SUNLAND Group (ASX:SDG), fresh from bolstering its workbook with major acquisitions in south-east Queensland over the past year, has now decided to invest some of its surplus cash in itself.
The developer of Q1 on the Gold Coast and Abian in Brisbane has announced it is buying back up to 10 per cent of its shares over the next year.
The buyback comes on the heels of a turnaround year for the company which, after capitalising on growth in both Sydney and Melbourne in recent years has now increased its focus on Brisbane and the Gold Coast.
Sunland more than doubled its full-year profit to $30.1 million in FY15, however its share price growth has remained fairly flat over that period.
Sunland's financials indicate net asset backing of $2.01 per share, compared to the company's latest share price of $1.56.
The new share buyback plan follows a four-year buyback program launched by the company in 2009.
That program saw Sunland acquire 145.2 million shares at an average of 81c a share for a total of $118 million. Based on its current share price, the company has almost doubled its investment in itself since then.
The latest program will target 17.8 million shares, which would reduce Sunland's total shares on issue to 163.8 million shares.
Sunland managing director Sahba Abedian says the buyback will be funded from existing cash and working capital reserves. At the end of June, Sunland had $26.3 million in cash.
"All capital management measures are viewed in the context of the medium to long-term strategic growth of the group," Abedian says.
"The buyback is expected to enhance the earnings per share of the company.
"The board sees this as an excellent opportunity to continue consolidating the group's issued capital, especially when the shares are trading at a discount of some 25 per cent below the net tangible asset value."
Neither Sahba Abedian nor founding executive chairman Soheil Abedian will participate in the buyback program.
Between them the Abedians hold about 55 million shares in Sunland, and Soheil Abedian has been an acquirer of the stock over the past year.
Sunland has assured investors they won't be losing out, saying it plans to continue paying dividends equivalent to between 40 and 50 per cent of net operating earnings during the buyback program.
Sunland has a $3.7 billion development pipeline, comprising 6086 land, housing and multi-storey apartment products. Its biggest projects are now in Brisbane and the Gold Coast where it is undertaking two major high rise projects in each of those markets.
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