Key Takeaways of the recent OSK Holdings Share Buybacks

A share repurchase is a transaction whereby a company buys back its own shares from the marketplace. It's a way for companies to return value to shareholders on top of dividends.

The Shareholders of OSK Holdings, by a special resolution passed at the Extraordinary General Meeting held on 18 December 2000, approved OSK Holdings’ plan to repurchase its own ordinary shares. The Company has annually obtained the approval of the Shareholders to repurchase its own ordinary shares not exceed 10 percent of the total number of issued, or an amount not exceeding the Company’s retained profits. The shares purchased may be retained as treasury shares, cancel/resell, or distribute as dividend.

From the share buybacks records of OSK Holdings in the annual report:

From the recent share buybacks of 14/1/2020:

Buyback yield is the net repurchase of shares outstanding over the market capital of the company. It is a measure of shareholder return. Although that the total number of shares purchased against total issued shares of OSK Holdings YTD is just about 1.14776%, the impact to OSK share price is quite significance.

Let also further taking a look back of the history record of share repurchase of OSK holdings:

Do you observed the significance share buyback in 2014 and as compared to now? In 2014, with adjusted NTA of 1.9 and share buybacks with an average cost of RM 1.67 per share have a significance impacts of share price to highest price of RM 2.82.

With the current NTA of RM 2.37, what do you think with the current market and target price? Most probably with lowest purchase price of RM 0.945 (as initiated SBB on Dec 18, 2019), and will be with an estimated average cost of RM 1.9 and estimated highest purchase price of RM 3.06 (just a projection reference only based on 2014 data, not real yet)

Therefore share buybacks indicators can be one of the investor portfolio to follow and adopt to get rewarded from undervalue companies.

Buybacks can raise the share price and make the financial statements appear stronger.

Share repurchases can have a significant positive impact on an investor’s portfolio. For proof, one only has to look at the S&P 500 Buyback Index, which measures performance of the 100 companies in the index with the highest buyback ratio. In the 10 years ending Nov. 8, 2013, the S&P Buyback Index had surged 158.2%, compared with a gain of 68.1% for the S&P 500, outperforming it by 90 percentage points.

Just like increasing dividends, share buybacks also demonstrate the company's confidence in its future prospects. However unlike dividends, repurchases indicate that the company believes its stock is undervalued and represents the best use of cash at the time. In most cases, as time goes by, the company's optimism for the future will be generously rewarded.

Although that past performance does not guarantee future results. We also know that history always repeats itself. Whether it is an opportunity or obstacle, it is clearly now and not in the future.