3 Most Active Companies In Share Buybacks For 3Q18

A share buyback is a program by which a company buys back its own shares from the marketplace, usually because management thinks the shares are undervalued, and thereby reducing the number of outstanding shares. Once the shares are bought back, they will be converted into treasury shares, which means they are no longer categorised as shares outstanding.

When assessing undervalued stocks, one of key catalyst I look out for is share buybacks. Usually share buybacks are positive signs that the management believes that shares are undervalued. Other motivations for share buybacks include companies moving to align stock valuations with balance sheet objectives, boost financial metrics (EPS, ROE etc) or to reward its employees.

Companies typically fund a share buyback using excess cash reserves or surplus from operating cashflows, however debt funded buybacks are red flags and undesirable.

According to recent updates from SGX, Singapore-listed companies have been repurchasing more of their own shares this year, with stock buybacks hitting a near three-year high in August, and analysts think this trend could continue amid a volatile market.

Here are top 3 most active companies in share buybacks over the past 3 months:

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SingShipping owns and manages ships in Singapore, Japan, and internationally. The group operates in two segments, Ship Owning, and Agency and Logistics. The group reported profit of US$10.4 million for FY17. This is an increase of 22% compared to the last financial year.
The group sits on a healthy balance sheet and low gearing of 3x Debt to EBITDA. With cash and short-term investments of S$ 25.42 mm based on latest fillings. This is in comparison to its peers, where debt levels averages between 120%-150% gearing for shipping majors due to the capital intensive nature of its industry. Its low gearing will allowed the management to conduct buybacks for boost shareholder value.
SSC
SingShipping FY17 annual report
Even as the global maritime industry continues to be mired in over-supply of tonnages and poor performance in almost every segment of shipping. SingShipping managed to establish itself a strong financial position due to its long-term charters, which meant that earnings for the future years are predictable and reliable. This is the result of a prudent policy in ensuring its cash flows and various external risk exposures are well-managed.
Despite the positives, SingShipping remains an undervalued stock with EV-EBITDA of 7 and price to book value slightly under 1.0. In Aug, the group declared dividends of $0.01 which gave investors 3.66% dividend yield.

Stamford Land Corporation (H07) – repurchased shares 33 times in the past 3 months.

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The group owns, operates, and manages luxury hotels mostly in Australia, and New Zealand. The company operates through 4 core segments: Hotel Owning and Management, Property Development and Property Investment.

Despite its cheap valuations and strong financial position – Price to Book Value of 0.8, 3.47x EV-EBITDA and Cash & ST Invt S$139mm (20% of Total Assets) – its share price has been on gradual decline over the past 5 years.

This is due to the rising discontent among minority shareholders regarding its low dividend payout (2% dividend yield) and high remuneration for senior management of the company.

In a recent spat with one of its minority shareholders, Mr Mano Sabnani, who claimed to be treated in an ‘inappropriate manner’ during the 2018 AGM after he raised questions on dividends and remuneration. This resulted in a defamation lawsuit against Mr Sabnani, fortunately, both parties have since reached a settlement on the issue. Obviously, this does not reflect well of the company and has caused concerns among the retail investing community.

That said, on the business front, Stamford Land still owns a portfolio of high quality assets and in aftermath of the dispute, management has conducted several rounds of share buybacks to boost shareholder value.

 

Singhaiyi Group (5H0) – repurchased shares 32 times in the past 3 months.

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Singhaiyi develops, owns, and manages real estate in Singapore, Malaysia, Australia, and the United States. The company operates through Property Development and Property Investment segments. Singhaiyi has one of the larger exposures to Singapore residential in the sector.

The group’s net profit shrank 92 per cent year-on-year to S$1.24 million for the first quarter ended June 30. Its share price is on all time low as of Nov 2018.

Revenue plunged 91 per cent to S$26.07 million as a result of lower property development income. This was mainly due to the decrease in revenue recognised for the group’s completed Executive Condominium project, The Vales. As a result, its earnings per share was sharply lower at 0.029 Singapore cent, versus 0.534 cent the previous year.

Recently, the group terminated an agreement for the sale of  its US commercial real estate project, 34 condominium units valued at US$23.1 million. The agreement was terminated because the buyer failed to close the escrow for 31 of the 34 condominium units before the dateline due to lack of resources. Its share price fell sharply lower after the announcement.

Despite its recent woes, the group is backed by a well-connected board and management team (Gordon & Celine Tang). Given its low share price, it is not surprising to see the company buying back shares from the market. However, could the resources have been better allocated instead?

Top 20 Deep Value (1)

 

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