BEAUTY buyback bedecks shares
The share price of SET-listed cosmetics company Beauty Community Plc (BEAUTY) rebounded yesterday after the company’s chief executive announced a share buyback, with the issue to be proposed for approval on Monday.
BEAUTY shares closed on the Stock Exchange of Thailand at 8 baht, up 80 satang or 11.11%, in heavy trade worth 10.98 billion baht.
A buyback occurs when a company purchases its own outstanding shares to reduce the number available on the open market.
The issue will have to be approved by the company’s board of directors, which will reconvene for a meeting on Monday.
Suwin Kraibhubes, Beauty Community’s chief executive and largest shareholder, has diluted the shares held by him and his family from 70% to 21%.
Mr Suwin said the company will repurchase the sold shares with its excess cash flow worth 1 billion baht, while the board of directors will consider the proper volume and value of the share buyback.
The company will inform the bourse once the board of directors reaches a resolution.
The SET temporarily halted trading of Beauty Community’s shares yesterday, effective from 11.42am, as it has not been officially informed about the share buyback plan and such a repurchase might affect investment decisions.
But the trading halt was lifted during the afternoon’s trading session as the company had clarified all relevant information to the SET.
On Tuesday, Beauty Community’s shares took a 30% nosedive as investors lost confidence in its sales and revenue growth potential going forward.
Beauty Community, which also sells dietary supplements as a secondary revenue source, has been reeling from controversies surrounding that industry following deaths connected with substandard and unlicensed cosmetics and food supplements.
As a result, all companies in the dietary supplement industry have been inspected by the Food and Drug Administration. Those inspections have caused delays in exporting Beauty Community’s products abroad, which took a toll on the company’s second-quarter financial performance.
Prakit Siriwattanaket, vice-president at Kasikorn Securities, said the share buyback plan can boost investor confidence, but it would be better for confidence if Mr Suwin repurchased the shares with his own money.
“Share repurchasing helps investor confidence in the short term and most share prices increase following this strategy,” said Mr Prakit.
In 2018, there have been several companies announcing share repurchase programmes such as TAC Consumer Plc, Bangkok Land Plc and Ladprao General Hospital.
Beauty Community had a gross profit margin of 67% and net profit growth of 33% in 2017, with total revenue of 3.74 billion baht and net profit at 1.23 billion.