JKH announces Rs.11.1bn share buyback

„Buyback to be executed at Rs.160 per share „JKH book value as at Sept. 30 is Rs.151.06

Premier blue chip John Keells Holdings PLC (PLC) yesterday announced plans to execute a share buyback to the tune of Rs.11.1 billion.

JKH in a statement said the repurchase of share reflects its director board and management’s view that the JKH share is currently not reflective of the value of the company and does not adequately represent the growth prospects of the company.

Accordingly, JKH will offer to repurchase one out of every 20 ordinary voting shares in issue, at a price of Rs.160 per share.

The company said the shareholders will be notified of the dates of the repurchase in due course.

According to analysts, the 14 percent Withholding Tax, which generally should apply to share buybacks as they are considered indirect dividend payments, will not be applicable in this particular case, as JKH has enough tax-free reserves stemming from its subsidiaries as dividend payments, which have already been taxed.

JKH has little over 138 billion ordinary shares in issue and the net asset value per share as at September 30, 2018 stood at Rs.151.06.

During the last few months, the JKH share was seen taking a beating and the share price has come down to the Rs.145 level, from the Rs.160 level three months ago.

Following the buyback announcement, JKH share yesterday closed at Rs.151.

With the current political deadlock situation, several foreign funds were seen reducing their exposure to JKH, while bullish local high-net-worth investors such as Harry Jayawardena and Nimal Perera were seen aggressively buying into the stock. JKH doesn’t have a controlling shareholder and has a free float of 98.5 percent. Meanwhile, JKH said the strength of its balance sheet along with the existing cash reserves, is more than adequate to fund the company’s planned investment pipeline, while retaining its track record of dividend payout. “With funding for the ongoing Cinnamon Life project fully secured and funding in place for all planned investments across its core verticals over the next few years, JKH will continue to retain healthy cash reserves and the balance sheet flexibility, post the repurchase, to pursue further investment opportunities as they arise,” the company statement said.

In a recent investor relations presentation JKH said it has an aggressive investment pipeline exceeding US $ 600 million over the next two years and approximately US $ 160 million of these investments will be funded through internally generated cash. The company also said the realization of benefits from these investments is expected to accrue from FY2021 onwards.