Firms to buy back their shares in bid to raise value
Firms to buy back their shares in bid to raise value
Seeing share prices tumbling, some companies have decided to buy back their shares in an effort to increase their value.
Lam Son Sugar Joint Stock Corporation (LSS) decided to repurchase six million of the company’s shares, equivalent to 8.6 per cent of outstanding shares, on the HCM Stock Exchange, after its shares lost over 33 per cent of their value in the last four months.
The transactions are expected to happen from December 1-31.
LSS shares have fallen below the par value of VND10,000 a share since early this month, a loss of 33.2 per cent from the peak of VND15,000 on June 26, and a loss of 15 per cent since the start of 2017. At this price, the company will likely spend about VND54 billion for the repurchase.
The performance of sugar makers has slid this year after a strong showing in 2016. Revenues of Lam Son Sugar declined 53 per cent year-on-year to VND214 billion (US$9.4 million) in the first quarter of the fiscal year 2017-18. Its net profit, at just over VND12 billion, was just one third of its profits over the same period in 2016.
In 2016, the company’s revenues and pre-tax profits increased 18 per cent and 38 per cent, respectively.
The poor result could be blamed on falling sugar prices on the world market, currently being traded around $15 per pound of sugar, down sharply from $24 per pound at the end of September 2016.
Another sugar company, Thanh Thanh Cong Tay Ninh JSC (SBT) is also considering a repurchase of 83.5 million shares, or 15 per cent of outstanding shares, after its shares plummeted 50 per cent in the last three months, from over VND41,000 per share in early August to just over VND21,000 on Monday.
The company will seek shareholders’ approval for the repurchase programme, which is expected to take place during daily trading on the stock exchange in the shareholders’ meeting on November 20.
Earlier, the company’s trade union registered to buy five million shares of the company for long-term investment purposes from November 15 to December 14.
After the merger with Bien Hoa Sugar (BHS) on September 6 this year, the total assets of SBT increased from VND7.8 trillion to VND19.4 trillion, of which equity capital is more than VND6.9 trillion and liabilities were nearly VND12.5 trillion. The company holds about 30 per cent of the domestic sugar market share.
Besides sugar firms, garment manufacturer Everpia JSC (EVE) has also announced a repurchase programme of three million shares, equivalent to 7.1 per cent of its capital. The company’s shares have lost about 32 per cent of their value this year after it reported gloomy business results in the first nine months: the company posted VND79.7 billion in net revenues and VND32.4 billion in net profit, down 62 per cent and 50 per cent year-on-year, respectively.
Hoang Quan Consulting-Trading-Service Real Estate Corporation (HQC) has decided to buy back a maximum of 10 million shares, equal to 2 per cent of outstanding shares, to maintain the share value after it plummeted 50 per cent this year to around VND2,600 per share.
Companies may buy back their own shares from the marketplace when the shares have declined sharply and are undervalued to push up the price and protect shareholders’ interests. This solution seems to be effective so far: shares of all these companies have begun rising again in recent sessions, indicating that investors believe share prices will rise on the companies’ buy-backs.
