Chemrez Technologies, Inc. (PSE: COAT) disclosed a P500 million share buy-back program on August 22, 2007 representing 9% of the current market price at that time and bought back 75,966,000 shares until 2008 spending a total of P 215 million. They never bought additional shares ever since until August 14, 2012 where the Company disclosed a re-confirmation of their intention to buy-back their own shares.  Since that date, COAT has already bought a total of 2.2 million shares spending approximately P6.4 million.
COAT initially intends to buy 9% of its own shares or 125 million shares. Currently, COAT already bought a total of 78 million of its own shares which means that the Company still has to buy 47 million more. The Company still has P277 million left of the budgeted P500 million. Should they push through with their buy-back program, it would mean that the company is willing to pay P5.83/sh (P277m/ 47m sh).
COAT has enough cash to complete the buy-back program:
Pros in the speculation:
- Scarcity of COAT shares may force the Company to buy up.
- They may buy up COAT to increase shareholder value.
- Buy-back program may be part of D&L’s strategy to increase their interest in COAT to above 50%. Currently, D&L only has 19.03% on COAT. D&L may use the IPO proceeds to invest in COAT since it is stated in their prospectus that they intend to use part of the proceeds for “acquisitions and investment”. Should D&L buy COAT @ 5.83 per share, it would only take P2.4 billion to acquire 30% of the shares which is only half of the projected proceeds of P5.6 billion.
Risks in the speculation:
- COAT may not push through of the buy-back program despite they are awash with cash.
- There may be enough sellers for them to accumulate 47 million shares to complete the buy-back program.
- There may be enough sellers at a lower price for D&L to acquire 30% of COAT shares in the market.
- D&L may not intend to acquire an additional 30% of COAT. Until it is disclosed that the “acquisitions and investment” use of proceeds is really intended for COAT we can never be certain.
- Boar re-confirmation of authority to engage in share buy-back program, http://www.pse.com.ph/resource/disclosures/2012/pdf/dc2012-6064_COAT.pdf
Disclaimer: I do not claim to be an expert and nothing I say should be taken as a recommendation to buy or sell.