For investors, in addition to "listening to their words," it is more important to "watch their actions."
After the recent sharp correction of Hong Kong stocks, the heavyweights HSBC Holdings (00005.HK) and other companies have begun to implement stock repurchase.
HK$12 billion repurchase is equivalent to 10 times in the first half of the year
On September 3, Xiaomi Group announced on the Hong Kong Stock Exchange that on September 2, 2019, the board of directors officially resolved to exercise the share repurchase authorization, and the shares were purchased from the public market at the highest total price of 12 billion Hong Kong dollars. The board of directors may further exercise the share repurchase authorization based on market conditions.
Affected by this news, Xiaomi's share price rose sharply on September 3, and the intraday price rose more than 6%. The market value returned to above HK$210 billion. As of the close of the day, Xiaomi closed at 8.70 Hong Kong dollars, an increase of 4.19%.
According to the semi-annual report issued by Xiaomi Group on August 21, “As of the date of this announcement, the Company purchased a total of 125 million shares of the Company's Class B shares on the Stock Exchange of Hong Kong Limited, and the total consideration (including transaction costs) was HK$1.2 billion. ”
After the semi-annual report was released, Lin Bin could not wait to reduce his shareholding and said it was used for “charity charity”. According to the information disclosed by the Hong Kong Stock Exchange on August 26, Lin Bin sold for three consecutive days on August 21, 22 and 23. A total of 41.307 million shares of Xiaomi, a cash out of about 370 million Hong Kong dollars. On August 21, August 22 and August 23, Lin Bin sold 2,670.62 million shares, 5,594,600 shares and 9,047,600 shares, respectively. The average selling price was HK$9.07/share, HK$8.92/share, 8.92. Hong Kong dollar / share.
It can be seen that Xiaomi Group plans to repurchase the amount equal to 10 times of the total repurchase in the first half of the year. However, the problem is that the amount of the proposed repurchase of HK$12 billion has not been indicated in the announcement.
Cash flow improvement or fund repurchase support
The improvement of the cash flow of Xiaomi Group in the first half of the year also provided some support for the repurchase action.
The cash and cash equivalents of Xiaomi Group in the first half of the year reached 34.92 billion yuan, and the total cash reserve reached 51.1 billion yuan. In the second quarter, the net cash generated from operating activities reached 11 billion yuan, a significant improvement from the first quarter (net outflow of 117 million yuan). The net cash generated from operating activities in the first half of 2019 was 10.915 billion yuan, a year-on-year increase of 78.3%.
Net cash used in investment activities, net outflow of 8.03 billion yuan, last year was a net outflow of 3.825 billion yuan.
According to the semi-annual report, “On June 30, 2019, Xiaomi invested more than 270 companies with a total book value of 28.7 billion yuan, a year-on-year increase of 20.8%. We also expanded our investment to supply chain companies to strengthen our suppliers with major components. The partnership strengthens advanced technology procurement and manufacturing capabilities.” “We have invested in 12 supply chain companies”, and three of them have been listed on the Kechuang Board. ”
The amount of foreign investment of nearly 30 billion yuan is equivalent to the amount of financing that Xiaomi Group listed in 2018, and the repurchase plan of 12 billion Hong Kong dollars finally shows that Lei Jun and Lin Bin’s team finally made up their mind to do “subtraction”. At present, the market value of Xiaomi Group is around 200 billion Hong Kong dollars. If the repurchase of HK$12 billion can be implemented smoothly, the total share capital of Xiaomi will be greatly reduced, which will help to improve earnings per share.
However, for investors, the key point is that the repurchase of the Xiaomi Group’s HK$12 billion should not only “listen to its words” but also “watch its actions” until the 12 billion Hong Kong dollar repurchase is fully implemented. After the decision, it is not too late to decide whether to buy Xiaomi stock. Judging from the situation in the past market, many companies may have a staged bottom during large-scale repurchase. If the management is really responsible to the investors, they will buy their own stocks when the market fluctuates, and buy back. To a certain extent, for example, the amount reaches about half, and there will be opportunities for investors to follow the bargain.