The current situation of the company
The company recently announced that on May 22, 2020, the general meeting of shareholders voted to buy back no more than 6.245 billion H shares, that is, no more than 10% of the total share capital. The company has bought back 4.494 million shares for six consecutive days since May 26, at a cost of HK $15.342 million, and its share price has risen 16.8 per cent since it announced its proposed buyback on May 22nd, while the Hang Seng index rose 4.6 per cent over the same period.
The market gives positive feedback.
Comment
Buybacks help to enhance market confidence and earnings per share, and the market gives positive feedback.
From the beginning of 2020 to 2020-5-22, the company's share price fell 8.83%, while the Hang Seng Index fell 18.66% over the same period. But at the same time, the CSI military industrial index rose 6.34 per cent. Hong Kong shares and A shares show a state of deviation. Based on confidence in the future development of the company, and responsibility to investors. At the shareholders' meeting on May 22, the company voted to authorize the board of directors to carry out share repurchases of no more than 624.5 million H shares, that is, no more than 10% of the total share capital. We assume that the total repurchase cost is HK $1.979 billion based on the closing price of HK $3.17 on May 22.
At the end of 2019, the company had cash and cash equivalents of HK $14.6 billion, other short-term investments of HK $1.7 billion and current assets of HK $78 billion, which was sufficient to support the successful completion of the repurchase programme. After the company buys back the shares, it will be cancelled. Assuming that the company buys back 624.5 million H shares completely, the share capital will be reduced by 10% and the EPS will be thickened by 11%.
The company began its buyback on the first day on May 26 and continued to buy back for six days, with a total of 4.494 million shares repurchased at a total cost of HK $15.342 million.
The cumulative turnover of the company in six days is HK $550 million. Since the company announced its intention to repurchase on May 22, by the close of trading on June 2, the company's share price had risen 16.8%, the Hang Seng Index rose 4.6% over the same period, and China Securities military Industry rose 2.5%. The share buyback was recognized by the market, and the market responded well.
With regard to the subsequent repurchase: according to the company announcement, the repurchase will depend on the market situation, and there is no guarantee of the repurchase time, quantity or price. Follow up and keep a sustainable eye on progress.
Valuation proposal
Keep the earnings forecast unchanged, the company's current share price is 12.5 times in 2020 and 10.5 times in 2021, respectively, maintaining the "outperform industry" rating and target price of HK $4.27, with 15% potential room for growth.
Risk.
Hong Kong stock market fluctuations, the company's sub-business sector orders and delivery instability and so on.