SM PRIME Holdings, Inc.’s board has approved a share buyback program worth between P5 billion and P10 billion, the property developer said on Tuesday.
“The final terms and implementation of the program have been delegated to management,” the company said in a stock exchange disclosure.
A share buyback is when a company repurchases its own shares from the stock market, returning cash to shareholders.
Asked for additional details, SM Prime said the share buyback was approved because its stock is “currently undervalued.”
Citing yesterday’s closing price, it was down by around 20% year-to-date, “which does not accurately reflect the strength of our current performance and given our growth plans for the coming year.”
“This move demonstrates our confidence in the future of our business and allows us to return value directly to our shareholders,” the company said.
Jayniel Carl S. Manuel, an equity trader at Seedbox Securities, Inc., said that share buybacks have often been a company’s way of “showing confidence in their own long-term prospects and intrinsic value.”
“I guess it’s fair to say that if SM Prime is comfortable spending capital to repurchase its own shares, it’s an indication that they’re not worried about short-term cash crunches or emergency funding,” Mr. Manuel said in an e-mail.
“This can help improve their earnings per share too, since the same profit will be spread over fewer shares, making the numbers look more solid,” he added.
For the third quarter, SM Prime reported an attributable net income of P11.81 billion, up 10.6% from P10.68 billion a year ago.
Gross revenues grew by 6.7% to P35.62 billion from last year’s P33.38 billion.
At the local bourse on Tuesday, shares in the company climbed by 2.1% to close at P26.75 each. — Sheldeen Joy Talavera