SM Prime shares have lost over 20 percent of their value this year and more than 35 percent over the last five years despite being on track for its second consecutive year of record earnings.
Stock buybacks strengthen share prices by reducing outstanding shares in the market. This raises earnings per share, which improves the stock’s perceived value.
On Tuesday, the board of directors approved a share buyback program worth P5 to P10 billion.
“The final terms and implementation of the program have been delegated to management,” the developer said.
Stock buybacks improve market sentiments
“It’s always a welcome development when companies decide to step in and support their own stock,” Alfred Benjamin R. Garcia, research head at AP Securities, told InsiderPH.
“Even if the share buyback program is not sizable enough to impact per share metrics (earnings per share, dividends per share), it goes a long way towards improving sentiment,” he added.
SM Prime’s buyback is equivalent to 1.3 percent of the company’s total value of about P764 billion.
AP Securities had previously issued a “buy” rating on SM Prime and set a P40.30 per share price target for the developer.
First buyback in 22 years
SM Prime had previously planned a P1 billion buyback in 2008 but this did not push through.
Before this, it repurchased shares from the market in 2002.
SM Prime is currently trading at P26.45 per share.
Miguel R. Camus has been a reporter covering various domestic business topics since 2009.
