Friday, September 28, 2007 2 comments ++[ CLICK TO COMMENT ]++

Takefuji Buying Back Shares

Takefuji (TSE: 8564) shares rallied recently after announcing that it is buying back stock. It will buy back at most 3 million shares, which represents 2% of the total outstanding. The amount of the buyback (2%) is small but I still like the idea of buying here given that the stock is trading near multi-year lows. Some companies announce buybacks without buying anything but hopefully this isn't the case here.

Assuming enough reserves have been set aside for the consumer loan liabilities (I think they have) then buying back shares is prudent right now. The shares are down more than 50% this year alone and the stock looks cheap. Takefuji is trading around 66% of book value and should post positive earnings next year. It's better than issuing dividends (Takefuji already has a dividend yield of around 5%). I'm usually in favour of buybacks over dividends.

The whole Japanese consumer lending sub-sector has been suffering lately, and I think buybacks is an attractive proposition for them. I think other companies should buy back their shares given the low prices they are trading at (as long as market value is below book value, I think this is a good strategy for most).

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2 Response to Takefuji Buying Back Shares

John
September 28, 2007 at 4:46 PM

You know I'm with you on this. Nothing goes straight up, though it certainly feels like the Japanese consumer lenders have gone straight down! And if any sector deserves to go straight up, it is Takefuji and the others. But it won't happen that way. There will be ups and downs but I think Takefuji and the others will be a 2008, 2009 story.

September 28, 2007 at 9:58 PM

Yeah... it does surprise me that the consumer lenders keep going down even after all those massive write-offs.

Although you are probably more of a value investor who doesn't predict currencies, I'm thinking the Yen may strengthen so there should be at least some positive currency effects for the time being.

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