Indonesia’s largest realty company by market capitalization PT Bumi Serpong Damai Tbk (BSDE) said it has set aside Rp2 trillion ($141.17 million) to buy back its shares from secondary market, on grounds that its shares price has been undervalued following recent weeks market rout.
PT Bumi Serpong Damai Tbk has joined several other companies that have recently announced plans to buyback shares after the Financial Services Authority (OJK) eased buyback ruling, in which companies can repurchase shares without prior approval of their shareholders.
The company said the buyback program will be executed within three months from September 1 to November 30, 2015, with maximum share price to be bought back at Rp1,700 per share.
At the current price of hovering around Rp1,570, BSDE’s shares price has fallen by 30 percent from its peak level so far this year at Rp2,230. The price is considered to be below its fair price.
“The buyback program is a really good momentum because the current share price of BSDE has been far below its fair price. Once the market recovers, BSDE can reap gains from selling the treasury stocks as in principle, BSDE has a strong fundamental,” said Hermawan Wijaya, director of Bumi Serpong Damai in a statement.
The buyback program, he said, will not affect the company’s revenues and capability to expand because the company still has strong capital and solid cash flow.
As of June 30, 2015, the company has cash on hand of Rp6.90 trillion, surged 144% compared to 2.82 trillion at end of 2014. The cash on hand includes the proceeds of US dollar bonds issued by one of the company’s subsidiary in April this year worth $225 million.
The decline of the Jakarta Composite Index does not reflect the fundamentals of BSDE shares as well as the prospect of property industry, Herman added.
In the six months to June period, BSDE posted revenues of Rp3.37 trillion up 38% from the same period last year. Property sales contributed Rp2.83 trillion, up 30% from the same period last year.
A property unit of Sinar Mas Land is aiming to book Rp7.5 trillion ($559.70 million) in property pre-sales for 2015. The target is 15% higher than last year’s results Rp6.5 trillion.