Companies buy back their shares for a variety of reasons. Some do it in order to deploy excess cash, as they feel the shares offer good value; others may buy back their shares in order to enhance earnings per share, as the exercise would reduce the issued share capital base.
I have a habit of scanning through the list of share buybacks made by companies on a weekly basis. This gives me some ideas as to which companies may feel that their shares are cheap and offer good value. Here are three companies that bought back their shares last week.
1. Nordic Group
Nordic Group Limited (SGX: MR7) is a supplier of automation system integration solutions; vessel maintenance, repair, and overhaul (MRO); and precision engineering. Its clients are in the marine, oil and gas, petrochemical, and pharmaceutical industries.
On 31 May 2019, Nordic bought back 3,000 shares at an average price of S$0.28. Note that the share price of Nordic has declined from a high of S$0.54 a year ago to the current S$0.29 for a fall of 46%. Nordic’s latest Q1 2019 earnings show a decline of 14% year on year in revenue, due to a fall in project services revenue. However, this was offset by increased revenue from its maintenance services division thanks to new contracts and increased work from existing customers.
The group suffered a 40% year-on-year decline in net profit due to lower gross margins. The order book stood at S$95.5 million as of 31 March 2019, and chairman Chang Yeh Hong is confident in delivering despite challenging operating conditions in the offshore and marine segments.
2. AEM Holdings
AEM Holdings Ltd (SGX: AWX) is a company providing solutions in equipment systems, precision components, and related manufacturing services across various industries. The group had been riding high on the electronics boom for the last few years, but orders have since moderated due to the trade tensions between the US and China.
The group bought back 100,000 shares at S$0.85 on 31 May 2019. The shares have fallen from S$1.42 to the current S$0.82 (a 42% decline) in just over a year. AEM’s recent earnings saw a 19.7% year-on-year drop in revenue, which was accompanied by a similar 19.7% fall in net profit. Management expects to sustain its investments in research and development, and to also accelerate the company’s sales and marketing efforts in the second half of 2019 in order to boost sales.
3. OCBC Bank
Oversea-Chinese Banking Corp Limited (SGX: O39), or OCBC, is one of Singapore’s three big banks and offers a wide range of banking services to individuals and corporations. On 30 May 2019, OCBC repurchased 200,000 shares at S$10.77. OCBC’s shares have sold off 13% in May alone as concerns over trade wars and tariffs flared up once again.
OCBC reported a stellar set of Q1 2019 results, with net interest margins rising, stable non-performing loan ratios, and year-on-year loan book growth of 5%. The share price decline may seem unwarranted as the bank is doing well, which may be the reason for the share buyback being conducted as a signal of confidence in the bank’s prospects.
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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 Royston Yang does not own shares in any of the companies mentioned. The Motley Fool Singapore has recommended shares of Nordic Group Limited, AEM Holdings Ltd, and Oversea-Chinese Banking Corp Limited.