Thursday, April 17, 2008

Shares Buy Back: Parkson

Shares buy back used to be interpreted as a proactive capital management. It is supposed to be a good practice, a shareholder value enhancing activity. But some have used it as a sentiment indicator, interesting isn't it?

One can see very clearly the highest number of buybacks transactions coincided with a dip. There is no guarantee however that is an absolute bottom though. One can more or less generalize that shares buy back is a signal of owners think their companies are undervalued but their voices are not loud enough to offset share prices fall.

Parkson has recently started shares buy back since beginning of April. Turtle is in opinion, the company will not or cannot absorb any selling pressures. Defending share price is a wishful thinking. On heavy selling days, the company shares buy back were less than 5-6%. Nevertheless, Turtle supports the management moves of reducing outstanding shares and sending signals the company share is undervalued. They can only doing so if they have spare cash. Nothing more, nothing less, period.

The direction of Parkson Holding Berhad is simply correlated with general sentiments except the magnitude of fall is deeper than HSI and Parkson Retail Group.

Switch subject. Of Late, Mark Mobious thinks the US financial crisis is almost over, he begins to buy China Mainland banking stocks. He thinks Malaysian stocks are getting more and more attractive too. Li Ka Shing bought shares of his own company - Cheung Kong.

Earnings from the US banking sectors were not out of expectations. Sub-prime write down did not shock anyone yet, however there are some signs of strains in the consumer credits. Citigroup will release their results tonight. Despite of the US negative economics news, about 10% plus of the earnings released so far have not been reflecting the weaknesses-some divergence. Signals are mixed, it is not all clear kind of situation, odds are 50-50. It is all depend on one's risk appetite. Turtle will remain as a turtle at this moment, though there is a premium to be paid later if worldwide stock markets rally.

1 comment:

AC said...

I join you to become turtle because Buffett said this: "It seems everybody says it'll (the economic slowdown) be short and shallow, but it looks like it's just the opposite. You know, deleveraging by its nature takes a lot of time, a lot of pain. And the consequences kind of roll through in different ways."