Tuesday, December 18, 2012

Jobstreet: Share buyback is the name of the game

What do you do when you have funds that you do not know what to do with. Either dividend or buyback. I like buyback especially when the shares are cheap presumably.

Well, this is what Jobstreet did. 2 major buybacks in less than a month. 3 million shares was bought in late November. I much like this than when they bought Innity.

And another 2.6 million stocks today, making a total 1.75% of Jobstreet's shares being bought back in these 2 transactions.

All in all Jobstreet has spent RM12.8 million on this. The thing is that, I believe in the two transactions, the selling are just done by 2 shareholders who hold large blocks. Otherwise, it would not be done in such manner.

The difference between dividend and share buyback is that while dividends provides returns to the shareholders immediately, a share buyback done right would provide the impetus for creation of better value per share in the long term.

Coincidentally, on a larger scale, Berkshire Hathaway did the same by buying back USD1.2 billion worth of stocks in a single transaction just last week.


Carina said...

Hi Felicity, I read that Jobstreet had today cancelled 6.3m treasury shares.

Does this mean EPS will increase as the number of shares in circulation are reduced? Can you explain how such a move benefits shareholders?

Thank you.

felicity said...

Hi Carina

Definitely EPS will be higher, this to me is a very good move. You see the thing I like about Jobstreet is that they do not even bother to redistribute the stocks in the form of stocks dividend (which attracts more people.). They just quietly go ahead and do whats best for shareholders which is take away shares from the market.

For Jobstreet as in some of the articles, it really has free cashflow and these cashflows are not needed for the business. Very few businesses in fact have this trait. And very few in Bursa have this kind of management who just go ahead and do the right thing.

However, I sense that many do not quite like the business as you can see in the comments. I can understand. When originally listed in Bursa, I have negative perception on the business as well.

Right now or rather since 2007 or 2008, I really changed my mind.