Pecca group announced another round of share dividend by distribution of its treasury share on 30 Sep 2021. The first round was 25 Jan 2021. After this announcement, investors seems positively reacted to the stock price. See picture below.
Let’s consider the stock return as a company stockholder. As a business owner, we can receive the cash dividend from the company when it is profitable. In the other way, the company can also act as to return the capital to the stockholder by buying back its own share from the market. So this creates treasury share. Either cash dividend or treasury share, it is a form of returning the profit or capital to the stockholder. The different is whether the stockholder can receive the cash on hand. Obviously, stockholder did not receive cash when the company buy back as treasury shares. Hence distribute share dividend by using its treasury share is one of the method so the shareholders can get the money on hand.
Let’s analyze what is the average cost of the treasury currently sit on Pecca’s book.
First, I get this info from Bursa.com.
Then, according to the last financial statement as of 30 Jun 2021, the treasury share value was RM 4,996 thousand. Hence the estimated average cost per treasury share is RM 1.10 (= 4,996/4,528). With its closing price of RM 3.24 on 15 Oct 2021, the stockholders could sell it for a profit of RM 2.14 per share.
In theoretical, company buys back its share when the management think that their stock price is undervalued currently. In the opposite, the company can also dispose its treasury share to the market and raise some funds. Now, the ball is under the stockholder to decide whether to sell the share or hold. Not to forget, by distribute the treasury as share dividend will dilute the EPS in the subsequent financial year. Anyway, the dilutive impact by this 4.5 mil treasury share is rather small (estimated as 2.5%).
Disclaimer:
At the point of writing this article, I did not hold Pecca shares in my portfolio and I did not have any relationships with the group. There is no warrantee on the accuracy of the presented data and analysis. This article is purely my personal comment. It musts not be read as investment advice.
The Street-Analyst 