26-02-2012, 08:18 PM
I see a few resistances of the management being hesitant to share buyback:
1. The cash is not available (still locked in project account til T.O.P), they may need to take debt to do share buyback. It is not unusual to do share buyback using debt. A lot of US companies are doing it, often because cash in their oversea subsidiaries won't be remitted back to US due to tax.
2. Share buyback could easily trigger a GO from the substantial shareholder/the management. Given that property development is kinda business requiring a lot of money to grow and the uncertain future, they probably would not like it to be triggered.
3. The management is still of mindset of running a public company like a private company.
intrinsic value is certainly not just book value. Otherwise, W.B. would be hurting continuing shareholders' interests by buying back share at 110% of its book value.
1. The cash is not available (still locked in project account til T.O.P), they may need to take debt to do share buyback. It is not unusual to do share buyback using debt. A lot of US companies are doing it, often because cash in their oversea subsidiaries won't be remitted back to US due to tax.
2. Share buyback could easily trigger a GO from the substantial shareholder/the management. Given that property development is kinda business requiring a lot of money to grow and the uncertain future, they probably would not like it to be triggered.
3. The management is still of mindset of running a public company like a private company.
(26-02-2012, 02:37 PM)Behappyalways Wrote: [ -> ]hope he is convinced. i meant i like what Warren Buffett describe on share buyback for undervalued shares.....shooting fish in the barrel. Yes the company's main biz is in property but it always comes with a certain risk although got to admit the boss is quite conservative and good at it. But now he is allowed to 'shoot fish in the barrel', why not grab it instead of earning $$$ the usual hard way.
(by the way, Warren Buffett use 110% over book value as a price to pay......not exact science but.... I remembered I had a discussion many months ago on a certain company which is buying back at 2 times NTA.......the boss 'fell in love' with his shares...luckily it is treasury shares meaning the company hope to sell it to someone at a higher price later........I don't wish to name the company....you guys should remember.....B.........)
many CEOs never stop believing their stock is cheap. In other instances, a less benign conclusion seems warranted. It doesn’t suffice to say that repurchases are being made to offset the dilution from stock issuances or simply because a company has excess cash. Continuing shareholders are hurt unless shares are purchased below intrinsic value. The first law of capital allocation – whether the money is slated for acquisitions or share repurchases – is that what is smart at one price is dumb at another.
intrinsic value is certainly not just book value. Otherwise, W.B. would be hurting continuing shareholders' interests by buying back share at 110% of its book value.
well i think the boss only knows how to surprise himself.......
