CPF to buy back 200 million shares in 3rd go at stabilising its stock price
Charoen Pokphand Foods (CPF)’s board of directors has resolved to buy back 200 million more shares for the third time in two years to prevent its stocks from falling.
The board announced that CPF will start buying back 200 million shares or 2.32% of its paid-up shares from Monday to June 18, and will pay no higher than 115% of the average closing price of the stock over five working days.
Between October 31 and December 13, the average price of CPF shares was 24.36 baht apiece.
The board said it has decided to carry out another round of buyback because it believes the stock market value is lower than the stock’s book value.
The board is also confident that the buyback will result in an increase in CPF’s return on equity (ROE) and earnings per share.
Before the board announced the latest round of buybacks, CPF’s stocks closed at 23.80 baht, marking a 6.67% drop year to date (YTD). The shares’ price vs EPS ratio is at 10.60 and price to book value ratio of 0.79, the board said.
CPF insists that it has enough cash to carry out the new round of buybacks. As of September 30, the CPF had 2.23 billion baht in cash and said it expects to receive another 9.5 billion baht in dividends from its subsidiaries in the fourth quarter for profits earned in the first half of this year.
Hence, the company said it is confident it will have enough cash to buy back shares.
CPF has bought back its shares twice before to stop its price from dropping in the fallout of the Covid-19 pandemic.
The first buyback was launched on March 13, 2020, when the company said it would buy back 400 million shares or 4.65% of all paid-up shares for 10 billion baht. The first buyback round lasted from April 1 to September 30.
CPF’s shares had dipped to the lowest in four years, below the resistance line of 20 baht to 18.70 baht per share on the day the board resolved to buy back the shares.
As of September 30, CPF had bought back 197.673 million shares or 2.30% worth 6.084 billion. The programme drove up CPF’s shares to gradually peak at 35.25 baht on July 20, 2020, before sliding back to 28 baht per share at the end of the programme.
Then on September 30, 2021, the board resolved to spend another 10 billion baht to buy back more shares from October 15 to April 14, 2022. During this period, CPF’s share price fluctuated in the 25.75 to 23.50 range.
Brokerage firm CGS-CIMB said the actual value of CPF’s shares was about 30.65 baht per share and recommended that people buy up to sell at a profit when the price rises to 33 baht.
