Looks like shore buying into all big names on NZX, they're are all up barring one or two.
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Its good to see that Contact SP has held up well even though the company is not currently purchasing its own shares.
Hopefully it appreciates a bit more from around its current level.
Interesting comment from Brian Gaynor on the merits - or otherwise - of share buybacks. Based on American research but with relevance to the NZ companies, including CEN, which have/are buying back.
http://www.nzherald.co.nz/business/n...ectid=11631082
From the Brian Gaynor article:
"Last year Moody's downgraded McDonald's unsecured debt because of plans to increase its borrowings, partly to fund share buybacks."
That seems like a fairly clear-cut case of insanity to me. Could someone kindly explain (slowly) what I am not understanding.
The 'logic' is around share price being lower than the company feels is warranted (and it is therefore a good investment) and/ or that the cost of borrowing being so low currently that a buy back offers holders the best means of utilising free cash flows ( as opposed to un-imputed dividends etc.)
I didn't quite understand the point of the article. Gaynor points out the companies in the US buyback a lot more shares in proportion than NZ companies do. Many of these buybacks benefit management in the near term, but could be detrimental to companies in the longer term due to raised gearing. But NZ companies do not buy back nearly so many shares and NZ management does not benefit in the way their US counterparts do. So buybacks are not an issue here?
Maybe I can complete the circle? Gaynor identifies Contact Energy as doing the most buybacking on the NZX. And the Tim Hunter article I reference below shows that Contact management are cynically looking to benefit themselves by doing so!
From my post 1070, on 10th November 2015 on this thread:
SNOOPY
Althou' the SP isn't at $5.20 yet!
It's hard to see what impact, if any, that the buyback has had on the share price. Even in the midst of the buyback it retreated to a low of $4.38 (a 5 year low, at that.)
The share price has remained over $5 post buyback, and on good volumes. However; all the gentailers have enjoyed a run of late. It's not like Contact's share price has outperformed.
In a perfect world we would see companies like Ebos, growing from acquisition after acquisition,making sure each acquisition is earnings accretive.
However there are too many companies such as FBU and WHS who go from one disastrous acquisition to the next.
So share buy backs are a good discipline for the undisciplined .
Instead of looking at the US, Brian Gaynor could have written a more relevant article had he quoted NZ companies.
HBY is a good example of what a company should be doing.Instead of making another poor acquisition, they would be better to do a decent share buy back,and sell off their non core businesses, and concentrate on their excellent motor/equipment divisions.The market would positively rerate them very quickly.