JKH share buy back to benefit long term shareholders - Deputy Group Chairman

Ravi Ladduwahetty

John Keells Holdings PLC believes that the share buy back at Rs. 90 will benefit the long term shareholder due to their owning a bigger share of the company.

Companies buy back their own stock when they believe the share price presents a good opportunity to create value by conducting a buy back.

JKH Deputy Group Chairman Ajit Gunewardene

We believe that buying back at Rs.90, the shareholders who remain for the long term will benefit because they will own a bigger share of the company that has a strong intrinsic value and potential to be worth more in the future, JKH Deputy Group Chairman Ajit Gunewardene told Daily News Business yesterday.

Gunewardene said when a share price of a company falls and the company has the cash in the balance sheet to make investments, the best investment to make may well be in your own shares, and we believe that this is so with the JKH share.

Responding to a question as to how the conglomerate expects investors to react to the buy back issue, he said: “We believe based on the information and input we have at this point most of our long term shareholders will not accept the offer even at a price of Rs. 90 because they know the intrinsic value and the long term potential of the company.

However in this time of a major global financial crisis, it is difficult to predict how each individual investor may react as the environment is changing almost daily.

Asked why the company was offering Rs. 90 per share when it is Rs. 66 in the open market, he said: “ As we stated at the time of the buy back, we felt that the price of Rs.90 was, based on fundamentals and the potential of the group, an attractive valuation at which to buy back our own stock.

This view has not changed despite the fall in the share price as the fundamental value of the company has not changed. Based on our current earnings and potential earnings as well as our asset value, we believe Rs.90 is good value.

Asked why the JKH share was falling dramatically and whether the Group attributes to LMS’s reduced earnings, he said that it was not only due to LMS.

“In recent days there has been an up-tick in the global markets and this has been reflected in the JKH share as well with some substantial buying seen in recent weeks,” he added.