Amidst gloomy politics JKH gives cheer with Rs. 11.1 b share buyback

• Announces one for 20 buy back amounting to 5% stake at Rs. 160 per share
• Payout via tax-paid dividend reserves hence will be free of Withholding Tax
• Investors toast move as share price peaks to Rs. 152 before closing up Rs. 6, or 4%

Amidst gloomy politics in the country, the premier blue chip John Keells Holdings (JKH) yesterday brightened the investor community outlook with a Rs. 11.1 billion share buyback move. 

It said the Board resolved to offer to repurchase one out of every 20 ordinary voting shares at a price of Rs. 160 per share, dates of which will be notified in due course.

The offer to repurchase shares amounting to a potential outlay of Rs. 11.10 billion reflects the view of the Board and management that the JKH share is currently not reflective of the value of the company and does not adequately represent the growth prospects of the company, and therefore presents an opportunity for the company to repurchase its shares. 

Further, the strength of the JKH Balance Sheet, along with existing cash reserves, is more than adequate to fund the Company’s planned investment pipeline while retaining its track record of dividend payout.

JKH said with funding for the ongoing Cinnamon Life project fully secured, and funding in place for all planned investments across its core verticals over the next few years, it will continue to retain healthy cash reserves and the balance sheet flexibility, post the repurchase, to pursue further investment opportunities as they arise.

The payout will be from tax-paid dividend reserves hence won’t be subject to the Withholding Tax. It was also the first share buyback by JKH after 2008 when its stock price was trading below book value as it was in recent weeks. 

Investors toasted the move as JKH share price peaked to an intra-day high of Rs. 152 following the announcement. The stock closed at Rs. 151, up by Rs. 6 or 4.14%, and figured as the sixth largest gainer percentage wise. The move also comes hot on the heels of an interim dividend of Rs. 2 per share announced on 29 October.

JKH also emerged as the top contributor to turnover with Rs.154 million on account of 1.027 million shares traded.

LOLC Securities said ASPI was up by 2 points and S&P SL20 was up by 12 point. During the day gainers surpassed losers 81 to 39.  First Capital said ASPI witnessed a volatile downward trend during the first two hours of trading, reaching an intraday low of 5,936 and continued on an upward trend closing the day at 5,981 gaining mere two points.

“Large cap counters such as JKH, CTC and Browns lifted the main index up by 23.1 points,” LOLC Securities added. Turnover was moderate at Rs. 425 million. Bank Finance and Insurance sector contributed mostly to the market turnover while the sector index was down by 0.36%.

Foreign investors were in a buying sentiment, while the net foreign inflows amounted to Rs. 82 million. Foreign investors showed a buying sentiment mainly seen in HNB and LOLC.