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CITY Developments Limited (CDL) initiated share buybacks for its ordinary shares on the open market on Friday (Mar 8), citing its discounted share value as a reason.
The property developer picked up 954,000 ordinary shares, or 0.11 per cent of its issued share capital, at an average price of S$5.75 a share for a total consideration of S$5.5 million.
The lowest price that CDL paid on the market was S$5.75, while the most that it forked out was S$5.78.
The average share price marked a discount of 43 per cent to the net asset value of S$10.12 a share and a discount of 70 per cent to revalued net asset value per share of S$19.461 as at Dec 31, 2023, CDL noted in an after-market announcement on SGX.
Its announcement comes a week after it posted its financial results.
While CDL achieved a record revenue of S$4.9 billion for the year ended Dec 31, 2023, its net profit dropped 75 per cent to S$317.3 million as higher financing costs ate into profits in the absence of divestment gains.
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In a press release on Friday, CDL said that its shares are “currently trading significantly below their intrinsic value” despite the company’s strong fundamentals.
Sherman Kwek, CDL’s group chief executive officer, said that global equities have been hit by macroeconomic headwinds, resulting in depressed valuations.
“Our share buyback programme demonstrates our confidence in CDL’s strong fundamentals and growth potential,” he noted.
He added that the discounted shares present an “attractive opportunity” to deploy CDL’s capital in its portfolio. It also signalled the company’s commitment to strengthen its alignment with its shareholders.
The developer added that the buyback was in line with a share purchase mandate that was renewed at the annual general meeting on Apr 26, 2023 with the company authorised to buy back up to 10 per cent of the total number of issued ordinary shares and preference shares. This translates to 90.7 million ordinary shares and 33.1 million preference shares.
It added that the share buyback programme will be made in tranches over a period of time, subject to market conditions and depending on the prices at which the ordinary shares are purchased. The purchased ordinary shares will be held as treasury shares, and a portion of them may be deployed for the company’s long-term incentive plans.
The latest buyback programme follows CDL’s off-market equal access offer last November to buy back up to 10 per cent of the total preference shares issued, at the offer price of S$0.78 per share.
The offer was completed in December 2023, with the group’s purchase of 33.1 million preference shares. The purchased preference shares have been cancelled, reducing the group’s finance cost in relation to the coupon payment obligation for these preference shares, said CDL.
The company has been mulling share buybacks for some time. At its results briefing in 2022, Kwek had said that the group was “actively discussing” share buybacks as it believed its assets and share price was undervalued.
Shares of CDL closed up 1.2 per cent, or S$0.07, at S$5.75 prior to the announcement on Friday.
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