Almost half of share repurchases by SET-listed companies failed during virus crisis
Sixteen of 36 SET-listed companies have failed to buy back their shares to manage excess liquidity amid the Covid-19 fallout, experts have noted.
After the Covid-19 crisis hit the Stock Exchange of Thailand, several listed companies decided to repurchase shares in order to manage excess liquidity when the companies' share price dropped.
Since the beginning of this year, 36 listed companies have approved share buybacks, with 12 currently underway.
Of the other 24 companies, five (WP, SPALI, KBANK, SPALI and ZIGA) were successful in buying back all shares; 10 companies (BLAND, BPP, CK, CPF, CPN, EKH, SCP, SPC, STPI and THG) failed to buy back all shares; six companies (CPALL, GUNKUL, PJW, SGP, XO and TKN) did not buy back shares; and three companies (SPCG, TFD and SCB) cancelled the plan.
Apichat Poobunjirdkul, senior strategist at Tisco Securities, said there were many reasons why listed companies were unable to buy back shares or cancelled the plan. Among them was the Bank of Thailand’s instruction to commercial banks to maintain liquidity to deal with the Covid-19 fallout.
Listed companies are unlikely to launch more buybacks over the next few months since the market will not face high volatility or big corrections next year, he added.
He expected companies’ performance in the third and fourth quarters to improve but not recover to 2019 levels.
"We expect listed companies' profit in the first quarter of 2021 to be higher than in the same period this year, but some companies may face tight liquidity," he added.
Therdsak Thaveeteeratham, Asia Plus Securities' executive vice president of Research, said some listed companies announced buybacks to send a signal that their share price was very low and they have high liquidity.
The reason some companies were unable to repurchase all their shares was partly due to Covid-19, which forced several companies to hold cash to run business operations amid uncertainty over the economic recovery.
"Meanwhile, some listed companies decided to increase their capital instead of repurchasing shares. This was because they would be unable to increase their capital if they failed to sell all repurchased shares within three years," he said.
He added that listed companies' liquidity is not worrisome because their debt to equity ratio (D/E) was not high and they had healthy financial deposits.
"The decision to buy back shares depends on current market conditions and listed companies' liquidity," he added.
