Tencent: can share buyback support share price?

TECENT:BUY BACK SUPPORT SHARE PRICE

Abstract

Tencent has launched a new share price programme on 19th August 2021, after 46%+ price correction in 2021. Based on the past 12 share repurchase programme pattern, Tencent management has a tremendous record, i.e. 100% win rate as the share price delivered 30D positive return after the completion of share repurchase programme. However, investment during the repurchase period did not guarantee any positive return.

Tencent launch a new share repurchase programme

Tencent repurchased 180,000 shares (less than 0.01% of total issued shares) with the average price at HK$427.6 on 19th Aug 2021, after price corrected 46%+ from the peak in Feb 2021. This is the first time for Tencent to repurchase its share price since 19th August 2021. Market expects that Tencent has launched a new share repurchase programme in 2021.

Source: HKEX, Invbots.com (https://www.invbots.com/hk/company/hk-700)

Since IPO in 2013, Tencent has repurchased shares in 12 out of the 18 years. In total, Tencent has spent HK$6.4 bn (or US$817.7 mn) to repurchase 70.5 mn shares (around 0.7% of total issued shares).

Repurchase once every 1.40 calendar days since 2013

After studying Tencent past 166 share repurchase records from HKEX, Tencent’s each share purchase programme had the lowest 1 record (2014) to the highest 31 records (2019) (the median is 11 records). The previous share repurchase programme lasted from 1 calendar day (2014) to 258 calendar days (2011) (the median is 43 calendar days). And days per each repurchase ranged from 1.00 (2014) to 68.0 (2012) (the median is 3.73 days per each repurchase). However, since 2013, during each share repurchase period, Tencent repurchased once within 1.40 calendar days.

Source: HKEX, Invbots.com (https://www.invbots.com/hk/company/hk-700)

No guarantee on price guarantee during share repurchase

During the past 12 share purchase programme, Tencent share price was increased 9 times, implying 75% win rate. However, in the past 6 times, the win rate in each repurchase period dropped to 50% only and the median return is -0.31%. Separately, the largest four share repurchase spending in Tencent was made in the past 6 years. However, in these four largest repurchase spending periods, Tencent share price declined in three out of four periods. Thus, high spending on share repurchase did not guarantee price stability. Thus, any investment strategy simply following Tencent share repurchase does not generate high win rate and investment return.

100% win rate after the past 12 repurchase programme

Despite no guarantee on price stability during share repurchase periods, Tencent share price showed positive 30D return after the past 12 repurchase periods, implying 100 win rate. Tencent management has a great credibility to show its support to share price until potential rebound potential. In conclusion, investors should closely monitor the latest Tencent share repurchase programme. Based on the past 12 share repurchase period, investors should buy Tencent after the completion of the repurchase programme. [Based on the past four repurchase patterns, Tencent should repurchase once every 1–2 days. If there is no repurchase after 4–5 days, Tencent should likely complete its share repurchase programme.]