Olam's share buyback programme a curious situation: Maybank KimEng

Olam must be borrowing money to buy-back shares and there's doubt if the program would be even completed.

Olam’s share price has jumped 10.5% since announcing commencement of a share buyback programme last Friday. According to MayBank KimEng, these are usually a positive sign, but the circumstances here are 'curiously unique'.

"Given its high gearing ratio, Olam is essentially borrowing money to buy-back shares. Assuming a full exercise of its share buy-back mandate, this SG397m could represent an outlay similar to its entire dividend payout history since 2004 IPO," it said in a report.

"Ultimately, empirical evidence shows many companies never complete these programs. We think the market may have over-reacted on this news," it added.