KOH BROS, SERIAL SYSTEM: Credible share buy back

L-R: Koh Tiat Meng, executive chairman; Koh Keng Siang, MD & Group CEO, Koh Brothers Group, the company which built the iconic Marina Barrage. Photo: annual report

COMPANIES WHICH buy back their shares readily find favour among investors -- the buying helps to absorb any selling, especially in a down market like the current one.

Companies may keep the purchased shares as treasury shares, which can be given subsequently to employees as part of the company's performance plan.

Then there are the few that actually cancel the purchased shares. This is the most beneficial to existing shareholders, as the shrunken number of issued shares leads to a higher earnings per share and even possibly higher dividend per share.

In this regard, one company that caught our attention recently is Koh Brothers, a construction and property development company.

On 1 June, it cancelled 13.138 million treasury shares valued at S$2.7 million.

Its stated purpose was to "enhance shareholder value".

And it continues to do so: On the very same day, Koh Brothers bought back another 128,000 shares from the open market at 20.5 cents apiece. That's at a big discount to its NAV of 39.3 cents.

The company deserves applause for that.

Recent story: Insider Buying: ROXY-PACIFIC, XINREN, SERIAL, KOH BROS

Serial System has bought back its shares every trading day since May 15, except for May 29.

SERIAL SYSTEM: Every trading day, except for one, in the past four weeks, Serial Systems was buying back its shares.

In all, it has bought back 9.492 million shares so far (between May 15 and June 8).

Assuming an average price of 9 cents a share, the purchases cost about S$850,0000.

Derek Goh, CEO of Serial System. NextInsight file photo

The buying had helped absorb market selling and pushed up the stock, which had closed at 10 cents the day before Serial started its share buyback.

Strong selling sent the stock down to below 9 cents in subsequent days as the euro crisis worsened. The buy back has raised the stock to 11.3 cents where it closed last Friday.

Prior to this, Serial chairman & CEO Derek Goh has also been a fervent buyer of the stock for over a year, in part because of the dividend yield of 6-9%.

The stock price looks undervalued compared to NRA Capital's fair value of 15 cents as stated in its recent report.

Recent story: SERIAL SYSTEM: Lots of business insights shared at AGM

Comments

#5 Gee 2012-06-12 17:51

Clap, Clap, Clap!

#4 Kee 2012-06-12 05:33

Of course the 400m shares was not a recent count, I could go thru' the share count over the years, 400+m shrs from 04, gg up to 500m, 600m, 700m, 800m to 900m tdy. My point is of course to illustrate tat nvr have Serial's buybacks made an impact in the long term, i.e. increasing shareholder value. The share count is to illustrate that in the context of long term (>5yrs), increasing shareholder value wasn't exactly evident. I agree share-count and bargain don't exactly relate in the measure of mkt price to tangible value/intrin value, but in the context of this article - my beef is "credible buybacks" hardly seem credible. No offence intended.

#3 Series 2012-06-12 00:00

The 2 are not quite related. Issuing shares was for some reason --- TDR, etc. As for buyback, shareholders can only encourage it. No one would say, don't do it. Whether Serial is a bargain --- mmmm, it's not exactly cheap currently. Like I said, these are not related matters. Btw, when was it 400 m shares? I don't have such a long experience with it.

#2 Kee 2012-06-11 06:48

The buying's just to offset the dilution, a bargain to you?

#1 Kee 2012-06-11 06:47

The real reason they have bought back so many shares is because of the increase they have had in the number of shares over the last few years. Increasing shares from over 400m to 900m shares, no wonder the massive dilution, and no wonder the massive buying by insiders.

Refresh comments list

KOH BROS, SERIAL SYSTEM: Credible share buy back

You may also be interested in:

Comments