Frankly Speaking: White Horse’s share buybacks generate interest

This article first appeared in The Edge Malaysia Weekly, on February 17, 2020 - February 23, 2020.

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On Jan 22, ceramic-tile maker White Horse Bhd announced that deputy managing director Teo Swee Teng, non-independent non-executive directors Teo Kim Lap and Teo Kim Tay, and substantial shareholder Teo Boon Hoo had disposed of 55,400 shares that were indirectly held by them, on Nov 21, 2019.

While the number of shares sold may be small, amounting to only 0.024% of the total issued share capital of White Horse excluding treasury shares, it begs the question as to why the disclosure took two months to materialise.

To make matters worse, checks on White Horse’s share buyback announcements indicate that on Nov 21, 2019, the company had bought back 15,000 of its own shares at RM1.11 per share, or RM16,760.89 in total.

This means that White Horse could have forked out cash to buy back its directors’ shares, a situation that leaves a bad taste in the mouth.

As at end-September, White Horse had cash and bank balances of RM62.90 million, and RM170.61 million in long and short-term debts. For the cumulative nine months, its interest expenses amounted to RM5.74 million.

Filings show that White Horse has been busy buying back its own shares and, at an average of RM1 per share, it would have spent quite a large amount. As at mid-February, the company had accumulated 12.23 million in treasury shares, or almost 5.1% of its share base.

Could the money have been put to better use, for instance to generate another revenue stream for the company? White Horse has been in the red in the past six quarters.

Are share buybacks still a good idea when the company is making losses?

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