Every now and then, I like to flip through analyst reports or financial magazine to see which companies have been buying back their shares. The rationale behind this is because companies that buy back their own shares tend to do so because management feels that its shares might be undervalued. Management may be wrong in their assessment of how cheap their company’s shares are, but such situations are worth digging further into. When a company’s management team thinks its shares are cheap, it pays to sit up and take notice. With these in mind, let’s take a look at two companies…
Every now and then, I like to flip through analyst reports or financial magazine to see which companies have been buying back their shares.
The rationale behind this is because companies that buy back their own shares tend to do so because management feels that its shares might be undervalued. Management may be wrong in their assessment of how cheap their company’s shares are, but such situations are worth digging further into. When a company’s management team thinks its shares are cheap, it pays to sit up and take notice.
With these in mind, let’s take a look at two companies that have been engaged in buy backs these past few weeks:
- Centurion Corp Ltd (SGX:OU8)
Centurion Corp started off as an audio cassette tape manufacturing business in Singapore and became one of the market leaders in the optical storage media industry in the 1990s. However, following a reverse acquisition in 2011, the company successfully diversified into the accommodation business to capture growth opportunities in this niche market.
According to its website, Centurion has a strong portfolio of 14 operational accommodation assets with a total 45,662 beds as at 31 March 2015. Upon completion of the development of two workers accommodation assets in Singapore and three assets in Malaysia, the accommodation portfolio is expected to grow to over 74,000 beds in 2017, up by an impressive 62%.
The share buyback mandate was passed on 28 April 2015, stipulating that the company is allowed to repurchase a maximum of 75,687,333 shares from the market. The company initiated its buyback process on September 2015 and has since bought back 3,847,500 shares (i.e. 0.5083% of its total issued shares).
The last buyback transaction was executed on 15 October 2015, where Centurion Corp acquired 242,100 stocks at S$0.415 per share. After which, the company now owns 753 million issued shares outstanding and around 3.85 million treasury shares.
Centurion last traded at S$0.42. With that price, it has a below-market PE ratio of 3.2 and a modest dividend yield of 3.57%.
- GP Batteries International Ltd.(SGX:G08)
If you have used a battery with a logo emblazoned in green and yellow, then it is quite likely that you have heard of GP Batteries. It is one of the largest suppliers of primary and rechargeable batteries globally to original equipment manufacturers, leading battery companies, as well as consumer retail markets under its own GP brand name.
With its production facilities set up in various Asian countries, the Group currently employs about 5,900 people worldwide and occupies a total floor area of approximately 262,000 square meters.
On 21 October 2015, it repurchased 30,000 shares via the open market at an average price of S$0.905 per share. Investors might be excited to know that GP Batteries began the share buyback as early as 11 June 2015. With the cumulative number of shares standing at 3.5 million, it has already covered 21% of the maximum number of shares the firm is authorised to buy back.
GP Batteries last changed hands at S$0.875, with a P/E ratio of 10.7 and decent dividend yield of 4.29%.
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 – such as the companies’ future prospects and financial strength – which are unanswered.
Some of the companies listed above might indeed be buying back their own shares because their management team thinks their shares are cheap. It’s our job to figure out which ones are.
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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 James Yeo doesn’t own shares in any companies mentioned.