Posted by: donmihaihai | September 2, 2022

Share buyback.

I don’t have any data to back it up but it certainly look like more companies are buying back shares. Some of the purchases are for reissue under share schemes while others are plainly because the management deemed their company share prices are cheap. Leave aside on whether the price is really cheap for a second, knowing that more management is recongising that buying back their own shares is an alternative capital allocation option is heartening.

Jardine companies, China Sunsine, Sarine, YZJFH, YZJSB,PEC & YHI are companies that I know somehow but there are many others such as few STI components to smaller companies like Tiong Woon. Thumb up! Jardine did not buy back in any big scale about 10 years back where their shares were traded at some premium but last few years, they are big buyers. Not just their own shares but listed subsidiaries and I think bought shares in right subsidiaries. Certainly I don’t like the idea of buying DFI and Mandarin Oriental International.

At what valuation these companies should be repurchasing share, I am somehow more relax these days. What is more important is that they are buying back in big quantities at at least reasonable price than at deep discount. Those names that I mentioned need to learn from Jardine. Share buy back is not about share price gone up after repurchasing but at what quantity and at discounted price so to reduce outstanding shares. If I am rich enough to buy 1% of JMH and JMH reduce the outstanding share by 50%, my interest shoot up to 2% without spending another cent. The prospect of JMH remain the same as long as capital allocation is done right. How nice for long term shareholder.

Share buy back must be done in a responsible manner too and companies in need of cash are in no position to buy back share. For companies that are sitting on lot of cash such as Haw Par, PEC, Sarine, Sunsine and reasonable share price, I hope the management start to or increase their buying.

I believe that when we look back to the current period, it would be clear that this is one of the rare period where we have many healthy cash rich companies trading at very reasonable share prices. Of course, some people will always say, If I knew it, I would do it.


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