S$0.245-ARMS.SI
• Armstrong continued its fifth day of share buy backs yesterday after having re-started its buy back program on 16/11/11.
• The company bought 900,000 shares at 23.83 cents, spending $214,470, the most since 16/11/11. While it represented a significant 78% of yesterday’s traded volume, its lower than the previous day’s 88% and 98% achieved on 17/11/ 11.
• Having bought 6,291,000 shares representing 12.5% of the maximum buy back allowed, the company can still buy back 43,929,735 shares. As yet end Sept’11 Armstrong’s cash holdings total close to $25mln versus debts of close to $22mln.
• Since the company re-started its latest share buy back program on 16/11/11, it had bought an average of close to 80% of the daily traded volume. The aggressive buy backs have seen the stock outperforming both its close peer Adampak as well as the market by rising 6.5% (versus Adampak’s 6.3% decline and the market’s 3.3% decline).
• While its continued aggressive buy backs could continue to support the stock, we note that at 1.23x price to book, its at quite a big premium to Adampak’s 1x and is already in line with the market’s 1.25x, and business prospects and profitability remains weak in the near term.
• Coupled with SGX buy back ruling not allowing firms to buy back shares 5% above the last 5 day’s average price (about 24 cents for Armstrong’s case), we are maintaining our Neutral recommendation.
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