Swire to buy back $510 million shares, sending stock surging

Bloomberg

Swire Pacific Ltd, one of the two remaining British trading houses in Hong Kong, announced plans to buy back up to HK$4 billion ($510 million) of shares, sending the stock surging.
The buyback comes as Swire reported a 38% increase in underlying profit to HK$1.7 billion in the six months ended June 30, mostly due to smaller losses at Cathay Pacific Airways Ltd, where it is the largest shareholder. Still, two of the group’s most profitable businesses — real estate and beverages — were impacted by Hong Kong’s worst Covid-19 outbreak earlier this year, and lockdowns and travel
restrictions in China.
The 206-year-old Swire joins an expanding list of local conglomerates in buying back shares as their stocks continue to trade at a deep discount. The city’s prolonged closure to the rest of the world under China’s Covid Zero policy has dimmed confidence in its outlook while other major financial hubs like Singapore and London open up.
Swire shares jumped 10.4% in Thursday trading, closing at HK$49.90, the biggest gain in almost 18 months.
Swire Coca-Cola, which operates one of the world’s largest Coke bottlers and serves around 675 million customers in mainland China, reported a 22% fall in first-half attributable profit to HK$1.2 billion amid China’s lockdowns and higher raw materials costs.
The stringent restrictions under China’s Covid Zero policy also affected Swire’s new investments in health care aimed at boosting growth.
Swire Properties Ltd suffered a slight drop in recurring underlying profit to HK$2.97 billion from HK$3 billion a year earlier as retail sales took a hit during Hong Kong’s Covid-19 outbreak.
Despite the challenges, Swire remains committed to the future of Hong Kong and China and is optimistic about the company’s medium
and long-term prospects,
Chairman Guy Bradley said.
Some of Hong Kong’s largest family-owned conglomerates have been buying back shares in recent years.
China’s prolonged Covid-19 curbs come at a particularly bad time for Swire, which in March announced plans to invest HK$100 billion over the next decade in its real estate arm, with half of that allocated to the mainland.
The company has also made efforts to diversify outside Greater China. Last month, it agreed to buy Coca-Cola Co.’s bottling operations in Vietnam and Cambodia for about HK$1 billion, marking its first foray into the Southeast Asian beverages market.
Some of Hong Kong’s largest family-owned conglomerates have been buying back shares in recent years. In 2020, Jardine Matheson Holdings Ltd., the city’s other British trading house, announced its intention to invest up to $500 million in a share buyback program. The same year, CK Hutchison Holdings Ltd., the flagship of billionaire Li Ka-shing’s business empire, said it would use part of the proceeds from a 10 billion euro ($10.3 billion) mobile tower sale to buy back shares, but didn’t specify an amount. Other major companies including New World Development Co. and Kerry Properties Ltd. have repurchased shares last year.