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What Investors Should Know About Share Buybacks by Singapore-Listed Companies in 2018

Sudhan P.

According to a recent report released by the Singapore Exchange, 32 companies bought back 97 million shares or units for a total amount of S$78 million in December 2018. For the full year, the total share buybacks amounted to S$1.5 billion.

The top ten companies with the most significant share buyback amounts in December were United Overseas Bank Ltd (SGX: U11), Keppel REIT (SGX: K71U), Oversea-Chinese Banking Corporation Limited (SGX: O39), Stamford Land Corporation Ltd (SGX: H07), Venture Corporation Ltd (SGX: V03), SingHaiyi Group Ltd (SGX: 5H0), SATS Ltd (SGX: S58), Singapore Post Limited (SGX: S08), Tuan Sing Holdings Limited (SGX: T24), and Sembcorp Industries Limited (SGX: U96).

Keppel REIT’s manager has been regularly buying back the REIT’s units since July 2018. As I noted in an earlier article here, Keppel REIT repurchasing its units could be a signal to the market that its units are selling below their intrinsic value. As of Friday’s close at S$1.15, Keppel REIT had a price-to-book ratio of 0.8 and a distribution yield of 4.9%.

2018 share repurchases

For the whole of 2018, the total share buybacks amounted to S$1.53 billion, with 100 companies conducting buybacks. The 2018 amount was triple that of 2017’s, which was at S$426 million. In 2018, Singapore’s stock market benchmark, the Straits Times Index (SGX: ^STI) tumbled 9.8%. But in 2017, the index rallied 18%. I note that with all things being equal, companies tend to repurchase more of their shares when the broad market is falling.

The 2018 share buyback was led by CapitaLand Limited (SGX: C31), DBS Group Holdings Ltd (SGX: D05), Oversea-Chinese Banking Corporation, United Overseas Bank, and Keppel Corporation Limited (SGX: BN4).

Straits Times Index components made up more than 80% of the 2018 share buyback amount. However, in the grand scheme of things, the combined buyback amount by the blue-chips was insignificant as it represented a mere 0.5% of their total market capitalisation, as of 31 December 2018.

The Foolish takeaway

Companies which repurchase their shares could hint to the market that their shares are undervalued. Share buybacks could also cosmetically enhance the earnings per share of companies since the outstanding share count is lowered. My Foolish colleague, Royston Yang, recently looked at other reasons why companies buy back their shares. You can click here to learn more.

The SPDR STI ETF (SGX: ES3), an exchange-traded fund which tracks the fundamentals of the Straits Times Index, was valued at a price-to-earnings ratio of 11.1 and had a distribution yield of 3.6% on 31 December 2018.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Singapore Exchange Limited, DBS Group Holdings Ltd, United Overseas Bank Ltd, Oversea-Chinese Banking Corporation Limited and SATS Ltd. Motley Fool Singapore contributor Sudhan P owns shares in Singapore Exchange Limited and SATS Ltd.