SM Investments Corp. (SMIC), the flagship investment arm of the SM Group, has unveiled a historic share buyback program worth up to P60 billion—a little over USD1 billion at current exchange rate, aligning itself with a growing trend among Philippine Stock Exchange-listed companies to address the decline in share prices by repurchasing their own stocks.
Just in December, SM Prime Holdings Inc., the SM Group’s property arm, also announced plans to buy back as much as P10 billion of shares to boost shareholder value by reducing the number of stocks available in the market.
Frederic C. DyBuncio, president and chief executive officer of SM Investments, explained that the decision to launch the buyback program came as a response to the company’s current undervalued stock price. “We are trading well below our historical valuation multiples, which do not accurately reflect the robust performance and promising growth trajectory of the Group,” DyBuncio stated.
As of Thursday, February 27, SMIC shares were priced at P780 each, yielding a price-to-earnings ratio of 11.5 times based on 2024 earnings, which highlights the considerable discount compared to the company’s historical valuations.
The primary goal of the buyback program is to enhance shareholder value by reducing the number of outstanding shares, thereby improving earnings per share. “This program is designed to create and return value to our shareholders. We plan to repurchase up to 6 percent of our outstanding shares,” DyBuncio added.
While SM Investments is setting a significant budget for its buyback, it is not alone in this strategy. Companies like International Container Terminal Services Inc. (ICTSI) and Aboitiz Equity Ventures Inc. have pursued similar repurchase initiatives, albeit with open-ended budgets.
Global port operator ICTSI, led by tycoon Enrique Razon, has been buying back shares since 2015 and has spent P10.71 billion to date. Meanwhile, Aboitiz Equity already spent P4.44 billion for the repurchase of its shares as well as those of its unit Aboitiz Power Corp. and affiliate Union Bank of the Philippines. Aboitiz Equity approved the plan in April 2024 but didn’t set an amount or a timeline on when it will end.
Additionally, the Gokongwei Group has earmarked P25 billion across three of its companies—Universal Robina Corp., Robinsons Land Corp., and Robinsons Retail Holdings Inc.—to buy back shares in response to market conditions since the COVID-19 pandemic lock down was imposed in early 2020.
Ayala Land Inc., one of the country’s largest property developers, has already spent P18.63 billion of its P26 billion buyback budget, while Alliance Global Group Inc. has utilized P8.46 billion of its P9 billion program.
These buyback programs reflect a broader trend in the Philippine market, where companies seek to bolster their stock prices amidst volatile market conditions. However, critics argue that such programs may divert funds that could otherwise support expansion or economic growth, potentially inflating stock metrics that benefit executives’ compensation packages.
