A share buyback is one of the strategies that is endorsed by legendary investors such as Warren Buffet and Charlie Munger to gain significant returns on their investments.
The logic is simple – if you have a good business and its share price is undervalued, and there is no option to deploy the cash to achieve high rates of return, you are better off just buying back your own shares.
Though the appearance of share buybacks does not mean that a company is indeed a good buy now, it is definitely a good place to start digging further.
Here, I’ll look at three Singapore blue-chip companies that bought back significant amounts of their own stock in May.
DBS Group Holdings Ltd (SGX: D05)
The first blue-chip that bought back its own shares in May is DBS Group Holdings Ltd (SGX: D05). For most of us, DBS Group is a company that needs little introduction. It’s one of the three local banks in Singapore.
In May 2019, DBS Group bought back 2.60 million of its shares for S$65.7 million. It’s also the biggest buyer of its own stock among all Singapore companies in May.
At its current price of S$24.08 per share, DBS Group is down by about 18% from its 52-week high of S$29.28. This might entice investors to study more about the company since a combination of a lower share price and share buybacks is usually a good source of investment ideas.
Oversea-Chinese Banking Corp Limited (SGX: O39)
The second company that bought back its shares last month is another local bank, Oversea-Chinese Banking Corp Limited (SGX: O39), or OCBC. In fact, it’s the second largest purchaser of its own stock in May after DBS Group. Here are some numbers about OCBC’s stock buyback.
For the month, 2.78 million shares were bought back for a total of S$30.6 million. Nevertheless, given its current buyback mandate is at about 212.3 million shares, investors might see more share buybacks from the company in the foreseeable future.
At its current price of S$10.58 per share, OCBC is down by about 18% from its 52-week high of S$12.91. Similar to DBS Group, OCBC might be a good candidate for investors to study further.
Singapore Technologies Engineering Ltd (SGX: S63)
The last blue-chip that we will look at here is Singapore Technologies Engineering Ltd (SGX: S63), or STE. As a quick introduction, STE is a conglomerate with business interests in various sectors, namely Aerospace, Electronics, Land Systems, Marine and others.
In May 2019, STE bought back 1.1 million of its shares for S$4.3 million. It’s the fifth biggest buyer of its own stock among all Singapore companies in May.
At its current price of
S$27.71 S$4.00 per share, STE is trading at close to its 52-week high price of S$28.73 S$4.05. As such, investors could pay more attention to STE’s valuation when researching whether to invest in the company.
Though share buyback may be a good place to search for potential ideas, investors should carry out comprehensive research before investing in any of the companies mentioned above.
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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 Lawrence Nga doesn’t own shares in any companies mentioned. Motley Fool has recommended the shares of DBS Group Ltd and Oversea-Chinese Banking Corp Limited.