I have previously written a post about the clock work precision of Sarine Technologies Ltd’s share buy back. (read here)
“When companies with outstanding businesses and comfortable financial positions find their shares selling far below intrinsic value in the marketplace, no alternative action can benefit shareholders as surely as repurchases.” Warren Buffett 1984 Letter to Shareholders
If we just consider the share repurchase by the company while ignoring the fluctuations of profits, tax, cash flow, expenses, etc, and assuming earnings remain the same over the years, technically Earning per Share (EPS) will increase, as the no. of shares has decreased. On the other hand, Grant of Employee Share Options & Issuance of Bonus shares increases the no. of shares and technically will dilute the EPS. Of course, profits, earnings, expenses will always vary through the years…
Warren Buffett advocates the repurchase of shares as this adds value to the share holder provided the following conditions are met (read here):
- the company has surplus funds;
- the company can buy them back at a price below intrinsic value.
I have no issues with the issuance of Employee Share Options at a moderate level, as it helps to align the interests of the employees with that of the company’s.
So having noticed that Sarine does active shares buy back and Grant of Employee Share Options, with the occasional issuance of bonus shares, I am curious to find out if over the years, after the many rounds of these Shares repurchase, Grant of Employee Share Options, etc, has the total no. of shares increased or decreased. A good thing about Sarine is that these actions can easily be found in the company’s website. I have tabulated the figures dating back to 2010 (see below).
As you can see, the total no. of shares repurchased is 3,065,100 and the amount spent is S$3,816, 959. Interestingly, for a company with an enterprise value of S$837.47 million, we can see small shares repurchases of a few thousands dollars eg. in 28/3/2011, 31/12/2010, 6/12/2010 (I wonder why they bother) – of course the purchases get bigger through the years.
For the Grant of Employee Share Options, the no. of shares granted is 2,270,000. And the no. of bonus shares issued is 422,250. So if we total up the Grant of Employee Share Options & Bonus Shares (2,692,250), the no. is still lesser than the share repurchased.
However, it is noted that on 27.02.2013 and 25.03.2013, Sarine sold 411,000 and 250 treasury shares respectively. So if we total up the Grant of Employee Share Options, Bonus Shares & Treasury shares (3,103,500) it would slightly more than the total no. of shares repurchased. eg. 38,400.
So in gist, overall (at least from 2010 till now), there is a slight dilution of no. of shares (eg. 38,400).
In addition, I read this article in the Business Times recently, about share buy back by Sarine’s insiders- and who are the people behind it. See below.
Here is a video clip talking about shares buy back. (see here)