These 3 Companies Have Been Buying Back Shares – Are They Bargains?

Every now and then, I like to check the daily share buy-back list to see which companies have been buying back their shares.

I do so because companies that buy back their own shares tend to do it when they think their own shares are undervalued. So, checking out the daily share buy-back list can sometimes lead to interesting ideas.

A quick check shows that the following companies have been buying back their shares recently.

  1. Golden Agri-Resources Ltd (SGX: E5H)
  2. United Overseas Bank Ltd (SGX: U11)
  3. Sats Ltd (SGX: S58)

Are these companies really bargains? Let’s see.

The palm oil play

Palm oil producer Golden Agri-Resources has suffered from four consecutive years of profit declines now, as seen in the table below. Consequently, its share price has more or less followed the same trend, sliding from S$0.80 at the start of 2011 to some S$0.44 today.

Year Profit
2010 US$1.42 billion
2011 US$1.27 nillion
2012 US$410 million
2013 US$311 million
2014 US$114 million

Source: S&P Capital IQ

But, Golden Agri-Resources does display some signs of being a bargain. That’s especially so if we look at its low price-to-book (PB) ratio of only 0.47 at the moment.

If it is able to turn-around its operations and grow its earnings again, there might be some opportunity here for investors. That said, we have to keep in mind that Golden Agri-Resources’ fate is highly related to the price of crude palm oil, something which the company has no control over.

The banking giant

Meanwhile, United Overseas Bank, Singapore’s third largest bank, has seen stable growth in both its revenue and earnings since 2009. Along the way, it has also been able to increase its dividends slightly.

United Overseas Bank's historical revenue, earnings per share (EPS), and dividends per share (DPS) (2)

Source: S&P Capital IQ

Yet, after that decent run displayed in the chart above, the bank is actually trading at just 1.3 times its book value, a fair bit lower than its average PB ratio of 1.39 over the past five-plus years since the start of 2010.

If United Overseas Bank is able to continue growing like it has since 2009 while maintaining the strength of its balance sheet, its current low PB ratio may make it an attractive share for investors.

Helping make your flights better

Sats, a food solutions and gateway services (think ground handling services for passengers, flights, and cargo at airports) provider, has been experiencing slow growth over the past few years.

From FY2010 (financial year ended 31 March 2010) to the 12 months ended 31 December 2014, the company has seen its top-line increase by just 2.9% per year on average from S$1.54 billion to S$1.76 billion. Over the same period, SATS’ profit has inched up only slightly from S$181 million to S$187 million.

At its current price of S$3.11, Sats has a trailing price-to-earnings (PE) ratio of 18.6. In comparison, the SPDR STI ETF (SGX: ES3) – an exchange-traded fund which tracks the market barometer, the Straits Times Index (SGX: ^STI) – has a PE ratio of just 13.8 at the moment.

What’s more, the PE ratio of 18.6 is also higher than the average PE ratio of 17.2 that Sats has had over the past five-plus years since the start of 2010.

Given the historical context we’ve seen, Sats’ current PE of 18.6 seems like a high price to pay for it shares.

Foolish Summary

So, of the three shares here, it would appear that Golden-Agri Resources and United Overseas Bank may be worth a deeper look by investors who are out looking for bargains by virtue of their low valuations.

On the other hand, Sats may warrant some caution given its elevated valuation and lack of growth.

All that being said, it’s worth pointing out that more work needs to be done beyond what I have shared before proper investing decisions can be made. There are still many important questions – like on the shares’ future prospects and financial strength – which are unanswered.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim does not own any companies mentioned above