount to NAV should be.