JKH’s Rs. 11 b share buyback offer ends

Thursday, 17 January 2019 01:36 -     - {{hitsCtrl.values.hits}}


  •  Acceptance only 46% of offer but additional demand to be used to complete deal
  • Acceptance rate points to majority of shareholders believing JKH share has greater upside going forward


The Rs. 11 billion worth share buyback offer of John Keells Holdings (JKH) had ended with the move triggering acceptance of only 46% of the offer.

JKH said that its offer to repurchase 69.37 million shares or 5% of shares in issue received acceptances of 32.2 million shares amounting to 46.39% of the offer. However those who accepted had requested for additional repurchase of 68.53 million shares. 

The offer was on a pro-rata basis of one share for every 20 shares held at Rs. 160 each.

JKH will complete the offer of 69.37 million by accepting additional applications on pro rata basis as per their shareholding. 

Company analysts said the level of acceptance points to majority of shareholders believing JKH share has greater upside going forward. 

JKH share closed 2018 at Rs. 159, up 6.9% from the previous year.The 52-week highest share price of JKH in 2018 was Rs. 167 and the lowest was Rs. 126. Yesterday it closed at Rs. 152.10.

Given recent political instability and depressed economic performance, some anticipated foreign shareholders of JKH would accept the buyback offer. However the fact that majority had not, analysts opined, reflects their forward view as well as overall sentiment on emerging/frontier markets.

Foreign shareholding in JKH amounts to 47.6% and has nearly 11,700 shareholders in total.

According to CT CLSA, JKH share was up 1% in the past 12 months, outperforming the market by 8% and trades at 9% discount to its estimates sum of the parts valuation of Rs. 173.

JKH was the most traded stock in 2018 with 318 million shares changing hands for Rs. 47.3 billion accounting for 23.6% of CSE’s total as per CT CLSA data. However in terms of market capitalisation JKH’s figure of Rs. 220.6 billion is behind number one Ceylon Tobacco’sRs. 268 billion.

In announcing the share buyback, JKH said that the Board was of the view that the share is not reflective of the value of the Company and did not adequately represent the growth prospects. This presented an opportunity for JKH to repurchase its shares. Further, the strength of JKH’s Balance Sheet, along with existing cash reserves, was more than adequate to fund the Company’s planned investment pipeline while retaining its track record of dividend pay-out.

Investors toasted the announcement on 12 November pushing JKH share price to a high of Rs. 152 before closing up Rs. 6, or 4%.

The pay-out 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.