The Hour Glass leads July buyback consideration tally

JULY buyback activity typically declines seasonally in Singapore with the majority of stocks on the cusp of reporting first-half fiscal year (H1FY ended June 30) results.

This meant that July saw just 10 primary-listed stocks buy back their shares for a total consideration of S$11 million, compared to 28 stocks and a total consideration of S$94 million in June.

The Hour Glass AGS led the July buyback consideration tally in July, commencing a new mandate, while also completing its preceding mandate which saw the group buy back 1.04 per cent of its outstanding shares (excluding treasury shares), in a relatively short period of six weeks from June 17 to July 27.

Since The Hour Glass reported its FY21 financial results on May 20, the stock price has rallied from S$0.96 to S$1.54 at the end of July, while the 10 weeks spanning May 21 to July 30 saw the average daily turnover of the stock increase more than 12-fold compared to the 20 weeks spanning Jan 1 to May 20.

STI stocks - OCBC O39 , Wilmar F34 , SGX S68 , ST Engineering S63 and Keppel BN4 have led the S$379 million in total buyback consideration of Singapore's primary-listed shares for the past seven months, contributing S$308 million (81 per cent) of the total consideration.

The S$379 million represented 0.04 per cent of the S$903.8 combined market capitalisation of all stocks listed on SGX at the end of July.

Just one of these five stocks, ST Engineering conducted buybacks in July.

For the month of July, 10 primary-listed stocks on SGX bought back their shares, for a total consideration of S$11.2 million.

This compared with 28 primary-listed stocks buying back S$94 million in total consideration in June and 13 SGX primary-listed stocks buying back shares for a total consideration of S$3 million back in July 2020.

The 1.2 per cent gain of the Straits Times Index (STI) in July brought its price gain over the first seven months to 11.4 per cent, with dividends boosting the total return to 13.2 per cent, ranking the STI among the top three performing APAC benchmarks for the past seven months which include the TAIEX and Nifty 50.

The combined AUM of the SPDR Straits Times Index ETF and the Nikko AM Singapore STI ETF ended July 2021 was at S$2.24 billion, compared to S$2.08 billion at the end of December 2020 and compared to S$1.10 billion at the end of December 2019, with the unit creations and redemptions generating S$900 million of net inflows into the two ETFs over the last 19 months.

The Hour Glass

The Hour Glass led the buyback consideration tally in July, with 5.7 million shares bought at an average price of S$1.451 per share.

On July 27, The Hour Glass completed its preceding buyback mandate with a start date of Aug 28, 2020, which saw the company buy back 7,338,700 shares or 1.04 per cent of its outstanding shares (excluding treasury shares), in a relatively short period of six weeks from June 17 to July 27.

It then commenced a new buyback mandate on July 28, buying 600,000 shares at an average price of S$1.45 per share.

The current buyback mandate, approved at the July 28 AGM, is for the company to buy back 10 per cent of its 696 million outstanding shares (excluding treasury shares, and as of July 28).

Over the first seven months of 2021, the share price of The Hour Glass almost doubled to S$1.54, from S$0.80 at the end of 2020.

After the May 20 close, it reported its FY21 (ended March 31) results, which saw the group record a one per cent decline in sales to S$742.9 million, while profit-after-tax rose 9 per cent to a new high watermark of S$84.5 million.

During FY21, the group successfully acquired 139 Collins Street in Melbourne for A$68.0 million. This is a heritage-listed retail and office building presently tenanted by Louis Vuitton.

The company noted in July that the best performing watch brands have continued to enjoy intensified demand well into 2021, reflected in record-low inventory levels and the multiple increase of interests being registered for its most sought-after watches.

The client-focused retail enterprise also noted that drivers of this demand include, firstly, watches transcending the luxury goods market, increasingly viewed as a serious collectible and even a store of value.

Secondly, its clients often cite the fact that a watch is a substitute for what would have been spent on travel.

Thirdly, crisis or not, the broader segment of middle-class Singaporeans remains financially sound.

The bulk of the share price gains over the first seven months of 2021 also came after the S$0.96 close on May 20, which coincided with the average daily turnover of the company's stock for the May 21 through to July 30 reaching S$1.0 million a day.

This represented a more than 12-fold increase from S$80,000 a day from Jan 1 to May 20.

July share buybacks

The table summarises the buyback transactions of the 10 stocks that conducted buybacks in July.

The table is sorted by the value of the total consideration amount for the month, which combines the amount of shares or units purchased and the purchasing price of the transactions.

Share buyback transactions involve share issuers repurchasing some of their outstanding shares from shareholders through the open market.

Once the shares are bought back, they can be converted into treasury shares, which means they are no longer categorised as shares outstanding.

Motivations for share buybacks can include employee compensation plans (such as share option schemes or employee share purchase plans) or long term capital management.

Buybacks can pick up amid market declines that are driven by broader moves on international macroeconomic developments.

As best practice, companies should refrain from buying back their shares during the two weeks immediately before semi-annual financial statements and one month immediately before the full-year financial statements.

• The writer is the market strategist at Singapore Exchange (SGX). To read SGX's market research reports, visit sgx.com/research.

This report was first carried in SGX's Market Updates on Aug 4, 2021.