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What investors should know about share buybacks in SGX market?

Recently in Singapore Stock Exchange, share buyback is trending as many companies are repurchasing their shares from the Singapore Stock Market. Due to the buyback of shares in Singapore, the number of outstanding shares has decreased in the market.

The report released by the Singapore Stock Exchange (SGX), 30.2 million shares i.e. the total amount of S$26.4 million is bought back by 21 companies. The buyback has done in December 2018 and January 2019 with the cost of S$78 million and S$54 million respectively according to the report.

The last share buyback has done on March 4th by Bumitama Agri Ltd.

This can affect the share price of the stock of the companies. Therefore Singapore Stock trader should know a few things about these buybacks and how it can affect the SGX market.

Before that let’s know about What is a share buyback.

Buyback or sometimes it is known as share repurchasing is when a company repurchase its share from the shareholders in the market price, therefore decreasing the number of outstanding shares. The company can buy back the shares from shareholders by offering them the option of tendering shares directly to the company at a fixed price or buyback directly from the stock market.
 

Why companies are buying back shares from SGX market?


The companies usually buyback the share when the stocks are undervalued. By repurchase of the stock, they decrease the number of outstanding shares in the market thereby increasing the earning per share of the stock. The share buyback is the way of increasing the revenue of the company and increasing the share price of stocks.

The most apparent effect of the share buyback is an increase in EPS and a decrease in P/E or price-earning ratio.

 

What investors should know about share buyback in SGX?


Considering the latest market action, investors should be aware of all the companies which are repurchasing their shares. They should be aware of the result of these buybacks and how it can affect the stock price of companies.

The top 10 companies which buyback the shares from the SGX are given below. These companies have the highest number of buybacks according to the percentage of buyback volume.

They are:

 

1) Keppel REIT(SGX: K71U)
2) Venture Corporations Ltd(SGX: V03)
3) Silverlake Axis Ltd (SGX: 5CP)
4) Singapore Post Limited (SGX: S08)
5) Oversea-Chinese Banking Corporation (SGX: O39)
6) Global Investment(SGX: B73)
7) Eurosports Global Ltd(SGX: 5G1)
8) Star Pharmaceutical Ltd (SGX: AYL)
9) Stamford Land Corporation (SGX: H07)
10) Singapore Shipping Corp Ltd (SGX: S19)


All the above companies have more than 80% of the volume of the share buyback of the Singapore Stock Exchange. OCBC, Global Investors, Singapore Shipping Corp Ltd, and Stamford Land Corporation are the most recent and more frequent share buyback companies.

The latest share buybacks in SGX on 4th March are Bumitama Agri Ltd (SGX: P8Z), Eurosports Global Ltd, OCBC and Global Investment.

Keppel REIT is buying back the REIT’s units since July 2018. This continuous buyback of the stock is might be the signal that the REITs of Keppel are undervalued. The REIT’s manager, during the earing release for the 2018 second quarter stated that it would only purchase the units when it is incremental to distribution and net asset per unit. The last trading price of Keppel REITs on March 4th is S$ 1.26, P/E ratio 29.28, Price to book values 0.86 and dividend yield is 3.61%.

ISEC Healthcare Ltd (SGX: 40T) is repurchasing its hare for the first time since its listing in SGX. The initial public offering of the company happened in October 2014. Last month it bought back 386,400 shares for an amount around S$105,300. ISEC Healthcare is a medical eyecare provider and the last share price is SGD 0.29 and selling at price to earnings ratio of 18.12 offering dividend yield of 5.38%.

Silverlake Axis repurchased around 7.15 million share amount of S$2.9 million in January. Silverlake Axis is the payment solution provider in Singapore. The current P/E ratio of the company is 23.07 and last close price was at S$0.58 as on March 4th.
 

What is the effect of Share buyback in SGX market?


Share buyback in SGX can improve the stock price in short term. The most effective result of share buyback increases in Earning Per Share (EPS). Companies buy back their shares when they believe that shares are in underestimated value and resell them again in the open market when they think the market price of the stock is back to normal. By share buyback companies decrease their number of assets but increase return on assets.

Many Singapore traders like share buyback as it increase the shareholder value and in short term the price of the stocks increase with the buyback.

In the long-term, the effect of share buyback can be positive or negative. Sometimes this can give the wrong signal of market growth, therefore, investors should be careful during the share buyback in the market.

MMF Takeaways

The share buyback in SGX market can boost the stock price of the company and investor can get the benefit from the stocks. But it can also go otherwise if the company doesn’t perform well even after share buyback and stocks don’t regain the value. SGX investor should keep the eye on the share buyback companies of Singapore to make profitable decisions on SGX stock trading.

 

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