Share buybacks is an initiative where companies buy some of its own shares back from the open market.
These shares that are bought are held by the company as treasury shares and no longer publicly available for trading. This reduces the number of outstanding shares and also improves the earnings-per-share, and other financial ratios of the remaining shares.
Very often, a company buying back shares from the open market suggests that management thinks that its current share price is undervalued. This acts as a signal for other investors, who may take a deeper look at the stock to see for themselves if they agree with the management’s observations.
In this week’s edition of 4 Stocks This Week, we look at four companies on the Singapore Exchange which have bought back a large number of its own shares this year.
#1 Oversea-Chinese Banking Corporation Limited (SGX: O39)
OCBC have bought a total of 15.36 million of its shares since the start of 2017. Based on its current share price of $12.39, they would have spent about $190 million. Do note that this figure is only an estimate, since the share buyback from OCBC would have occurred at different prices throughout the year, rather than at one single price.
It’s also worth noting that OCBC’s share price has increased by about 39% since the start of 2017, making it one of the top performing companies within the Straits Times Index.
#2 SilverLake Axis Ltd (SGX: 5CP)
For those who are not familiar, SilverLake Axis is a software company that specialises in Financial Technology (FinTech). It works with banks such as OCBC and CIMB to provide digital solutions to improve their banking systems. With the FinTech space currently booming in Singapore, SilverLake Axis is prime to capitalise on the future growth of this space.
Since the start of 2017, it has bought a total of almost 132 million shares, which represent close to 5% of overall shares in the company. Based on its current share price of $0.60, the company would have spent about $78 million on share buybacks this year. It’s market capitalization is about $1.57 billion.
Since the start of the year, the share price of SilverLake Axis has increased by about 13.2%, with a total return of about 23%, once dividends are included.
#3 Sembcorp Marine Ltd (SGX: S51)
Due to the challenges of the oil and gas industry, the last few years have been difficult for Sembcorp Marine. One of its biggest client, Sete Brasil, declared bankruptcy in 2016, taking a sizeable chunk of about $4 billion off its order book.
Still, the company managed to inch out a slight profit of $2.7 million in its latest 3Q2017 announcement.
Since the start of the year, the company has bought back about 1.7 million shares, which includes 1.3 million shares just for the month of November. Based on its current share price of $1.90, the company would have spent about $3.2 million on share buybacks this year.
It’s also interesting to note that the company share prices have gone up by about 35% from $1.40 to $1.90 since the start of the year.
#4 Singapore Post Limited (SGX: S08)
Most of us are familiar with the traditional business of Singapore Post. Once a core function that the economy depends on, postal services have slowly become obsolete in our fast changing digital world today.
Singapore Post has found ways to keep itself relevant. It is now partnering with AXA to sell insurance and also partner with Standard Chartered to offer credit cards and business loans. It is pushing itself into the space of e-commerce by offering an integrated solution of storage, delivering and payment for its clients. It’s also worth noting that the company majority shareholders are Singtel (21.8%) and Alibaba (14.5%)
The company continues to enjoy revenue growth even as its profits remain at a similar level. Since the start of the year, the company has bought back 4.47 million of its shares. Based on its current share price of $1.27, it would have spent about $5.7 million on share buybacks.
Unlike the other three companies mentioned in this article, Singapore Post’s share price has dropped since the start of the year from $1.47 to $1.27 today, or a decline of about 18%. The company is currently valued at about $2.9 billion.
If you are interested to read more about Singapore stocks, you can check out our extensive archive 4 Stocks This Week articles. To stay up to date with the latest news on the Singapore Exchange, you also can visit the SGX My Gateway Market Updates to get more insights.
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