Frankly Speaking: Sale of treasury shares timely

This article first appeared in The Edge Malaysia Weekly, on July 19, 2021 - July 25, 2021.
Frankly Speaking: Sale of treasury shares timely
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When times are bad, companies tend to buy back their shares to support the share price. These shares would then be held in the form of treasury shares.

The common practice is to either sell the shares for a profit or reward shareholders via a dividend distribution in future. Another option is the cancellation of the treasury shares, which will reduce the shares outstanding. 

A recent beneficiary of a sale of treasury shares is Kumpulan H&L High-Tech Bhd, which has raked in a total of RM9.66 million since early this month.

As its share price continued to rise, it made the decision to sell 2.21 million treasury shares over the past two weeks, significantly bringing down the number of treasury shares to 847,960 from 3.06 million as at end-June.

The plastic injection moulding firm has seen its shares surge 72.2% to RM4.22 last Friday from RM2.45 on June 30. 

While proceeds from the sale can be channelled towards working capital, the sale of the treasury shares may also reflect that the company was already seeing a fair value for its shares, hence putting a cap on the share price gain.

In reply to a query by Bursa Malaysia last week over the share price spike, Kumpulan H&L said it was in the final stage of negotiations for the purchase of an investment property for about RM13.88 million as well as exploring options to develop real property on its existing land bank.

For whatever reason, investors are looking forward to more sustainable growth for Kumpulan H&L, whose earnings have been on the decline since the financial year ended Oct 31, 2017.

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