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This Logistics Blue Chip Stock Has Been Buying Back Its Own Shares

Every now and then, I like to keep track of companies which have been buying back their own shares. That’s because share buybacks may be a sign that a company’s stock is undervalued.

Peter Lynch, the legendary manager of the U.S.-based Fidelity Magellan Fund, also included buybacks as one of the criteria in his investing checklist. To Lynch, it’s a good sign if a company or its insiders are buying shares.

Of course, management may be tasking the company to buy back shares for other reasons other than its stock being undervalued (some other reasons would be to offset dilution). And even if management feels that the stock’s undervalued, they may well be wrong in their assessment too. But, companies that have been buying back their own shares are still worth digging further into.

With these in mind, let’s take a look at one that has been engaged in buybacks these past few weeks.

The company in question is Global Logistic Properties Ltd  (SGX: MC0), one of the 30 constituents of the Straits Times Index (SGX: ^STI) – and thus a blue chip stock. As a brief background, the company – known as GLP for short – is a provider of modern logistics facilities in four countries, namely China, Japan, US, and Brazil.

The company develops and operates its logistics properties and also has a real estate fund management arm. It has a strong presence in its four aforementioned geographical markets. In fact, the company has the largest base of modern logistics facilities in China, Japan, and Brazil when compared to its competitors. The company is the second largest in the US market.

GLP has really been busy buying its own shares in the month of June. Since the start of the month, the logistics company has bought shares on 20 occasions, snapping up a total of 28.7 million shares for a sum of S$51.6 million.

GLP’s latest quarterly earnings were released more than a month ago on 19 May 2016. It was for its fiscal year ended 31 March 2016 (fiscal 2016). The company had a good year with growth seen in both its top- and bottom-line; revenue was up by 9.8% to US$777.5 million while earnings per share had spiked by 53.3% to 14.43 US cents.

The company appears upbeat about its future prospects. It commented in the earnings release that its markets “have attractive supply and demand fundamentals for logistics facilities in the medium to long term.”

China is GLP’s largest geographical market and the company mentioned that “leasing in China reflects healthy consumer demand.” GLP added that 90% of its portfolio “is occupied by businesses focused on domestic consumption, which historically has remained relatively stable even in times of slower economic growth.”

GLP’s shares closed yesterday’s trading session at a price of S$1.77.  At that price, the company is valued at just 9.2 times trailing earnings and 0.7 times book value.

A Foolish conclusion

Companies that are engaged in share buybacks are just a good starting point for investors looking for opportunities. It’s up to the individual investor to dig further and determine for him or herself whether a company’s shares are actually cheap or not.

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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.