The first half of 2020 has seen volatile swings in the stock prices. From continuing to grow at the start of 2020, to plunging on the back of COVID-19 uncertainties, to rebounding to close to 2019 levels.
Going forward, much uncertainty about the economy remains. This can have unpredictable effects on companies in both the short- and long-term. However, companies will know better than any retail or even institutional investors how well they are actually doing. While companies can just say they believe in their business resilience or that their share price is undervalued, one way to signal that is the case is by conducting share buybacks.
In the first half of 2020, 81 Singapore primary-listed companies conducted share buybacks, spending $663 million. This is more than double what they spent in the first half of 2019, which amounted to $325 million, but less than what they spent in the second half of 2019, which amounted to $836 million.
What is most obvious is that companies understand that these are uncertain times. Even though they have moderated share buybacks since second half 2020, what is more significant is that three quarters of their share buybacks happened in March 2020, when the Straits Times Index (STI), plunged close to 26% between 2 March 2020 to 23 March 2020. In fact, at $501 million, monthly share buybacks consideration in March 2020 was the highest since August 2015.
In the first half of 2020, DBS Group, OCBC, UOB and SGX led in total share buybacks, purchasing $431 million, $63 million, $20 million and $17 million respectively. In this article, we look at 4 non-STI stocks that led with the highest share buyback tally in first half of 2020.
Silverlake Axis (SGX: 5CP)
Silverlake Axis bought back more than 47.6 million of its shares amounting to $15.4 million in the first half of 2020. The average price per share (including costs) was $0.322.
Today, shares of Silverlake Axis are trading at $0.24, which is over 25% under the average price the company paid to buyback its shares in first half 2020.
On 14 May, Silverlake Axis announced a 3% increase in revenue to RM506.8 million for the first 9 months of its FY2020. However, its earnings per share declined 29% to RM0.0477.
In the same announcement, it noted that it foresees a challenging road ahead amid uncertainties brought upon by COVID-19 and US-China trade war. Nevertheless, it won contracts totalling RM65 million in the third quarter of its FY2020.
It also noted that it is an essential services provider to the banking and finance industry. Despite the tough economic landscape, none of Silverlake Axis’ customers terminated contracts or exercised temporary relief clauses.
Silverlake Axis also mentioned that government measures will create a new operating environment in the post-pandemic era, and the group is innovating with technological tools in delivering its services.
Global Investments (SGX: B73)
Global Investments bought back 80.1 million of its shares in the first half of 2020, totalling $10.6 million. The average price it paid (including costs) per share amounted to $0.132.
This is 4% less than what its shares are currently trading at today – at $0.137.
On 2 Feb 2020, it announced its FY2019 results, recording over two-fold increase in total income to $26.0 million. Its earnings per share grew from $0.0043 in FY2018 to $0.0116 in FY2019.
It also answered some questions related to its investments during its Annual General Meeting (AGM), stating that it will take a cautious stance in rebalancing its portfolio of assets and adopt a selective approach in its investments, as well as maintain its policy to invest in a portfolio of assets in different sectors.
The company also had hardly any borrowings on its books, and stated that it has assessed private equity investments which would require borrowings, but had not embarked on them due to unfavourable valuations VS financing costs.
Golden Agri-Resources (SGX: E5H)
In December 2019, Golden Agri-Resources was dropped from the STI, making way for Mapletree Logistics Trust to replace it.
In the first half of 2020, Golden Agri-Resources bought back 42.7 million of its shares for a total consideration of $8.1 million. On average, it bought back each of its shares for $0.189 (including costs.)
Its shares are trading at $0.15 today, which is a 21% discount to the average price it paid during its share buyback in the first half of 2020.
In its first quarter of FY2020 results announcement, it reported a 2% increase in revenue to $1.7 billion. However, it sunk into the red, posting a net loss of $95 million, compared to a profit of $18 million in the first quarter of FY2019.
In its announcement, it also noted that its business is in food and biodiesel industries are deemed essential by the government. Leading the way in sustainable outcomes globally, it also stated that Golden Agri-Resources is a preferred supplier.
Restaurants and hotels closed, while households experienced an increase in cooking, has mitigated the impact on demand for palm oil. Golden Agri-Resources also notes that short-term volatility in its crude palm oil may persist, but will be buffered against demand for food usage compared to crude oil prices. There is also health supply and demand, with limited growth in palm oil supply this year, which was affected by drought and lower fertiliser application.
Hong Fok (SGX: H30)
Hong Fok bought back 11.5 million of its shares for a total consideration of $7.1 million. It paid an average of $0.621 per share (inclusive of costs).
This is 14.3% lower than its current share price – trading at $0.71.
Hong Fok, which is in the property business, reported a 14% decline in revenue in its FY2019, which dipped $113 million. Its net profit declined 57%.
With existing development projects primarily in Singapore, sales may be slower amid the uncertainties induced by COVID-19. It also has a portfolio of investment properties in the hospitality industry, which will be impacted by the restrictions in tourism, and commercial and retail properties, which may similarly experience a slowdown.
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4 Stocks This Week is not a recommendation from us to buy or sell any of these stocks. For investors who are keen to find out more, you should continue researching about them before making your investment decisions.