Holiday week sees jump in buy-backs, but total value remains flat

Twenty companies post 102 repurchases worth HK$1 billion

PUBLISHED : Sunday, 18 September, 2016, 8:40pm
UPDATED : Sunday, 18 September, 2016, 10:45pm

Buying fell after rising for two consecutive weeks while selling plunged following heavy activity for three weeks, based on filings on the Hong Kong exchange during the holiday-shortened week of September 12 to 15.

A total of 26 companies recorded 102 purchases worth HK$38 million, against 12 firms with 29 disposals worth HK$43 million. The figures were sharply down from the previous week’s five-day totals of 34 companies, 161 purchases and HK$87 million on the buying side and 16 firms, 90 disposals and HK$89 million on the selling side.

While buying by directors fell last week, buy-back activity surged with 20 companies posting 102 repurchases worth HK$1 billion. The number of firms and trades were up from 16 companies and 94 repurchases. The value, on the other hand, was consistent with the previous week’s turnover of HK$1.26 billion.

The most puzzling trade of the week goes to electronics materials manufacturer Kingboard Laminates Holdings, with executive director Liu Min picking up an initial 300,000 shares on September 12 at HK$6.50 each. The purchase, which represented 0.01 per cent of the issued capital, was surprising as Liu waited until the stock rose more than 145 per cent from HK$2.90 in February to record his first acquisition since the stock’s trading debut in December 2006.

Independent non-executive director Leung Tai-chiu also acquired 78,000 shares from August 23 to 25 at an average of HK$6.27 each. Those were also his first trades since listing.

The purchases by the pair may have some substance, however, as the group announced last month a 35.28 per cent gain in first-half profit to HK$840.2 million.

The stock closed at HK$6.38 on Thursday.

The most puzzling trade of the week? Kingboard Laminates executive director Liu Min waits until stock rose more than 145pc from February to pick up his first acquisition (300,000 shares) since the stock’s trading debut in December 2006

Another stock that might have turned retail investors’ heads last week is road maintenance equipment manufacturer and seller Freetech Road Recycling Technology (Holdings). Chairman and chief executive Sze Wai-pan bought shares for the first time since September 2014 with 1.1 million purchased from August 29 to September 12 at an average of 96.4 HK cents each. The trades increased his holdings to 48.76 per cent of the issued capital.

The purchases were surprising as they were made after the stock rebounded as much as 50 per cent from 66 HK cents in February. While the recent rebound may indicate a lack of upward potential for the stock, Sze’s purchases were made at sharply lower than his previous acquisition prices based on the 3.6 million shares he acquired in September 2014 at HK$1.66 each. His acquisition prices were lower than the listing price of HK$2.43.

The counter closed at 94 HK cents on Thursday.

Meanwhile, there are bullish clouds forming in Chuang’s group of companies with purchases in property plays Chuang’s China Investments and Chuang’s Consortium International.

Chuang’s China Investments bought back for the first time, based on filings on the exchange since 1992, with 56.72 million shares purchased from September 5 to 15 at an average of 54 HK cents each. The trades were made after the stock rebounded as much as 83 per cent from 30 HK cents in May.

The counter closed at 51 HK cents on Thursday.

There was even more bullish activity in Chuang’s Consortium with buy-backs and purchases by chairman Alan Chuang Shaw Swee totalling 8.42 million shares. The trades were made from September 12 to 15 at an average of HK$1.65 each, higher than the acquisition prices by the company and the chairman earlier this year.

The group bought back 3.42 million shares from September 14 to 15 at an average of HK$1.67 each. It previously acquired 5.9 million shares from June 30 to July 4 at an average of HK$1.43 each and 49.5 million shares from January 21 to April 6 at an average of HK$1 each.

Chuang, on the other hand, bought five million shares from September 12 to 13 at HK$1.63 each, which increased his holdings to 55.87 per cent of the issued capital. He previously acquired 11 million shares from January 12 to 20 at an average of 85 HK cents each.

The recent trades by the chairman bode well for shareholders as the stock rose by an average of 15 per cent three months following his purchases, based on 229 acquisitions since 1994. The stock recorded a price gain three months after on 61 per cent of those acquisitions.

The stock closed at HK$1.76 on Thursday.

Another stock that recorded a rare buy-back last week was paper carton and packing box manufacturer Realord Group Holdings.

The group resumed buying back after the stock rose 102 per cent from its acquisition price in September last year with 3.49 million shares purchased on September 14 at HK$5.03 each. It previously acquired 700,000 shares from September 15 to 16 last year at HK$2.49 each and 2.41 million shares in October 2009 at 38 HK cents each. It also announced last month a first-half profit of HK$81.69 million, swinging back from a loss of HK$9.87 million a year earlier.

The stock closed at HK$5.51 on Thursday.

One of my favourite shows in the 1970s is American sitcom Three’s Company due to the interplay between the characters. The title for the show is perfect as having only two characters would have made the show flat. This somewhat applies to insider dealings as the more directors buy, the more bullish the signals are.

Our combo-buying stock of the week is construction consultancy firm Beijing Urban Construction Design & Development Group with purchases by non-executive chairman Wang Liping, general manager Wang Hanjun and deputy general manager Li Guoqing. The three acquired a combined 148,000 shares on September 8 at an average of HK$4.79 each in their first trades since the stock was listed in July 2014.

The purchases were made on the back of the 38 per cent rebound in the share price since February from HK$3.46. The directors’ acquisition prices were also significantly higher than the listing prices of HK$2.75 to HK$3.30.

The stock closed at HK$4.62 on Thursday.

Robert Halili is managing director of Asia Insider